Department of the Treasury Under Secretary for International Affairs David Malpass leaves a hotel in Beijing, Wednesday, Feb. 13, 2019. President Trump has nominated Malpass to head the World Bank. (AP Photo/Andy Wong)
Between the State of the Union address and the border-wall showdown, President Donald J. Trump quietly picked a key player to act on the global stage. Trump nominated Treasury Undersecretary for International Affairs David Malpass to lead the World Bank. Malpass is the ideal candidate to cleanse and modernize an institution charged with helping developing nations climb the economic ladder.
If confirmed by the U.S. Senate and endorsed by the World Bank’s Executive Board, Malpass would take the wheel of an organization that has grown flabby and distracted from its original mission of “ending extreme poverty” and “promoting shared prosperity,” as its website declares. Before he became a key member of President Trump’s economic team, Malpass served President Ronald Reagan as Deputy Assistant Treasury Secretary for Developing Nations and was President George H.W. Bush’s Deputy Assistant Secretary of State for Latin American Economic Affairs.
Despite these solid GOP credentials, Democrats should applaud Malpass’ calls to resist Chinese business practices and promote further structural reforms at the World Bank. Malpass echoes Senate Minority Leader Chuck Schumer. “We should focus on China,” the New York Democrat recently told radio host and businessman John Catsimatidis. “They’re the ones hurting us, and they hurt everybody. If we do nothing about it, it’s long-term real damage to America.”
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Rep. Brad Sherman, D-Calif., a member of the House Financial Services and Foreign Affairs committees, made comments that Malpass could have expressed: “We must end the World Bank’s lending to China, especially at a time when Beijing itself is saddling developing countries with predatory debt on unfair terms. Growing the Chinese economy is not the World Bank’s job.”
China and India are among the largest recipients of World Bank loans. Yet they are unrecognizable from when the Bank was launched in 1944. China is the Bank’s largest debtor. Its cumulative lending (from the International Bank for Reconstruction and Development and the International Development Association, both World Bank agencies) exceeds $60.5 billion as of last April, including $2.5 billion committed in 2017 alone. China enjoys substantial access to the global capital markets and is the U.S. federal government’s largest foreign lender. China owns $1.1 trillion in U.S. Treasuries, or 17.5 percent of America’s $6.3 trillion in international-debt obligations.
While China seeks additional World Bank largesse, the Middle Kingdom simultaneously is one of the largest lenders to the developing world. These investments are far from altruistic. China uses its balance sheet to advance its economic and strategic interests — hardly a shock. As part of its “One Belt, One Road Initiative,” China makes infrastructure and other investments in developing nations, both to secure its own supply lines and expand its geopolitical influence in such places as Sri Lanka, Tanzania, and Venezuela.
Most alarming, many of these Chinese loans finance dubious projects that too often collapse or fail to deliver the economic results needed to repay these debts to the heirs of Mao Tse Tung. Thus, World Bank dollars earmarked for enriching the world’s poor slosh through China and into “fragile” developing nations that ultimately wind up even worse off. All this while sound-lending and anti-corruption practices go up the chimney. Madness!
Sri Lanka, for example, was forced to cede control of the strategic port of Hambantota to China Merchants Port Holdings Company after falling into the “Chinese debt trap.” Djibouti, site of America’s primary African military base, also may have to hand over the keys to at least one of its new ports after falling behind to Chinese lenders.
David Malpass is just the man to rein in these abuses. He already has pushed to shift funds from countries that have escaped poverty to those still struggling to slip the shackles of penury. “We have been successful,” Malpass testified before Congress last December “in getting the World Bank to commit to meaningful reforms to achieve sustainability in its lending, enforce its graduation policy, implement differential pricing, and agree to other reforms that would enhance accountability.” These are the words of a serious, well-prepared reformer, not those of a “disastrous, toxic choice,” as former Treasury aide Tony Fratto described Malpass via Twitter.
Malpass most recently sandbagged dictator Nicolas Maduro’s attempt to pilfer Venezuela’s gold reserves.
After all, Malpass pressed the Trump administration for an unprecedented expansion of America’s contribution to the World Bank. The negotiations he led boosted the Bank’s capital by $13 billion after it agreed to key business-conduct changes, mainly weening “graduated” countries — like China — from the World Bank’s teats.
Malpass does not seek to stymie international-institutional lending. Rather, he seeks to do so while protecting American taxpayers. He will do this by watching the World Bank like a Rottweiler and assuring that it keeps its reformist pledges. Malpass seeks the “accountability and effectiveness” demanded by none other than leftist heroine Rep. Maxine Waters, D-Calif., the new chairwoman of the House Financial Services Committee. Malpass likely would advance these twin goals by making the Bank’s lending practices more transparent and streamlining its operations.
Laughably, Justin Sandefur, a senior fellow at the Center for Global Development, accuses Malpass of “economic malpractice” for not foreseeing the 2007-08 financial crisis while he was chief economist of the late Bear Stearns. Malpass, like so many other economists, indeed was caught off guard by this colossal market rout. But the fact that Malpass did not foresee the meltdown hardly detracts from his decades of pro-market intellectual leadership as a former board member of the Manhattan Institute and the Economic Club of New York, a frequent contributor to Forbes and the Wall Street Journal, and panelist on numerous news programs.
Since August 2017, Malpass has served in the Treasury and racked up a roster of significant accomplishments in global economics and finance. Among other things, he has:
• Promoted enhanced debt transparency and limits at the World Bank, International Monetary Fund, and other multinational institutions;
• Confronted Chinese predatory lending as part of its One Belt, One Road Initiative and achieved agreements to reduce Chinese lending;
• Pushed the Foreign Investment Risk Review Modernization Act of 2018, which strengthened U.S. national security interests;
• Collaborated on numerous multilateral pacts such as the U.S.-Mexico-Canada Agreement and the U.S.-Korea Free Trade Agreement to incorporate his long-held support for monetary stability. Such policies likely averted a new currency-related crisis in Argentina just last year;
• Advanced the Americas Grow program to foster prosperity and stimulate economic partnerships within Latin America, particularly Mexico and Brazil;
• Foiled the subversive, destabilizing economic misbehavior of the Marxist “troika of tyranny” — Cuba, Nicaragua, and Venezuela — by expanding sanctions and other restrictions. Malpass most recently sandbagged dictator Nicolas Maduro’s attempt to pilfer Venezuela’s gold reserves;
• Participated in trade talks with China and discussions on continuing economic challenges, including Brexit and U.S. relations with the European Union; and
• Labored to return jobs and foreign direct investment from overseas to America.
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Malpass is a committed free-marketeer with whom Democrats and Republicans largely agree. He has worked extensively with the G20 nations and across numerous multinational organizations on an array of economic projects, all while balancing both foreign and domestic concerns. He puts America first, but also understands that the United States wins by engaging our global partners and growing wealthy with them. Thus, David Malpass is the perfect fusion candidate to lead the World Bank and seek higher returns on America’s increased investment.
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Timothy Furey is an international financier and policy strategist.
Deroy Murdock is a Manhattan-based Fox News Contributor, a contributing editor with National Review Online, and a senior fellow with the London Center for Policy Research.