The US needs the World Bank because the energy race is for overseas consumers, not AI
It’s about Asia, stupid.
Readers: Katie Auth has a brand new Substack, Aid Interrupted, where she’ll be diving head first into what’s happening with US foreign assistance and what it all means. Follow her here.
Rumors are swirling that the US might ‘withdraw’ from the World Bank. This would be epically foolish because it would undermine virtually every objective of the new administration: energy abundance, fair markets for American technology, and countering China’s influence.
Exhibit A: soaring global electricity demand
After years of plateau, US electricity use grew by 2% last year. This news has some people worried: Will utilities be able to meet demand? Can we build transmission fast enough? Will AI gobble up all our power and spike prices?
Others are giddy at the 2% uptick because new demand creates all kinds of opportunities, such as Big Tech’s Big Bets on nuclear. Yet if 2% gets you excited, what about 400%? Or 1000%?
New data from the IEA projects that global electricity demand will grow by about 4% per year until 2027. Some of this will be for data centers in the rich world, but the vast majority – 85% of the growth – will come from emerging and developing economies.
I was on NPR’s Marketplace making this exact point:
We’re talking about orders of magnitude differences in developing countries, and so most of the energy investment and infrastructure is going to be in Asia, Africa, and the Middle East.
It’s all about Asia – and parts of Africa
Here’s what the past four decades look like.
And the next several decades? IEA goes out to 2027. To get a sense of the longer-term future of electricity demand, we made rough estimates out to 2050 using IMF growth projections and historical income-electricity correlations. With those assumptions, countries like Indonesia, Cambodia, and the Philippines will see demand grow by more than 400% by 2050. Bangladesh, Nigeria, and Ethiopia will soar more than 1000%. That means most energy investment opportunities will be in those markets too.
Big cities, bright lights
For all the hype about power investment for AI and new tech, the real story is more about repeating the history of human progress: billions of poor people will get richer, move to cities, and need more electricity. This is wonderful news. We should welcome it and do what we can to make sure that people benefit as quickly as possible. We should hope that governments everywhere make smart choices about how they get their future energy and pick partners that can deliver. The US should not miss the boat by short-sightedly abandoning the energy markets to China and other strategic competitors. Pulling out of the World Bank would be doing exactly that. (As would gutting DFC.)
How does the World Bank actually help?
The World Bank was created after World War II to promote post-war reconstruction in Europe. It quickly became a major Cold War tool for the United States to counter communism around the world by promoting private sector growth. The Akosombo dam in Ghana, for example, was financed by the World Bank in partnership with US firm Kaiser Aluminum. It was probably America’s single biggest move to contain Soviet influence in West Africa.
Today, the World Bank is one of the most important sources of infrastructure finance. It helps countries with sound long term energy planning too. Although I’ve been frustrated by their overplaying climate rhetoric and refusal to consider nuclear tech, the US still needs the World Bank. The Congressional Research Service has a terrific freshly-updated 2-page summary of the Bank, what it does, and how the US participates. Read those facts, not the misinformation being spread about the organization.
Shooting yourself to prove you have a gun is a poor policy choice
A key point for DOGE budget cutters: The Bank’s model is to borrow in private debt markets against shareholder ‘callable capital’ and then recycle its reflows. This means the US contributes very little in funding to generate huge sums of investment, while retaining a controlling veto. Despite what you may hear, US taxpayers are not just donating cash that’s blindly handed over to dictators who hate America. Even in the special window for the poorest countries, the US is scheduled to contribute $3.5 billion over three years to create $93 billion in new lending and grants. That’s a leverage ratio over 25:1.
We don’t have anything else even close. That’s why we must stay engaged and try to make the World Bank more effective. Being an active board member could help them refocus on economic growth and energy security, while strengthening one of America’s best tools for promoting competitive markets. That’s how you turbocharge global energy abundance and level the playing field for US firms. Walking away does not.
If the US withdraws and the World Bank shrinks, guess who that helps most of all? 🇨🇳
But World Bank does not support nuclear energy! Meanwhile Russia does for Egypt and many developing nations, as China is starting to do. Better to spend the WB money on such ample, reliable, clean power for them and US suppliers.
The World Bank is a key part of the Western finance and NGO agencies that block and restrict economic development especially development of nuclear fission, hydroelectric and natural gas energy capacity of mid level and south countries under the phony pretext of degrowth and Malthusianism. Absolutely pull out of World Bank on the route to killing it and the rest of the rest of the Western anti development agencies. The useful competition between firms and companies is to develop better products and services, not any schemes to game the system for one competitor or another. Public private partnerships are needed by every country that seeks to commercialize fission plants and any viable firm must sell globally. We have a rudiment in NRIC and ARDP, insufficient in scope and funding, but let’s repeal IRA and take a small chunk of the savings to commercialize multiple fission technologies.