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The World Bank after Wolfowitz

Paul Wolfowitz – former U.S. Deputy Secretary of Defense, one of the most influential neoconservatives of President George W. Bush’s administration and a key architect of the Iraq war – has been forced to resign in disgrace from his current post as President of the World Bank. Technically, his resignation comes because of ‘ethical lapses’ …


Paul Wolfowitz – former U.S. Deputy Secretary of Defense, one of the most influential neoconservatives of President George W. Bush’s administration and a key architect of the Iraq war – has been forced to resign in disgrace from his current post as President of the World Bank. Technically, his resignation comes because of ‘ethical lapses’ concerning favoritism and financial benefits to his girlfriend, Shaha Ali Riza. In reality, this is not just the story of a bad manager who was reviled by his staff and become a pariah in his own institution. This is also the story of an institution that plays with the destiny of hundreds of millions of people around the world but remains unsure of and unable to shape its own identity. Wolfowitz should never have been appointed to the job. His tenure as World Bank President has been disastrous and he will leave behind deep and lasting scars on an already troubled institution. While his departure is, generally, a good thing for the World Bank and while it provides a perverse but real sense of satisfaction to the critics of current US foreign policy, it will do little to solve the structural problems that the World Bank faces. Indeed, it may even exacerbate some of these problems. Controversially appointed in 2005, Wolfowitz was a terrible choice for the post. A long-time security-hawk, he had no background in development or poverty alleviation. His claim to fame was as one of the principal proponents of the neoconservative strategy to go to war in Iraq as a way to reshape the Middle East. By the time he was nominated, that strategy had already resulted in disaster and his boss and mentor, Defense Secretary Donald Rumsfeld, was himself politically isolated. For the ambitious Wolfowitz, being elevated to Defense Secretary or to National Security Advisor – posts that he had been eyeing- were no longer viable options. The presidency of the World Bank offered Wolfowitz an opportunity to test out his grand theories about shaping the ‘hearts and minds’ of populations in developing countries who were becoming increasingly distrustful of US foreign policy goals. It also allowed President Bush a chance to install the most hawkish of his hawks at the helm of the one international institution that can intrude deeply into national economic, social and knowledge institutions that do, in fact, have the capability to shape the ‘hearts and minds’ of people around the world. Following, within weeks, the equally unpopular nomination of John Bolton as U.S. ambassador to the United Nations, Wolfowitz’s nomination in 2005 shocked the international community. Coming without any international consultations, it was seen as one more example of American arrogance and unilateralism. As the single largest shareholder of the World Bank (with some 16 percent of the vote in the Executive Board), the United States has traditionally held the right to nominate the president. The European Union – whose members control a cumulative 30 percent of the vote – made clear that they did not like the choice. Eventually the Europeans agreed to stick with tradition. As it turns out, their first instinct was correct and the arrangement has crumbled after barely two years. It was not just the scandal about Ms. Riza. It was also his dictatorial management style, his self-promotion, his aloofness, and his suspected hidden agendas. Now that he has been made to resign, does that mean that all will be well at the World Bank? Not really. Apart from the collateral damage that he has inflicted upon the institution’s reputation and staff morale, there is the fact that the World Bank was a dysfunctional institution even before Wolfowitz came to it. Its staff seems forever stressed, its public image forever tarnished, its shareholders (rich countries) forever dissatisfied, and its clients (poor countries) forever unhappy. It would be a pity if the Wolfowitz affair pushes the World Bank even deeper into the abyss of institutional angst. It would be equally sad if the opportunity for serious reform at the World Bank that is afforded by this turn of events were to be missed. Like most international institutions, the World Bank is reform-resistant. In particular, it has failed to resolve its own identity crisis: is it a ‘bank’ or a ‘development institution’? It likes to call itself not just ‘a’ bank, but ‘the’ Bank; but it is not. Its employees are encouraged to act as if they were bankers; but they are not. Many do not even want to be. The result is that it ends up being neither. It fails to apply either the fiscal rigor of a real bank or the deep compassion of a real development institution. Resolving this schizophrenia is not going to happen overnight. But what can happen immediately is to change the process for selecting World Bank presidents. Traditionally, the president is an American and is chosen by the U.S. government. Maybe it is time to change this tradition. As the Wolfowitz case has shown, this job is too important to be a partisan political appointment from one country. The fact that the U.S. is the single largest shareholder should never have been the criteria. If it is to be, then the European Union now holds more votes and should have precedence. But if we have to rethink the process, then why not think bigger and broader. Are individuals coming from the richest industrialized nations automatically more capable of understanding and implementing the World Bank’s stated mission of ‘global poverty reduction’? Couldn’t someone who comes from a developing country and who has seen poverty and its determinants closer at hand do the job as well? Maybe even better? The U.S. has been quick to lay claim to the next appointment. Others have suggested European alternatives, including U.K. Prime Minister Tony Blair. Developing countries should also throw a few names into the ring. At the very least it will get a conversation going on imagining the possibility of putting the ‘world’ back into the World Bank. Later, we can also start thinking about taking the ‘bank’ out of it.

Prof. Adil Najamteaches at The Fletcher School of Law and Diplomacy, Tufts University, USA, and is author of the book ‘Global Environmental Governance: A Reform Agenda’ (2006).

Topics: Wael Ghonim

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