David Malpass: World Bank Needs New Approach to Resolve Poverty in Emerging Markets
The COVID-19 pandemic and the economic shutdowns are dealing a severe blow to the global economy and especially poorer countries - Photo by G20 Secretariat

JAKARTA (TheInsiderStories) – The World Bank Executive Board has approved David Robert Malpass’s victory to fill the leadership chair of financial institutions after being abandoned by Jim Yong Kim who resigned on February 1, more than three years before his term ended in 2022.

In last Friday’s election, Malpass became the sole candidate because until the deadline, no other countries had proposed a candidates to challenge the economist, so the “high council” was sure to set him a winner. That was different from former World Bank President Kim, who faced two challengers in the elections five years ago, namely from Nigeria and Colombia.

Some observers doubt the choice of Malpass because it’s considered to close the openness for the best non-American candidates to be able to occupy the highest positions in the institution. However, of course the world deserves respect for democracy that is taking place at the global financial donor agency.

The election of loyalists of President Donald Trump who will fill the position of the 13th World Bank President with a term of five years until 2024 continues the tradition of bank leadership which is majority owned by the United States (US), which 73 years are always led by US citizens towards the world’s largest development lending institution.

The Malpass track record in finance and banking is quite flashy. Malpass was the Deputy Minister of Finance of the US for international affairs under Trump’s presidency. He is often a US delegate at international economic meetings including the G-20 Summit, annual meetings of the International Monetary Fund (IMF) and World Bank.

He previously served as Deputy Assistant Minister of Finance under President Ronald Reagan, Deputy Assistant Secretary of State under President George H. W. Bush, and Chief Economist of Bear Stearns (1993-2008) for six years before collapsing during the global financial crisis.

During the Reagan and Bush presidency, Malpass worked on a variety of economic, budgetary, and foreign policy issues including small business promotions throughout Latin America and 1986 tax cuts.

So far, in the 2016 US presidential election, Malpass served as Trump’s economic advisor, who supported Trump’s message about faster growth through policy reform. In 2017, he was nominated as deputy minister for international affairs at the US Treasury.

Malpass is also an entrepreneur and economic analysis, where in 2008 he founded Encima Global, a New York City company that provides daily analysis of global economic and political trends relevant to institutional investors.

The Malpass began to be emerged because of his prediction before the 2007-2008 financial crisis and in the period after the Great Recession. In 2007, before the housing market collapsed, Malpass wrote for the Wall Street Journal that “The housing market and debt are not that big from the US economy, or job creation; correction of housing and debt markets might add to the length of US economic expansion.

He also called for an increase in interest rates in 2011 when others believed this would endanger the economy. Bruce Bartlett cited the 2008 Malpass forecast of economic growth and the forecast for its 2012 recession as a specific example of partisan bias in economic forecasts.

As a Trump’s subordinate, Malpass is very critical of China’s economic policies and follows Trump regarding the reform of the global economic order to make “A Great US Again”.

Therefore, Malpass encourages its institutions to limit loans and burden China with higher interest rates, arguing that the second largest economy in the world has sufficient financial resources to support itself.

Malpass often criticizes the World Bank and other international financial organizations. He considered the practice of lending global lending institutions “corrupt” and complained that China received too many loans at the expense of poor countries with limited access to credit markets.

Malpass said he would uphold the World Bank’s commitment to reduce poverty in the poorest countries and to combat climate change, and pursue the goal of increasing capital for infrastructure development in developing countries.

Malpass acknowledges that he has contributed to the preparation of a reform package in which the World Bank will receive an increase in capital of US$13 billion. With the addition of these funds, the Bank will focus more on lending to low-income countries.

Besides, Malpass is committed to encouraging wider growth potential for each borrowing country, and creating a stronger and more stable global economy for all parties, he said in an email to World Bank employees.

Previously, Malpass was well-known as the critic of the institution his had dreamed of, even once described the World Bank as an institution that was too large, inefficient and reluctant to cut funds for developing countries that had grown into emerging market countries.

This was acknowledged by former president Kim who had previously attempted to overhaul the bank structure. But Kim seems to have realized that the World Bank’s bureaucracy is not effective enough to fulfill its core task of mobilizing sufficient funds for the poorest people in the world, even calling it “totally irrelevant” to the conditions of poor countries.

In his letter to World Bank staff after his election, Malpass noted that 700 million peoples live in extreme poverty and many peoples do not see their living standards increase. With this trust, he will focus on efforts to develop in countries with extreme poverty.

Previously, Trump called Malpass an intelligent analyst who was the “right person” to lead the World Bank as president. Because, according to him, Malpass has struggled to ensure financing is focused on places and projects that really need assistance, including people who live in extreme poverty.

Written by Daniel Deha, Email: daniel@theinsiderstories.com