The outpouring of emotion that marked the departure of Robert McNamara, a protégé of John F. Kennedy, from the World Bank in 1981 after 13 years at its helm was unprecedented in the Bretton Woods institutions.
When incumbent World Bank president David Malpass took his leave last week ahead of his impending departure after four years, there was no McNamara-era emotion.
On the contrary, a stable, well-meaning president with a strong background in economic policy-making has been ousted from office by tribal politics.
But then, in the second decade of the 21st century, everything is political in Washington and the IMF, which moves the world’s money supply overseas, and its sister organization the World Bank, which aims to reduce poverty, are no exception. As IMF director Kristalina Georgieva warned this week, Russia’s war on Ukraine and deteriorating US-China relations are heralding a second “Cold War.”
As for Malpass, a moment of hesitation — when he declined to comment on whether he believed in the scientific consensus on climate change — opened the doors for his enemies. Former Democrat US Vice President Al Gore, a green activist, demanded the stately Republican’s resignation.
On the march: Russia’s war on Ukraine and a deteriorating US-China relationship usher in a second ‘Cold War’
The New York Times picked up the bats, and President Joe Biden’s climate change ambassador and former presidential hopeful John Kerry joined in the outcry.
The person who really mattered, US Treasury Secretary Janet Yellen, used her power as the bank’s largest shareholder to change Malpass’ direction. The World Bank boss did the honorable thing and resigned with a year left.
After the political assassination, he is a relieved man. The orchestrated campaign was based on untruths. In his last full fiscal year as World Bank president, the major lender provided $12.6 billion in climate finance, representing 38 percent of all projects.
Climate change targets were included in 90 percent of loans and 94 percent of credits and grants to the very poorest countries, mainly in sub-Saharan Africa.
Yellen also failed to see that the Bank’s clients, unlike its wealthy shareholders, do not want more climate change loans.
A confidential internal document prepared by developing country executives, dated March 20 this year and viewed by The Mail on Sunday, rejects the dominance of climate change targets.
It says that conflicts and pandemics have a huge impact on education and poverty and it penalizes advanced countries for demanding more green spending while not accepting their ‘own responsibility for climate change’.
The partisan dispute in Washington over the functioning of the World Bank rages in parallel with much deeper strife.
Barring political risks, the IMF has succeeded in recent months in pumping money into the economies of countries in intensive care, such as Ukraine and Sri Lanka. But it is a tough task.
Since the pandemic, the IMF has provided $300bn (£240bn) in new financing to 96 countries. But this was only a fraction of the $1 trillion in crisis facilities set up at the time of the pandemic.
Disaster is looming as massive debt and interest payments build up among the poorest countries in East Africa and around the world. The IMF and the World Bank have sufficient immediate financing resources, but are unable to relieve the pressure due to political divisions.
A new ‘Cold War’ between the US and China has become a huge blockade in alleviating sub-Saharan Africa’s debt and poverty problems. China may be faster at building roads than the World Bank and Western donors, but its support comes at a high price.
The People’s Republic refuses debt restructuring, considering it a special instrument of Western democracies, throwing the fate of hundreds of millions of people to the wind.
Friends: Robert McNamara and John Kennedy in 1960
A second geopolitical twist emerged during the Group of Seven session of advanced nations, including the UK, here in Washington. The commitment to finding alternative supply chains for energy, semiconductors and other sensitive commodities has been accentuated by the war in Ukraine and China’s threats against Taiwan. Russia and, increasingly, China are becoming geopolitical pariahs.
Georgieva fears a second Cold War and personally knows the consequences as someone born behind the Iron Curtain in Bulgaria. There is only acrimony between Democrats and Republicans in Washington, as the coup against Malpass and his swift replacement by Indian-born, former Mastercard CEO Anjay Banga illustrate.
But when it comes to common enemies China and Russia, US political leaders are united in slander. It is this geopolitical fault line that threatens to destroy the cohesion of the post-war economic order.
The pioneering work of the great British economist John Maynard Keynes, one of the founders of the IMF and the World Bank, has never seemed so threatened.
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