Bashing World Bank damages US interests
That US president Donald Trump’s administration should pick a fight with the World Bank — and the bevy of other multilateral development banks the US owns shares in — is no surprise.
Trump loves a quarrel with an international institution, and those devoted to such wishy-washy causes as funding overseas development and fighting climate change look particularly punchable.
Some of the US agenda is normal penny pinching for taxpayers: wanting MDBs to be more efficient and curtail salaries. Trumpians chafe at loans going to make China richer, when some parts of it are very much First World.
But this week’s resignation of Jim Yong Kim as World Bank president shows just how grave the threat to MDBs is. Above all, the US is determined not to let their balance sheets get any bigger.
This is an error that harms US interests. The US has always exerted immense power over the MDBs, and maintaining this sway would be easy.
For astonishingly little money — $1.25bn in the World Bank’s latest capital increase — the US gets the leading say in an organisation that committed $23bn of loans last year and exercises vast influence in the developing world. The same goes for the regional MDBs.
At a time when the US is trying to push back against China and its huge banks pouring loans into developing countries, the decision is self-defeating.
First on the list of rethinks for the Trump team should be its scepticism about securitization and risk transfer. Allowing MDBs to recycle capital by shedding risk is a clear win for US aims of making public resources go further and stimulating private sector investment.
Perhaps Wall Street should tell Steven Mnuchin securitization is great.