THE president of the World Bank Jim Yong Kim resigned from his post on Monday with more than three years left in his tenure. Kim’s departure now opens up the prospect of a succession battle that could turn on its head a decades-old tradition that many see as holding back the development organisation.
Since its foundation in 1945, the Bank has always been run by an American with the top role appointed by the US presidential administration at the time.
Why all the Americans?
This method of appointment came about in the wake of World War II when, during a meeting in Bretton Woods, New Hampshire, the United States and European allies came to the understanding a European would run the International Monetary Fund (IMF) and an American would control the World Bank.
And the agreement has stuck, despite the changing nature and objective of the institution.
The World Bank was originally founded to aid rebuilding efforts after the war. Much of its first loans went to funding infrastructure projects in France and other areas of Western Europe.
But as Europe healed, the Bank shifted focus and turned its attention to developing nations. The eradication of poverty became the organisation’s predominant driver; so much so, the motto, “Our dream is a world free of poverty,” is carved in stone at the Bank’s entrance in Washington DC.
Given the change of geographical focus, from the western world to a predominantly Sub-Saharan Africa base, a change of leadership began to make sense to many.
Former-US President Barack Obama had a chance to change the system back in 2012, but instead appointed Kim as a middle-ground candidate. Obama hoped his South Korean heritage and background in global health advocacy would make him a candidate to please everyone.
But that pick appears to have backfired as Kim prepares to leave for a position in the private sector and the world is left facing the prospect of a Donald Trump pick.
What does this mean for the developing world?
The dominance of Americans in the top job raises uncomfortable questions of neo-colonialism. There is a long – and bleak – history of developed nations overseeing and advising poorer countries, providing them little autonomy in their own fates.
The Bank doesn’t just loan money but advises these communities on best-practices that ultimately dictate their lives and livelihoods. In some eyes, it is seen more as a lending arm of the US government.
Critics have questioned the efficacy of such a system. Even Kim himself said his resignation is down to a belief he can do more good for the developing world by working in the private sector – a fairly damning appraisal from the man in the chief role.
Trump’s pick could spell more uncertainty for developing nations going forward.
As Kevin Gallagher of Financial Times points out, Trump’s administration is experiencing a human resources crisis of its own and is currently in the grip of a government shutdown. Trump has also repeatedly criticised the World Bank and denigrated the merits of multilateralism generally.
As Gallagher says, any qualified banking or development professional would be highly reluctant at best to take the job in this environment, and more likely run for the hills.
So that leaves the prospect that Treasury Secretary Stephen Mnuchin, who will be making the pick, could nominate a Trumpian populist who rails against the multilaterialism nature of the organisation.
What happens next?
If the White House chooses this course, they run the risk of lacking support among their European allies and other shareholders of the Bank. If their candidate is rejected, this opens the race up to other nominees and will almost certainly lead to a non-American heading the Bank for the first time in history.
Despite precedent, Bank members can nominate a candidate, or candidates, of their own to go up against America’s pick. If all members rally behind one nominee, victory is guaranteed and would likely see a president from the developing world elected.
While Americans have remained in the top job since the Bank’s foundation, the Bretton Woods deal is more a gentlemen’s agreement than an actual rule, meaning other members can overturn the status quo and end the odd quirk of history. Now looks like a prime time to do just that.
But Trump will be reluctant to relinquish America’s place in such a key international development role.
The Bank’s only major competitors are the China-backed development funds that are pouring money into the developing world. Given America’s ongoing spat with Beijing and China’s dogged determination to become the world’s authority, the US will be keen to keep a presence.
But developing nations are eager for change and ready for their voices to be heard. With a number of highly-qualified potential candidates waiting in the wings, a non-American nominee looks likely.
Frontrunners include former World Bank managing directors, Ngozi Okonjo-Iweala, a former Nigerian finance minister, and Sri Mulyani Inrawati, the Minister of Finance of Indonesia. Both of whom are highly popular with a proven track record. Sri Mulyani has just been named the best minister in the world.
There is also a third option – doing nothing.
Kristalina Georgieva, who has been serving as World Bank chief executive, will be taking over from Kim when he steps down next month. The Bulgarian former EU commissioner is well liked in the Bank and could offer a simple solution to the problem of succession if she remains in the position until the end of Kim’s term.
The Bank’s board of directors, however, seem eager to get the process underway, saying they would “immediately” start the process of electing a new president.
Whoever it is will be stepping into an important role with immense pressure to restore the Bank’s legitimacy after several years of inner turmoil and limited success. It will also be important to members that, whoever takes over the presidency is representative of the communities the Bank advises.