The resignation of Jong Yung Kim as president of the World Bank was unexpected, and at the moment the Trump Administration has plenty of other items to tackle beyond choosing a new leader for the Bank.
But every opening is also an opportunity, and this is a good time to take a fresh look at the role the World Bank plays in promoting prosperity across the globe – and whether some of its policies inadvertently do the opposite.
With 189 member nations, the World Bank was established after World War II to make low-interest loans support worthwhile projects throughout the world, usually lending to low-income but developing nations with solid credit and good reasons for needing the money.
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The United States has always contributed more to the World Bank than any other nation, and this year increased its contribution. There’s a lesson in that. We’re the biggest contributors because we remain the world’s most prosperous nation. We give the most because we can.
And the reason for this is that no nation on Earth embraces capitalism and free markets like the United States. The next leader of the World Bank should take wisdom from that fact, and apply it in guiding the World Bank going forward.
If you go down to your local bank for a business loan, they’re going to ask to see a business plan and financial information to ensure you’re a good bet to repay the loan. When the World Bank considers lending to any country in the world, it’s worth considering whether the Bank is capitalizing prosperous policies or subsidizing the policies of failure and poverty.
There are politicians in the United States who have learned nothing from the lessons of history and are pushing for socialist policies here. They are not going to prevail because America is too invested in free markets (and rightly so). But elsewhere in the world, socialist policies have sadly sown suffering and misery.
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Would the World Bank lend money to the Maduro regime in Venezuela without first demanding radical changes to the policies that have wrought such disaster there? Would the World Bank prop up the failed policies of the Castro regime in Cuba, or muddled mess that’s been created by the Ortega regime in Nicaragua?
The World Bank’s lending power could be used as an incentive for free-market reforms, but first its leaders have to see how this would help bring about global prosperity, as well as political liberalization.
Can the World Bank make a positive difference in the world?
The next World Bank president also needs to take a fresh look at some specific practices, particularly the continued granting of low interest loans to China. The vision of the World Bank is to provide such loans to developing countries who need the help. China is the world’s second-largest economy, and it turns around and uses much of the money to make its own loans – at far less generous terms.
A global institution heavily supported by U.S. tax dollars does not need to be doing such special favors for China, which is perfectly capable of financing its own projects at market rates. And granting such favor to China is another example of propping up an economic system light on freedom and heavy on state control.
Every vacancy is a void that can be filled with someone who has a better plan and a clearer vision. The World Bank can still play an important role in promoting global prosperity. That starts by remembering how the world’s most prosperous nation – and the World Bank’s biggest source of resources – got to be what it is.
The views expressed in this opinion article are those of their author and are not necessarily either shared or endorsed by the owners of this website.
The opening at the World Bank is an opportunity for the Trump Administration . . . and the world.