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Wolfowitz digs in at World Bank despite investigation findings

16 May 2007

The political outlook – what will the board do?

If he lacks supporters in his institution and in most governments around the world, he still has plenty in Washington, at least among his former cabinet colleagues. Bush, Cheney, Rice, Paulson and others have this week been working the phones and the airwaves in a strong coordinated defence of their man at the head of the World Bank. While they would like to it is unclear whether the Bank’s board is going to muster the courage to do the right thing and force a no confidence vote or similar resolution on their president. At this point it seems that the US and Japan and perhaps Canada are the only governments prepared to vote for Wolfowitz remaining in office, It seems increasingly unlikely that a consensus-based compromise will be found. Both the US government and several European ones are making implicit or explicit threats that they will reduce their funding for the World Bank’s International Development Association if this crisis is not resolved to their satisfaction.

Wolfowitz’s defence – and attack

Wolfowitz’s message to the Bank’s board is: I am being unfairly judged and will make changes to how I manage the institution to mend fences with staff and others. His message to the Bank’s board yesterday – carefully crafted by his high powered criminal lawyer – brings a very interesting interpretation to Wolfowitz’s public apology at the opening of the Spring Meetings on 11 April. He seems now to be saying that his wrongdoing was not to do with one human resources case, but with several much more important problems to do with managing a large public institution.

On the former – the Riza affair – it seems clear to most readers of the Bank board Ad Hoc Group report that both Wolfowitz and the Bank’s Ethics Committee were careless, and that Wolfowitz abused Bank rules. To quote the report: Wolfowitz "did not accept the bank's policy on conflict of interest, so he sought to negotiate for himself a resolution different from that which would be applied to the staff he was selected to head." This was: "a manifestation of an attitude in which Mr. Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply”. The report continued: “It evidences questionable judgment and a preoccupation with self-interest over institutional best interest".

It is this sense that Wolfowitz is arrogant, and unwilling or unable to listen to advice that conflicts with his set views which pervades much of the Ad Hoc Group’s findings, and the many many comments from Bank staff past and present. Following rebellions at the levels of current and former Managing Directors and Vice Presidents this week it was the turn of Bank Country Directors to speak out. Almost all of them signed an open statement of concern about Wolfowitz.

European governments: new approach needed 

European governments should not be too smug, however. A Guardian editorial today reminds readers correctly that Europe has resisted all calls to allow open appointments for the IMF head position. It says scathingly: “so far Europe has resisted any change of this cosy arrangement for retiring politicians. The IMF's managing director, for instance, is Rodrigo Rato, a Spanish rightwinger whose main qualification for the job seemed to be that he needed one”. I argued in an article last week that European governments should concede nothing on the issue of Wolfowitz, but should instead trade their right to appoint the head of the IMF.

Disputes such as this will be inevitable in future if such positions are gifted on the basis of political patronage rather than open, merit-based, recruitment. Europeans and Americans bearing heavy political baggage will be allowed to continue to wield power, and will repeat this approach to key appointments at the top of their institutions (Kevin Kellems, Wolfowitz’s aide who resigned last week, is but one of about five senior Wolfowitz’s appointees who people think should leave when the Bank president does).

Wolfowitz is coming to Europe for several meetings in the coming days. The first is the Annual Bank Conference for Development Economics in Slovenia where he is due to present an award for an anti-corruption essay prize. Based on the ridicule that greets Bank staff in Africa, Asia and Latin America whenever they mention good governance or anti-corruption these days, it should be a riveting spectacle. Then the Wolfowitz caravan moves to Germany for the G7 finance ministers meeting and the annual World Bank Forum, with German exporters and others discussing how they can benefit from the Bank. The German government is said to be very worried that both the G7 finance ministers’ meeting and the G8 summit in Heiligendamm will be overshadowed by the trans-Atlantic dispute on the Wolfowitz affair.

They are right to be. The situation is dragging on. The only solution seems to be for Europeans to call the American’s bluff, bring the issue to a vote at the Bank’s board, and then forge a compromise whereby both the Bank and Fund leadership selection processes are opened up. Eurodad and its members will continue to take these message to decision-makers and will use the worldbankpresident.org blog to continue to open up space to show the major lacks in transparency and accountability in the World Bank. At present it seems almost impossible to justify putting more aid money through an institution that is in such a mess and by the end of this month we will be announcing plans to take further the World Bank Campaign Europe to give further visibility to our concerns around the institution.