Faced with Growing Populism, World Bank and IMF Attempt to Maintain Course
This past week, representatives of 189 member countries convened in Washington for the Annual Meetings of the World Bank Group and International Monetary Fund (IMF) to assess the state of the world economy and evaluate the two international financial institutions’ plans for the coming year. This year’s Annual Meetings occurred amid growing dissatisfaction with global economic integration and free trade by populist movements in the United States and Europe.
Fearing a hostile Trump administration, the World Bank and IMF leadership tried to walk the fine line between proposing policies to address the concerns of globalization’s critics while defending international economic cooperation.
While praising the world economy’s protracted growth after emerging from the 2008 economic crisis, IMF Managing Director Christine Lagarde warned that many have been excluded from this growth, as well as from the benefits of globalization in general. She implored member countries to implement policies aimed at reducing inequality and addressing the threat of structural unemployment caused by automation. Lagarde contended, however, that “we know from experience that international cooperation works—from reconstruction after World War II more than 70 years ago to fighting Ebola just a few years back.”
World Bank President Jim Yong Kim espoused a similar message, warning that “what affects one city, one country, one region can have immediate and lasting impacts on us all.” According to Kim, many of the world’s problems, climate change chief among them, can only be resolved through international cooperation. To address these challenges, Kim petitioned the Bank’s member countries for additional capital.
The Trump administration responded to both leaders’ proposals with criticism, albeit not in the nationalist vein that supporters of globalization had feared. Treasury Secretary Steve Mnuchin characterized the IMF and World Bank as bloated and ineffective, contending that neither institution operated efficiently with the resources it already possessed.
Mnuchin advocated sweeping overhauls to how the World Bank and the IMF operate, calling on the IMF to design its lending programs promoting private sector-led growth rather than strengthening the public sector, and proposing that the World Bank focus on transitioning low-income countries off of donor assistance as soon as possible. Mnuchin also suggested that the World Bank seek to become self-sufficient with the capital it already possesses, and cease lending to middle-income countries such as China.
Neither institution seemed receptive to the prospect of such extensive structural adjustment.