Canada can play a leadership role in breaking World Bank stalemate by throwing its weight behind governance reform, strengthening accountability and transparency, and supporting a multilateral solution to presidential selection.
The leadership crisis at the World Bank enters its third week with a divided executive board, a divided staff and hence, a damaged World Bank. Canada’s low-profile approach so far could be perceived as siding with those trying to restore confidence in Paul Wolfowitz rather than pushing for reform, restoring legitimacy to bank governance and strengthening multilateralism, Canada’s signature values in the international community.
Graeme Wheeler, the New Zealander who is senior managing director of the Bank, has called this “the biggest crisis in its history.” The crisis is not just over the personnel matter involving Mr. Wolfowitz’s partner, but derives also from his efforts to centralize power in a few aides loyal to him, from breaches in policy-making processes involving poor consultation, individuals inserting narrow policy interests on population and climate change into policy documents, and pre-emptively cutting off loans to borrowing countries as a policy stick in his campaign against corruption.
This crisis of presidential leadership now threatens to become a double crisis involving a serious lack of accountability to the executive board if the board is not able to agree on his removal and a procedure for establishing his replacement. Canada can play a leadership role in breaking this stalemate by throwing its weight behind governance reform, strengthening accountability and transparency, and supporting a multilateral solution to presidential selection. So far, the Europeans have taken the lead in forcing these issues, with support from parts of Asia and most of Latin America. Respect for Canada’s reputation as the world’s leading multilateralist nation since the times of Lester Pearson give it weight and power in this situation which are vital to use to resolve the presidential crisis before it becomes a double crisis.
Merit selection for the president of the World Bank and managing director of the IMF has long been necessary. Practice since World War II has the U.S. name the president of the World Bank and the Europeans effectively appointing the managing director of the IMF. Calls for institutionalizing the merit-based selection reform have been rising recently as the North Atlantic anachronism becomes more visible and obnoxious. The way out of the presidential crisis is not just to require Mr. Wolfowitz to step down only to be replaced by another American “nominated” by the United States, thereby perpetuating the practice that led to the crisis in the first place. The way out is for the executive board to consider a list of nominees of experienced, qualified, trusted individuals who would neither represent nor be seen to represent their countries alone as president of the World Bank but be seen as appointed by the international community as a whole to manage the Bank in behalf of global society, not national or regional interests.
Such a list of nominees could include Paul Martin, former finance minister and prime minister of Canada, who has been an activist for governance reform in recent years and is a recognized multilateralist. But it could also include the likes of Pedro Malan, former finance minister of Brazil, Trevor Manuel, current finance minister of South Africa, Sri Mulyani, current finance minister of Indonesia, V.J. Kelkar, former executive director for India at the IMF, Stanley Fischer, former acting managing director of the IMF and former VP and chief economist of the World Bank, Jim Leach, former chairman of the U.S. House Banking Committee, and Tony Blair, current prime minister of the U.K., for example.
Canada’s support for this process of reform in the Bank and Fund would provide a way out of the current crisis by making clear that the kind of governance promulgated by Mr. Wolfowitz based on personality loyalties, national policy preferences, and centralized management practices is to be replaced by leadership selection based multilateralist engagement, global consensus, and consultative management practices of an experienced practitioner, not a political appointee. The crux of the crisis is not Mr. Wolfowitz and his dalliances but the misguided fundamentals of his management style, policy approach and lack of openness to different perspectives.
Canada would be true to itself and its multilateralist leadership role to take the high road in this crisis by pushing for merit-based leadership selection as an institutional reform which can not only lift the World Bank out of its current crisis but prevent the next one.
Homi Kharas delivered the keynote address at IFPRI’s annual staff retreat on September 12, 2018. He explored the evolving development agenda and its implications for policy research.