The surprise early resignation of World Bank President Jim Yong Kim on Monday has produced a flurry of reactions from the bank’s supporters and critics, although none have come close to outlining the best option for a post-Second World War institution that long ago outlived its original purposes. Does a 21st-century world economy awash in massive flows of investment cash really need a meddling, bureaucratic, multi-tentacled, government-backed fake financial institution that has, under Kim, been transformed into (among other things) a raging green lending machine that aims to deny developing countries poverty-relieving investment in fossil fuels and other resources in favour of windmills and solar panels?
The most radical idea circulating through the media portals in the wake of Kim’s announcement is that it is time to end the United States’ “stranglehold” on the presidency of the institution. All of the bank’s 12 presidents to date have been U.S. nationals, the result of a complicated history of global power alignments and the fact that America is the bank’s largest funder.
Kim, however, was hardly one to accuse of putting the bank in an America First stranglehold. His 2012 nomination by former president Barack Obama was heralded particularly by the moderate left, from Bill Clinton to development economist Jeffrey Sachs, who congratulated Obama for “nominating a world-class development leader.”
While some developing nation’s objected that it was time to let a non-American lead the bank, Kim sailed through to unanimous approval by the board of directors. He breezed on to a second-term extension in 2016, despite some objections about continued U.S. domination.
But that was then. With Donald Trump in the Oval Office, a more aggressive movement to overturn five decades of U.S. domination is underway. “The U.S shouldn’t get to pick the head of the World Bank. And not just because Trump is president,” said a Slate commentary by Charles Kenny, senior fellow at the Center for Global Development. Media reports warn that Kim’s departure, three years before the end of his term, “tees up a battle between the Trump administration… and critics seeking to break the U.S. stranglehold” on the bank’s presidency.
Maybe the critics of U.S. domination should be granted their wish. Ending U.S. domination of the bank’s hierarchy could be exactly the kind of reform it needs.
Under Kim, the World Bank accelerated its transformation from a do-gooding financial institution nominally dedicated to fighting poverty by aiding development in Third World countries, into an environmental crusader. No more loans for coal projects, Kim decreed — even as China, India and others were expanding coal production. In 2016, the World Bank introduced a “fundamental shift” in policy from fighting poverty to fighting fossil fuels. In 2017, the bank announced it would end financial support for oil and gas extraction by 2019.
Kim was not the first bank president to overturn the World Bank’s objectives. He was merely an extension of a policy drift introduced years earlier under previous leaders selected by Washington.
Back in 2003, the bank produced a review of “extractive industries” and concluded that it should get out of all funding of investments in petroleum and coal. The bank’s then president was James Wolfensohn, a Bill Clinton nominee and a global operator who — as FP Comment columnist Peter Foster has previously pointed out — was an associate of the late Canadian Maurice Strong, mastermind of modern United Nations green globalism.
When he took over, Wolfensohn began squeezing the bank into his and Strong’s extreme-green stranglehold. One journalist would later describe how “Wolfensohn was critical of Bank projects he considered environmentally harmful … Strong watched approvingly as Wolfensohn instituted environmentalist-friendly policies, including the appointment of environmental NGOs to World Bank advisory committees.”
Ah, those ugly Americans. They gotta be stopped. Get them out of there.
The global political scramble to replace Kim promises to be an ideological free-for-all. Politicians in developing countries want more control over the bank, radicals on the left and right want to shut it down, while Western globalists and an army of crawling bureaucrats and UN operatives are keen to keep the operation going. Meanwhile, some of the bank’s former supporters — including former World Bank research administrator Deepak Lal — believe the bank has become an obstacle to growth in developing countries.
As for Trump, he may or may not want to shake the place up. Some members of his team have in the past suggested closing the World Bank down. John Bolton, the president’s national security adviser, has suggested it should be scaled back, if not shuttered completely.
As the debate over Kim’s successor evolves, however, the Canadian government could find itself in another tricky situation, caught between Trump and its Green Boy Scout act on the world stage. In December, Environment Minister Catherine McKenna appeared at the global climate meeting in Poland to announce Ottawa had pledged $275 million to the World Bank-led “Powering Past Coal Alliance.” The funds will be used, the World Bank said, to help nations close down coalmines and “address the resulting socioeconomic impacts on workers and communities.” So closing coalmines in developing countries and socioeconomically impacting poor workers is now the priority of a World Bank that was once dedicated to ending poverty.
So, what will Canada’s position be on the nomination of the new World Bank president? If Trump decides to seriously shake up the sclerotic institution, the question could drive another wedge between Ottawa and Washington.