Making sense of Scott Bessent's critique of the IMF and World Bank
The US Treasury Secretary wants the IMF and World Bank to once again be singularly focussed on advancing US interests
Yesterday, US Treasury Secretary Scott Bessent delivered an interesting speech in Washington at the Institute of International Finance. The speech was delivered to coincide with the annual IMF and World Bank Spring Meetings taking place this week in Washington.
The speech was highly anticipated because there has been chatter about the future of the two Bretton Woods Institutions in the wake of the Trump Shock. That shock has already delivered the unexpected shutdown of U.S.A.I.D and the withdrawal of the US from the World Health Organization (WHO). Many have wondered whether a withdrawal from the IMF and World Bank was also on the cards.
The uncertainty was largely settled with yesterday’s address where Bessent was unequivocal in stating: “Far from stepping back, America […] seeks to expand U.S. leadership in international institutions like the IMF and World Bank.” In other words, the US ain’t going nowhere!
Bessent’s renewed commitment to the IMF (“the Fund”) and World Bank (“the Bank”) does not come as a surprise to me. In the last couple of weeks, I have heard pontifications from eminent social scientists (mostly from the global North) predicting a US withdrawal with certainty. These analyses have struck me as naive.
In my estimation, there are very few, if at all any, multilateral institutions that have delivered a “return on investment” for the US like the Fund and the Bank. This is why Bessent yesterday reaffirmed his country’s commitment to the two institutions.
Unlike other multilateral organizations, the US, on its own, has effective veto power when it comes to the most consequential decisions of the World Bank and the IMF. No other country has this power. And in no other multilateral setting does the US have this singular power. Not even in the UN’s Security Council where the US has to contend with the veto powers of the other four permanent members.
Unsurprisingly, the US has used its outsized power in the Fund and the Bank to much success in “winning friends and influencing people” across the world. In other words, the World Bank and IMF have been effective and efficient tools of US foreign and economic policy. This is why Harry Dexter White of the US Treasury fought so hard at the 1944 Bretton Woods Conference to have the two institutions headquartered in Washington. This is why Scott Bessent yesterday renewed his country’s vows to the Fund and the Bank.
Bessent’s address was not just a renewal of vows. He wants to see the Fund and the Bank returning to their original mission of advancing US interests at the expense of the rest. That is, as the foreign economic policy arm of “America First”. Anything short of this is, according to him, “mission creep”.
Bessent wants the IMF do a lot more to discipline the US’s arch economic rival, China. His speech, ostensibly about reforming the Fund and the Bank, mentions China at least 10 times and he doesn’t mince his marching orders: “the IMF needs to call out countries like China that have pursued globally distortive policies and opaque currency practices for many decades.”
Earlier on in his speech Bessent is very clear about the spectre of China from the vantage point of the US:
China, in particular, is in need of a rebalancing. Recent data shows the Chinese economy tilting even further away from consumption toward manufacturing. China’s economic system, with growth driven by manufacturing exports, will continue to create even more serious imbalances with its trading partners if the status quo is allowed to continue.
China’s current economic model is built on exporting its way out of its economic troubles. It’s an unsustainable model that is not only harming China but the entire world.
China needs to change. The country knows it needs to change. Everyone knows it needs to change. And we want to help it change—because we need rebalancing too.
China can start by moving its economy away from export overcapacity, and toward supporting its own consumers and domestic demand. Such a shift would help with the global rebalancing that the world desperately needs.
Whereas Bessent’s instructions to the Bank are slightly less US-centric and sensible in some cases (eg, emphasising the need to facilitate large scale energy access in developing countries), he also sees the Bank as vital in his anti-China strategy:
Going forward, the Bank must set firm graduation timelines for countries that have long since met the graduation criteria. Treating China—the second-largest economy in the world—as a “developing country” is absurd.
While it has been at the expense of many Western markets, China’s rise has been rapid and impressive. But if China wants to play a role in the global economy commensurate with its actual importance, then the country needs to graduate up.
In conclusion, Bessent’s address was the clearest and most cogent public articulation, at least in recent times and by a high ranking US official, of the raison d'être of the IMF and World Bank. Previous US administrations have purposefully hidden the original logic of the two institutions in doublespeak. I hope that the scales have now fallen from the eyes of our policy elites in Africa.