Keep politics out of the World Bank

PUBLISHED : Wednesday, 23 May, 2007, 12:00am
UPDATED : Wednesday, 23 May, 2007, 12:00am

After an agonising and argumentative few weeks, the stubborn and self-righteous Paul Wolfowitz has bowed to the inevitable and resigned as World Bank president, effective at the end of next month. Yet his resignation should be the beginning - not the end - of the affair, otherwise the already grave wounds inflicted on the bank may prove fatal.

Sadly, all the evidence is that the small-minded politicians running this fragile planet do not realise what is at stake. It is time for US President George W. Bush, as he enters his dying-duck days, to stop seeing the world in terms of black and white, good and evil, and think of a successor to Dr Wolfowitz in terms of one of the biggest practical and moral problems the world faces. What should be done about the uneven state of affairs in which the rich inhabitants of industrialised countries gobble up 85 per cent of the world's wealth, leaving the bottom 40 per cent of the population with barely enough to survive?

It is time for China, and India too, to assert themselves and make their voices heard. They have begun to show immense growth rates and have lessons for the rest of the world - just as they need the advice of the bank about how to overcome intractable problems, some of which have been caused by their expansion, others because the growth has not spread evenly.

It is time for Japan and Prime Minister Shinzo Abe, if they want to be part and partner in the modern world, to stop cringing behind the US. Indeed, it says a lot about Mr Abe's blinkered world vision that he regards it as more important and urgent to change Japan's constitution, to get rid of its no-war clause, than to demand a say in the choice of the bank's president to reflect the nation's economic standing.

It is time for Britain's finance minister Gordon Brown to practise what he has long preached, about the need for a new global financial architecture. Mr Brown has been strangely silent about Dr Wolfowitz, just as Prime Minister Tony Blair shamefully acquiesced in Mr Bush's choice of Dr Wolfowitz to move from Iraq hawk to leader of the world's biggest development bank.

Who cares if the bank lives or dies? That is a reasonable question. Its demise would release a few hectares of prime area in downtown Washington. It would throw 20,000 or more people out of work across the world - economists, agronomists, environmentalists, social scientists, educators, along with hundreds of time-servers masquerading as human-resources and ethics specialists.

The bank has become a bureaucratic behemoth. On balance, it does more good than ill, but it desperately needs an overhaul, good leadership and better political direction.

But this is not only about the bank. It is about tackling the intractable problems of poverty in which an immense number of the poor are denied entry to a world of growing prosperity; a world where they live and die without a job, income or someone to care for them.

Supporters of Dr Wolfowitz have tried to claim that the outcry against the departing president was a continuing attack by critics of the invasion of Iraq seeking any excuse to malign him. They also claim that Dr Wolfowitz was unfairly pilloried by Europeans and Indians for his assault on corruption, and that he was doing a wonderful job by focusing on graft, Africa and poverty.

Yes, Dr Wolfowitz did arrive as a controversial and divisive figure. But he further divided the bank with his poor management.

In critics' eyes, his single-minded determination to get a super deal for his girlfriend, a long-time bank employee - which saw her pay jump from US$133,000 to US$193,000 tax-free with a promise that, if Dr Wolfowitz served two terms, she would be allowed to re-enter the bank at vice-president level - was merely the final straw of poor management. It was like the minister preaching against corruption being caught with his hand in the cookie jar.

He had to go. His subsequent bullying arrogance that he had done nothing wrong, yet would amend his ways, merely underlined the point that he was the wrong man for the job, but did not have the humility to realise it.

The real problems of the bank as it faces the modern world are political. The bank owners are its 185 shareholder governments, from the mighty US with a 16.38 per cent voting share - enough to veto loans - through to Japan, with 7.86 per cent, China, with 2.78 per cent, down to tiny Palau, with 0.02 per cent.

But the political problems start at the top, with the US and the president's hitherto unfettered right to appoint the bank's boss. Since the bank and the International Monetary Fund were set up more than 60 years ago, the spoils have been divided, allowing Europeans to appoint the managing director of the IMF and the US to choose the bank's president.

Mr Bush has declared that he will choose a successor to Dr Wolfowitz soon. If it is a poor choice, the Europeans - who have led the criticism of Dr Wolfowitz - should tell Mr Bush: 'No, try again.' There is a precedent, in that Washington has sometimes said 'no' to the Europeans' choice for the IMF.

But it is really time for China, India, Japan and the Europeans to insist that the rules of the game change. Let a proper job description be drafted for the bank president (and for the IMF leader, too). Let candidates apply with CVs and plans of action. Let them be interviewed and questioned, preferably in public, and chosen by ballot, with votes weighted as to shareholding strength.

It will be argued that there is not enough time to do this. If so, then appoint a caretaker president for two years or for the remainder of Dr Wolfowitz's time (which would be three years) while a committee ponders changes.

The message has to be clear: with Dr Wolfowitz's exit, the bank must have a president for its own times, not a political favourite of the US president.

Kevin Rafferty edited daily newspapers during IMF/World Bank annual meetings for eight years and was managing editor at the World Bank from 1997-1999