Last week the World Bank published a major book on a crucial aspect of development. The problem was its title. The scandal surrounding its president, Paul Wolfowitz, and the pay package he secured for his bank-employee partner means The Many Faces of Corruption (one chapter piquantly headed “Corruption in Public Procurement: A Perennial Challenge“) has become less a resource for development economists and more a goldmine for satirists.
Poverty; development; infrastructure: the areas the World Bank deals in are hardly the stuff of laughs. Its president, however, has got caught in a controversy that sounds like a bad joke. A man who was bundled into the job by the Bush administration, which could no longer find a use for him, blustered about educating borrower nations in the ways of good governance — and was found wanting in this area himself. Thanks to Wolfowitz, the salary of his partner, Shaha Riza, is higher than Condoleezza Rice’s earnings. At just less than $194 000, it would make a respectable prize on a gameshow. As American satirist Stephen Colbert says: “He knows corruption is the enemy; and Mr Wolfowitz fights fire with fire.”
No wonder that there is now a mutiny among staff and some (primarily European) donor nations. The turmoil has already driven out the bank chief’s PR man, Kevin Kellems. He resigned, saying that “given the current environment … it is very difficult to be effective in helping to advance the mission of the institution”.
The same logic obviously applies to his boss. Wolfowitz has fought off calls for his resignation, each time with weaker ammunition. First, he declared that an investigation by the bank’s executives would exonerate him. Instead it found him guilty of “questionable judgement and a preoccupation with self-interest”. The bank chief said he thought he had been asked to arrange Riza’s pay, a claim the report says “simply turns logic on its head”. His last defence is one of acting in good faith. Yet he reportedly threatened bank staff with retaliation if they revealed the pay rises and promotions won for his partner.
The bank’s executive board, which met Wolfowitz on Tuesday night, is due to make a statement this week. The committee is expected to endorse the report of the ad hoc bank panel — effectively calling for Wolfowitz’s resignation — and censure Wolfowitz for circumventing bank procedures. The ad hoc group concluded he had violated ethical rules and the terms of his own contract.
Wolfowitz’s lawyer, Robert Bennett, on Wednesday suggested Wolfowitz was happy to force the board into a showdown. “Mr Wolfowitz will not resign under this ethical cloud and he will rather put this matter to a full vote,” he said.
Wolfowitz is striving to negotiate a deal that will allow him to resign while passing some of the blame on to the bank.
His role as an architect of the Iraq war meant that Wolfowitz was never going to get an easy ride at the bank. If he does go, his critics will doubtless be in celebratory mood. They will have won a prized neocon scalp. But bringing down one of President George W Bush’s inner circle for violating an institutional code of conduct is a bit like nabbing a mafia boss for tax evasion. They should take this opportunity to push for reform of the system that put such a divisive figure at the helm of what is, after the United Nations, the world’s most important development organisation.
The job of World Bank president is traditionally the gift of the United States, just as the head of the International Monetary Fund (IMF) is a European appointment. This is the legacy of an antiquated system. So far Europe has resisted any change to 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. This is the time to reshape the system. Even before this controversy, the bank was passing the cap around for funding. The least donor countries should extract in return is the promise of reformed behaviour. Wolfowitz must leave, but his departure should be the start of change, not the end of it. — Â