Wolfowitz and the World Bank at Bay

Kenneth Rogoff

Will World Bank President Paul Wolfowitz’s troubles finally catalyze real change at the World Bank? Will there finally be an end to the archaic practice by which the president of the United States unilaterally appoints the head of the world’s most important development agency?

Even if Wolfowitz is eventually forced to resign, nothing will be gained if President Bush is allowed summarily to choose his replacement, as U.S. presidents have been doing ever since the bank was founded after World War II. Instead, the bank’s head should be chosen in an open and transparent process that aims to select the best-qualified candidate, whether from the U.S., Europe or the developing world.

Indeed, a big part of Wolfowitz’s weakness today is the way he came to his job, as an in-your-face appointment from a U.S. administration weak at international cooperation. The World Bank is a development finance institution. But Wolfowitz’s background at the U.S. State and Defense Departments gave him no real expertise or experience in either area. By all accounts, Wolfowitz is a brilliant person, but it seems inconceivable that an open, transparent and multilateral selection process would have chosen him to head the World Bank.

I reach this conclusion even though I am quite sympathetic to the Bush administration’s desire to catalyze change at the bank. I have long been an advocate for shifting the bank’s center of gravity from lending to outright grants, a policy that the Bush administration has strongly endorsed. But choosing someone with no obvious background or experience in economic development was hardly the way to make progress on this front.

And surely a more open selection process would have zoomed in on the fact that Wolfowitz’s girlfriend worked at the bank. You may think this is a trivial issue, but it is not, given the bank’s strong policies to protect against nepotism. If Wolfowitz were otherwise overwhelmingly the most qualified candidate, the selection committee likely would have found a way to finesse the issue, openly and transparently. But, given his questionable fit for the job in the first place, the girlfriend issue might well have been disqualifying. Why, then, does the rest of the world meekly go along with the status quo and let the U.S. so thoroughly dictate the bank’s top position?

It is a sorry tale of poor global governance.

Europe does not get in the way because some of its capitals want to maintain Europe’s equally outdated privilege of appointing the head of the International Monetary Fund, the bank’s sister institution.

Asia has little choice but to defer to the U.S. and Europe’s shenanigans because it is grossly underrepresented in both organizations. As for Africa, its leaders are loath to do or say anything that might interrupt the flow of World Bank largesse.

Now and again, both organizations pay lip service to the issue. But so far, they have exhibited no real desire for change. To be fair, the IMF’s leadership is making a determined effort to give dynamic emerging economies, particularly in Asia, a bigger say in fund governance. If carried far enough, this process would ultimately catalyze the necessary changes.

Perhaps when Gordon Brown becomes England’s next prime minister, he will be able to convince the G7 countries to lead the charge for change. As head of the fund’s ministerial oversight committee, Brown understands the issues as well as anyone.

Or perhaps the Wolfowitz debacle will prove to be the necessary catalyst. Maybe at last, the next World Bank or IMF president will come from outside their usual domains. There are plenty of great potential non-American candidates. South African Finance Minister Trevor Manuel has ably served as head of the World Bank’s oversight committee and would make a brilliant World Bank president.

And it still could be a qualified American. What about former President Bill Clinton?

One way or the other, the bank and the IMF leadership selection process urgently needs to be revamped. What the Wolfowitz debacle tells us most clearly is that the time for patience with the status quo is over.

View the original article on the Project Syndicate web site.