Given the surprise opportunity to nominate a new president for the World Bank, President Donald Trump has made a good choice in David Malpass. The nominee, currently Undersecretary of the Treasury for International Affairs, affirms the administration’s thoughtfully critical but broadly supportive approach to the leading international institution for economic development.
The bank’s board of directors must elect a new president in April due to the recent surprise resignation of bank president Jim Yong Kim. There will be the usual calls for giving the position to someone from the developing world, and China, seeking recognition of its rising international stature, may propose its own candidate. But the board would be wise to select Mr. Malpass, not because of tradition — in its 75-year history the job has always gone to an American — but because of his track record of support for the institution.
The World Bank makes about $40 billion a year in loans to nations at below-market rates to promote the development of human capital — in areas such as education and health care — and infrastructure. Most loans go to poor nations, but a number of middle-income nations, including China and India, still receive subsidized loans from the institution.
Mr. Malpass has rightly criticized this policy in congressional testimony. He has also charged that many bank loans end up benefiting high-priced consultants instead of the poor people they are intended for and sometimes are corruptly managed by recipient governments.
These are cogent criticisms, but they reflect a real concern for making the World Bank more effective, not a knee-jerk rejection of international development assistance.
For example, Mr. Malpass is credited with getting the Trump administration, Congress and the World Bank board of directors to agree on a major new policy framework for bank lending backed by a new development capital infusion from the United States that is 50 percent larger than the one agreed to by the Obama administration in 2010.
The new policy framework adopted by the World Bank last April requires middle-income nations to pay a higher interest rate for loans, targets 70 percent of normal loans to countries below the middle-income threshold, and demands greater discipline and coordination within the bank when making loan commitments. All three points appear to answer criticisms made by Mr. Malpass, but the gains were achieved without pounding the table.
An analysis of the agreement by the Center for Global Development, a leading think tank, noted that the rising interest rates for middle-income borrowers lets them decide when to stop seeking World Bank loans. It concluded “as much as ending China’s borrowing from the bank would have been a political prize for the Trump administration, U.S. officials appear to have taken a sensible policy path that favors good incentives over polarizing fiats.”
Mr. Malpass is not perfect. Critics cite his failure to recognize in time the oncoming collapse of mortgage-based lending in 2008 when he was chief economist for Bear Stearns during the firm’s collapse. But he was not alone. The U.S. Treasury Department and the Federal Reserve Board were also taken by surprise. This is not a convincing criticism of his fitness for the presidency of the World Bank. He should be elected.