With David Malpass’s announcement on Wednesday that he will step down as president of the World Bank, the Biden Administration is faced with the choice of a nominee to run the institution at a particularly challenging time.
Treasury Secretary Janet Yellen has put forward an ambitious reform proposal that puts global challenges at the center of the World Bank’s agenda, with climate finance chief among them. This implies significant change for an institution that generally sees itself responding to the demands of its borrowing countries. Where the United States and European allies increasingly see global challenges, many World Bank client countries continue to think in terms of their own national priorities.
As much as Yellen warns against “false choices” standing in the way of her agenda, it’s also important to recognize the real tradeoffs these reforms could entail. More money earmarked for climate means less discretion for the World Bank’s client countries and the bank’s management in defining how money will be allocated. Further, without fresh capital on offer from the United States and other shareholders, the bank’s clients grow suspicious that any new agenda will take money away from their priorities or otherwise increase the cost of assistance from the institution.
Much of the detail behind the US-led agenda is technocratic in nature, entailing judgements about credit ratings and loan leverage ratios. But these reforms have been introduced against a backdrop of growing unhappiness in low- and middle-income countries about the stance of wealthy countries. They see hypocrisy on the climate agenda, with efforts to restrict the energy options of low-emitting countries as wealthy countries expand their fossil fuel consumption. And they see a stark lack of ambition in helping them deal with the collateral damage associated with Russia’s war in Ukraine, the effects of high interest rates globally, and mounting debt problems in many of their countries.
In such an environment, navigating the path toward a World Bank reform agenda has never been trickier or more consequential.
So, what sort of leader will be best suited to the task?
First, the Biden administration will need to acknowledge the limitations of the World Bank’s 75-year convention on the bank presidency. The World Bank president has always been an American and has always been nominated by the president of the United States. The upside of this convention is that the institution can be assured that its leader has the confidence of the bank’s largest shareholder. The downside, particularly now, is that nothing can be taken for granted when it comes to support from the World Bank’s other member countries. And a bank president with only weak support outside the United States is not well positioned to lead change at the 188-member-country institution.
Over the years, countries have grumbled about American dominance, or more frequently, complained about the qualifications of specific American candidates. By taking the convention for granted, successive White Houses have risked indifference to these concerns. In the current environment, that risk is acute. Any US candidate that cannot claim clear support and trust among the bank’s major constituencies (first and foremost the developing country members) risks being hobbled by questions of legitimacy.
So, while the Biden administration will undoubtedly exercise its prerogative to nominate a candidate, with a strong expectation of success, real success in the job will only come if the next president has a credible history of engagement, experience, and leadership in the developing world. In turn, the candidate will have to demonstrate those qualities vis-à-vis the bank’s wealthy country members, both to secure support from the Biden White House and to gain support from key European countries.
Second, the next leader will need to be an effective “insider outsider.” It does little good to lay claim to an ambitious World Bank reform agenda if you’ve never set foot in the building. This sprawling institution with 15,000 staff is not easy to navigate, let alone steer. Bureaucratic tendencies are strong at the bank, and the institution leans toward conservatism even as today’s poly-crises call for boldness. Today’s World Bank has 39 vice presidents, most of whom have decades of tenure in the institution. While any number of these individuals can be effective agents of change, the next president will be better able to lead fundamental change if she knows the institution as well as they do.
Third, as an effective insider, the next president will need to bring the reform mindset of an outsider. Many of the bank’s member countries rightly perceive an increasingly insular institution, resisting entreaties to collaborate with others when it is called for and offering only defensiveness in the face of criticism from outside the institution. This is a worrying and unhealthy culture for any institution, let alone one that plays such a large role on the global stage.
Finally, it is unavoidable to observe that the United States in 75 years has never nominated a woman to lead the World Bank. Among the firsts that the Biden administration has prided itself in when it comes to putting forward public servants that better reflect society, the first female president of the World Bank should be a claim that President Biden is able to make.
As much as this list may seem to point to a unicorn candidate, that need not be the case. Though the pool of qualified candidates may not be large, there are undoubtedly potential nominees who can both satisfy the traditional convention while also meeting the imperatives outlined here.
This blog post was initially published on October 18, 2022. It was updated on February 17, 2023. For more of CGD’s work on World Bank reform efforts, see our project “MDBs for a Global Future.”