Could the future of the World Bank be outside of Washington?

As the Trump administration dismantles foreign assistance, many in the development space are wondering when the government’s attention will turn to the World Bank. Experts say that withdrawing from the bank is very unlikely and wholly unadvised, but possible. If the U.S. did, however, there’s a chance that the headquarters, which were established in Washington, D.C. on June 25, 1946, could move. The World Bank’s headquarters must be located in the country that is the largest shareholder, according to World Bank rules. Right now, Japan is the next largest donor to the bank, but by a wide margin — the U.S. has 17.5%, while Japan has 7%. Germany, France, and the United Kingdom round out the top 5 donors. It’s impossible to know if this will happen and if it does, which country would host the bank. But some say that the center of power is already moving, as the recent actions by the U.S. show a set of priorities that go against the mission of the bank. “On some level, you're damned if you do, or damned if you don't,” said Kevin Gallagher, director of the Global Development Policy Center at Boston University. “If the United States stays in, we're already seeing that they are doing everything they can to violate the mission of the institution.” But the mission of the institution may depend on your viewpoint. Since its founding, alleviating poverty has been seen as its core mission, but over the last four years, the World Bank has consistently put climate change alongside poverty on its agenda, including changing its mission statement, partly at the urging of the Biden administration. But the Trump administration has reneged on $4 billion in financing to the United Nations Green Climate Fund and earlier this month, it opted to pull out of the Just Energy Transition Partnership, or JETPs, in which wealthy countries contribute money to help emerging economies shift to green energy sources. A survey of World Bank client countries last year found that climate change was not in the top 10 sectors they wanted the bank to prioritize — it was 11th on the list. But World Bank President Ajay Banga has argued that poverty alleviation and climate change are intertwined and must be tackled in tandem. If the U.S. were to withdraw, the question would become: Which member is likely to pick up the slack? The country that does will get the headquarters, as well as increased investment as it attracts financial institutions, consultants, and related businesses, job creation, and informal influence. Wherever the bank goes, the experts will follow, which boosts the knowledge and capacity available for local institutions. China is a candidate, as it already heavily invests in global development. But Nancy Lee, a senior policy fellow and director for sustainable development finance at the Center for Global Development, doesn’t think that China is necessarily the obvious destination. “The rest of the world remains committed to these institutions,” Lee said. “In all of my conversations, with Europeans, with Japanese, with Canadians, with Australians, they are still deeply invested in these institutions, they see their value.” Some experts also say that the idea that the bank would move over to Beijing could be a motivating factor for the Trump administration to stay in the bank. "It is inconceivable to me that the U.S. would vote for a capital increase that makes China the largest shareholder and then ship the headquarters to Beijing,” said Gallagher. In addition, China has the Asian Infrastructure Investment Bank, or AIIB, which is China’s home-grown multilateral development bank, headquartered in Beijing. China has around 30% voting share in AIIB, similar to the U.S. share in the Inter-American Development Bank. “[China] has never said we want to take over the World Bank,” said Gallagher. “They've just created an apparatus on the side that is bigger.” Both experts agree that there’s a need for strong European leadership, but even more so, collaboration. “Hopefully [Europe] has been stunned enough on the security and the NATO story to realize that they really have to get their act together and work with the Japanese,” said Gallagher. “If they took a proactive approach, you could see a Western consortium that bought up the shares.” Lee said that should this new “coalition of the willing” continue to grow, it could include large emerging markets and together develop a wing of the World Bank that has power in decision-making. “It would be better if that coalition of the willing included both the traditional rich countries as well as the big emerging markets that are, in some cases, borrowers from the institutions.” With this coalition, countries could pass issues that don’t require a supermajority even without U.S. approval. Lee said it’s in the early stages, but that it’s dawning on countries that the shift is real.