While most of the media were focused on the Green New Deal and a declaration of national emergency, President Donald Trump announced the new head of the World Bank to replace the current President Jim Yong Kim, who announced his resignation in early January, three years before the end of his second term. His replacement is David Malpass, a senior Treasury official and an economist with a Wall Street past.
The World Bank
If you have never heard of the World Bank, you are not alone. It was originally established in 1944 to provide funding to rebuild the countries devastated by World War II, but it quickly transmogrified into a generic development bank for Third World countries with a goal of making investments and low-interest loans that could alleviate poverty by uplifting the bottom 40% in developing nations.
Today many opine that the bank has outlived its mission, a dinosaur from the Cold War era, when Communist countries still were referred to as the Second World. Nevertheless, the bank is still here and lends billions of dollars to poor nations.
A Controversial Pick
While any appointment made by Trump will be controversial almost by definition, Malpass holds views that make him a thorn in the side of many in the political elite. He has, for instance, said that China no longer needs World Bank financing. It is rich enough to take care of its poor. Since 2010, the World Bank has invested in 115 projects in China.
Malpass thus aligns himself in part with Trump’s critical view of globalism that favors the likes of China.
As a Trump ally, Malpass may turn out to be far more controversial for a completely different reason. Since the Clinton administration, the World Bank has gradually shifted away from poverty alleviation to becoming a vehicle for combatting climate change. In 2016, under the leadership of Kim, the bank announced that it would spend 28% of its investments on climate-related issues by 2020.
…Malpass likely will shift investments away from climate-related projects…
The logic is that climate change will be detrimental to poor people a century from now, and therefore it is important to invest in renewable energy and other climate-related programs for the poor.
Knowing Trump’s below-freezing stance on global warming, Malpass likely will shift investments away from climate-related projects back to poverty alleviation in the present.
The Copenhagen Consensus
If Malpass does so, he will be on solid scientific ground. The think tank Copenhagen Consensus Center headed by Bjørn Lomborg gathered world experts from various fields and asked them to quantify and rank the projects by how much return on investment they give in the form of welfare, prosperity, and environmental improvement. Their top 16 recommendations contain only one climate-change project.
You do not have to be a world expert to understand why this makes sense. Almost all climate-related deaths and destructions are borne by poor people. The cure for this is wealth, and most wealthy people in the world got rich thanks to cheap fossil fuels.
It remains to be seen what difference Malpass will make at the World Bank, but if he cares about the poor, he will drop the current emphasis on climate change.