By Daniel Remler

After seven years at the helm of the World Bank, Jim Yong Kim announced in January that he would be resigning as president. Since the World Bank and International Monetary Fund (IMF) were first established after World War II, the United States and Europe have had an informal agreement whereby an American would run the World Bank and a European would run the IMF. True to this pact, President Donald Trump announced the nomination of Treasury official David Malpass as the US nominee. As happened when President Obama nominated Kim in 2012, there were calls for the US to abandon its stranglehold on the World Bank’s top job.

Though Malpass managed to gain enough support from other stakeholders to become president, progressive policymakers can take the opportunity of this transition to make clear that ending the US monopoly on World Bank leadership and supporting leadership for the organization from the developing world must be a priority for the next progressive US president. This policy shift would not only recognize fundamental shifts in the global economy toward developing countries, but also begin to address the institution’s significant shortcomings and help advance progressive economic policy.

The World Bank was founded in July 1945 with a mission to reduce poverty. At its founding, that meant financing large infrastructure projects for European countries to rebuild in the wake of World War II. Today, it primarily tries to serve that mission by giving advice to poor countries. But as has been well-documented by scholars and journalists such as William Easterly and Sebastian Mallaby, the Bank’s advice has often proved wrong, if not outright destructive, for developing nations despite the purported expertise offered by American leadership. Policymakers on the left have long argued that developing countries should have a greater voice in World Bank management. Though this argument failed to convince the Obama administration, the progressive position has since been strengthened by a broader shift in the global economic landscape.

The World Bank now operates in a much more varied landscape for development finance, making it a much less hegemonic organization today than it once was. The rise of private development finance and national development banks, coupled with historically low interest rates, has created new sources of financing for development around the world. The advice the World Bank gives remains influential, but pressure on the organization to remain relevant has increased.

This pressure has come in particular from the rise of a nominal competitor in the China-led Asian Infrastructure Investment Bank (AIIB), as well as the smaller New Development Bank (NDB). One of Beijing’s key arguments in sponsoring the AIIB has been that it better reflects the needs and goals of developing countries, both in the new bank’s leadership and in the advice and loans it gives. US officials have argued that the AIIB is unnecessary and duplicates the functions of the World Bank and Asian Development Bank (ADB) without having the same track record of good governance. Though the AIIB has pledged to meet and surpass the current development banks’ financial, social, and environmental standards, many developing countries are attracted by the potential for greater representation. Indonesia and Vietnam have voiced their expectation that, as prospective major clients of the AIIB, they would be well-represented among the organization’s shareholders and operating staff. Despite naming a Chinese official, Jin Liqun, to lead the AIIB, Beijing has repeatedly promised it would not dominate the organization’s leadership or channel financing only to Chinese firms.

A change in leadership at the top of the World Bank would be a powerful symbolic shift, marking the transition from US hegemony of the global economic order to an era of shared responsibility. If the international institutions set up by the United States are to function as more than just an extension of imperial power, they must invite leadership that heralds from outside Washington. Beyond the symbolism, the change would also lay the groundwork for more ambitious progressive policymaking at the international level. New leadership could push the organization to change its advisory role, rebalance its relationship to Wall Street, and coordinate international efforts for green public investment.

While much of the advice and research World Bank economists produce, particularly in sector or country-specific reports, remains commendable, some products such as the notorious “Doing Business” report are ripe for disruption. The report’s underlying thesis, that a pro-business, minimally regulatory state will lead to growth, is empirically suspect. Despite mounting evidence that the report incentivizes economic practices that hurt many more than they help, the report continues to be influential and skew policymaking toward deregulation and austerity. The report’s production also calls into question how the World Bank gives advice more broadly. In January 2018, then-chief economist of the World Bank Paul Romer brought forth convincing evidence that the report’s methodology had been altered under political pressure to penalize the previous left-leaning government of former Chilean President Michelle Bachelet, while rewarding the conservative government of current President Sebastián Piñera. A World Bank president that was more accountable to developing country stakeholders would have the authority to not only scrap the “Doing Business” report and other harmful products, but also protect staff from right-wing pressure. This could then open space for staff to refocus the organization’s advice to emphasize the potential impact of policies on inequality and political institutions in recipient countries, two areas currently underserved by World Bank advice and research but which the economics profession increasingly recognizes as vital to sustainable growth.

A new president could also begin to distance the World Bank’s lending practices from Wall Street. In recent years under President Kim the World Bank has increasingly partnered with financial services firms like private equity giant Apollo Global Management and asset manager Allianz for financing. The record to date however suggests these partnerships have not delivered for developing countries. A $500 million pandemic bond offering that would purportedly put investors on the hook in the event of a major disease outbreak launched to great fanfare in June 2017. But the bonds failed to pay out the next year when the Democratic Republic of Congo was hit by the Ebola virus, simply because the crisis had not triggered a key clause that the virus cross an international border. Apollo’s partnership with the International Finance Corporation (IFC), the World bank’s private sector lending arm, to invest a combined $1 billion in distressed debt is explicitly advertised as a means of relieving financial institutions of non-performing loans, rather than direct development impact. Progressive leadership at the World Bank could begin to unwind these ineffective and problematic initiatives and re-commit the organization to working with fiscal authorities around the world on a more ambitious and impactful program.

A World Bank president who truly sought to serve the needs of developing countries would also have to make climate change a priority. This would not simply have to mean supporting climate change mitigation projects as the Bank currently does, but could, as Yanis Varoufakis and David Adler have suggested, mean making the Bank the prime mover behind a green investment vehicle to support global decarbonization. The Bank president could begin by engaging in sustained shuttle diplomacy to ramp up donor support for the organization’s Climate Investment Funds (CIFs) which are focused on climate change adaptation and deploying new low-carbon technologies for the most vulnerable countries. These funds could form the foundation for expanding the issuance of green bonds to finance the transition of carbon-intensive economies, in addition to providing technical advice on domestic investment programs such as the Green New Deal. The Bank president would also need to re-align the World Bank’s private sector lending to support decarbonization to maximize the impact of its current resources. In a recent House Financial Services Committee hearing, Chairwoman Maxine Waters drew attention to concerns that the IFC’s Private Sector Window (PSW) was not sufficiently attentive to recipient country governments and their goals. New leadership could direct the PSW to focus on climate change mitigation and adaptation in partnership with recipient country governments.

What all of these steps require is a World Bank president with the ability to marshal the support of both major donor countries and rapidly growing developing countries. A progressive non-American president, backed by US policymakers and accountable to developing states, would be best positioned to manage this delicate diplomatic effort.

Reforming the World Bank president selection process would also allow US policymakers to demand similar reforms and policy priorities at  the AIIB’s and other multilateral development banks. US officials could encourage members of the AIIB to demand greater input and representation, without being hamstrung by its own position at the World Bank. Though China holds veto power and the institution is headquartered in Beijing, the AIIB remains a young organization, founded just three years ago. To the extent US policymakers want to shape the AIIB’s composition, culture, and actions to align with progressive goals and avoid domination by Beijing, its goal should be to empower the Bank’s developing country members.

The success of progressive economic policy at home will depend on the continued relevance and ability of global institutions, whether in addressing climate change or reshaping globalization. The Euro-American monopoly on the leadership of the World Bank and IMF has not served these goals and undermines the basic legitimacy of these critical institutions. The greater diffusion of economic power around the globe makes a transition to leadership by developing countries more important than ever. A change in the leadership of the World Bank and IMF alone would not be enough to guarantee that they follow progressive economic goals, but overcoming challenges on a global scale first demands more inclusive institutions.

Daniel M. Remler is an MPA student at the Harvard Kennedy School and an MBA student at the Wharton School.