World Bank faces change post-Wolfowitz

John W. Schoen Senior producer • Profile • E-mail

The political firestorm at the World Bank that cost President Paul Wolfowitz his job Thursday was sparked by a promotion he arranged for his girlfriend. But some of the real issues behind his ouster have been festering since his first day on the job in 2005, when he embarked on a mission to change the way the 60-year-old institution manages its task of fighting global poverty.

That means there’s a lot more at stake than the political infighting between Wolfowitz, the White House’s hand-picked proxy, and the powerful European members of the bank's board who pushed him out, according to Colin Bradford, a senior fellow at the Brookings Institution.

“What’s at stake is that the bank is a caldron, a forum in which countries around the world in their differing capacities and weights sort out where we’re going in the attack on global poverty and on issues related to it, such as global financial flows, debt, trade, health, environmental issues that impact on poverty and the like,” said Bradford, an economist and former World Bank staffer.

Established at the end of World War II as part of a restructuring of the world financial system known as Bretton Woods, the World Bank and its sister International Monetary Fund were tasked with rebuilding economies ravaged by war. The major parties to the agreement — the Allies that won the war — decided that the World Bank president would be chosen by the United States and the leader of the IMF would be appointed by major European powers, a policy that has persisted since.

As the bank's biggest donor and largest shareholder with a 17 percent stake, the United States also maintains effective control over broad policy issues with veto power over major bank decisions. Critics of the World Bank say that makes the bank too reliant on U.S. foreign policy.

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The backlash against Wolfowitz has reopened the debate over whether the agency should have greater independence. At the very least, it has increased pressure on the White House to cede some of the authority for naming the next bank president to seek a wider consensus among member countries.

“You’re seeing a kind of clash of cultures between a highly centralized, determined, single-minded and authoritarian style of management in an institution which is multilateral and therefore has a diverse set of interests and ideas and perspectives that is embodied by the nature of that fact that 185 countries are members of the bank,” said Bradford.

In his two years in office, Wolfowitz, who was one of the Bush administration's key architects of the Iraq war, managed to ruffle feathers on several issues, according to Faiz Shakir, research director at the Center for American Progress.

“He has promoted regressive family-planning policies,” he said. “He has tried to play down the link of global warming and carbon emissions in World Bank science reports. He's tried to push a World Bank office in Baghdad, of all places, one of the most corrupt and insecure places around the globe, and he’s saying anti-corruption is his principal issue."

Wolfowitz’s supporters say his campaign against corruption in developing countries is critical to the success of the bank’s mission of fighting poverty.

There’s no disagreement that money intended to help the poor can’t have an impact if it lands in the bank accounts of corrupt political leaders. But Wolfowitz took a harder stand than his predecessors — going so far as to cut off funds to countries that he felt didn’t attack corruption aggressively enough.

That cutoff antagonized some World Bank officials and fed the political backlash against him, according to Jack Burkman, a Republican political consultant in Washington.

“Most of the money has been embezzled by warlords and ended up in the hands of people with munitions,” he said. “These bureaucrats in the bank, the ones that don't remain bureaucrats for their lifetime, a lot of them go out and become consultants. They live off this fat and corruption. Wolfowitz (was) threatening their little fiefdoms.”

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