Europen February 23, just a week after David Malpass announced his resignation as World Bank president and hours after the bank said it would conduct an “open, merit-based and transparent” search for a successor, everyone knew who would win. Former MasterCard boss Ajay Banga has been nominated by the White House to be the bank’s head-designate. Mr Banga, a naturalized American, “Made in India”, as he puts it, and a private sector businessman represented a break from tradition.
Emerging economies, however, did not see his nomination as a victory.The White House has appointed every World Bank president since the gentlemen’s agreement with Europe, and Europe gets to choose International Monetary FundBoss, 1944. The US also has a disproportionate share of the vote in the bank. This made sense after World War II. Countries from China to Panama now want their growing influence in the world economy to be reflected in their institutions.
Mr Banga’s first task will be to resolve the infighting. The same tension is spilling over into the debate over the role of banks. The U.S. and Europe want it to lend more, under looser constraints to ease the burden of rising interest rates, climate change and China’s cuts in lending to poor countries.But some emerging economies are fighting back, saying the move would jeopardize the group’s ultra-safety ah ah Credit Rating. Without additional capital, the bank has holes in its coverage. Its officials have been silent on Ukraine’s rebuilding and have worked hard to inject as many regional institutions as possible into green infrastructure.
The other fight is over debt relief, which has been brought to a standstill by China’s insistence that the World Bank write down its loans. Mr Malpass has so far stood his ground, retorting that it would cripple banks’ ability to lend. A more hostile China reduces the likelihood that U.S. policymakers will agree to give Beijing more votes in the short term.
Some doubt Mr Banga (who sits on Exor’s board and owns economistparent company) is capable of resorting to the bureaucratic maneuvers needed to break the impasse. He will be the first appointee without full-time development or government experience since banker and lawyer James Wolfensohn in 1995. But Mr Banga’s career could be a fortune. After more than a decade on Wall Street, he has seen MasterCard rise from a $20 billion credit card company in 2009 to a $300 billion payments platform. He is well-suited to direct work on digital payments, which is a priority for the bank. He is known for turning lumbering organizations into lean ones.
Mr Banga may also finally help the bank embrace a green agenda. In September, Mr Malpass dodged questions about fossil fuels and global warming, saying he was “not a scientist”. In January, Occidental rejected the bank’s climate plan as not being ambitious enough. At MasterCard, by contrast, Mr Banga writes a super-green blog. Hopefully he can use his Wall Street expertise to get companies to funnel money into green tech and infrastructure.
America’s ideal World Bank is a well-oiled, sustainable-leaning machine, like Mr Banga’s MasterCard. Before the same mistakes are repeated, the new president must first stop the routine infighting by getting emerging economies on their side. To do that, he’ll have to make them forget about the unfairness of his selection. ■
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