Why Wolfowitz should quit the World Bank

It’s only when times get tough that you find out who your real enemies are, as Paul Wolfowitz found out at the April meetings of the World Bank of which he is president.

Mr Wolfowitz found himself unusually on the defensive after allegations were published that he helped negotiate a large pay rise for a Bank employee with whom he was romantically linked. After he was given the top job at the poor countries’ banker by US President W Bush who by convention has that job in his gift, he was presented with a problem. His girlfriend, Shaha Riza, a Tunisian-born British citizen, could no longer work at the Bank because of tight rules aimed at enforcing good governance within the institution.

The extra twist was the claim that he had personally got involved in negotiating a deal that saw her move to the US State Department on a salary higher than that of the Secretary of State, Condoleeza Rice. Mr Wolfowitz issued a public apology and said the matter had been handed over to the executive board of the Bank, which published the full 207 pages of background material to the case.

The board said it would decide on the issue “expeditiously” which was taken as meaning that the 25 development ministers who make up its board would make a decision, one way or the other, by the end of the meetings. This in turn fuelled speculation that he would not be able to hold onto his job.

The case for the prosecution was clear. He had come from the Bush administration with a mission to tackle corruption and poor governance at borrower countries. Within 18 months however it had turned out that he was at the centre of a storm of allegations over bad governance. However it swiftly emerged that the former deputy defense secretary had amassed some enemies along the way.
His role in the Iraq war, whose long-term fallout appears worse by the day, had angered many European countries. He had angered the Bank’s 10,000 staff by bringing in advisors from his Pentagon days and the staff association came out publicly calling for the publication of documents.

Then at the last meetings in September 2006 Hilary Benn, the UK Development Secretary, went public with a threat to withhold £50m from the Bank unless it followed through on a pledge fully to abandon its practice of attaching economic policy and other conditions to its loans and grants.

The Europeans looked keen to use this affair as a way to remove Wolfowitz from office and the White House, which should have been his most vocal supporter, seemed to be caught out by the issue. This left the African, Asian and Latin American country bloc, which include the Bank’s clients. It appears that Mr Wolfowitz used the three days between his apology and the meeting of the board to garner support.

Some African countries such as Liberia and Mauritius came out in favour and found their statements put up on the Bank’s website. Others such as South Africa and Zambia voiced concerns about a “kanagroo court”. In the end Mr Wolfowitz was able to front out his closing press conference, blocking all questions about his future with the same stock answer.

The only conclusion must be that the Europeans were too soft and the African and other blocs too divided to actually carry out the coup de grace.
This leaves a mess for the Bank. Its development committee of representatives of its 185 members said the issue was of “great concern” and said it expected the Bank to adhere to a high standard of internal governance. Yet he is still in his job and no one knows when the board will come to a decision
It is for that reason – not the Iraq War, nor his antagonism of his staff – that he should have resigned. The Bank is involved in a massive anti-corruption drive and has been accused of making lending decisions based on the recipient’s allegiance to the US (a claim Mr Wolfowitz denies).

For the same reason that Conservative ministers had to resign in the 1990s after it emerged they were not exactly following John Major’s back-to-basic family agenda, so the bank’s president should have quit after it became clear that he could not apply to himself the standards he wanted to impose on others.