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IMF, World Bank & Trade

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Wolfowitz The Pawn in Global Games
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The appointment of Paul Wolfowitz as head of the World Bank has little to do with his personal credentials, writes Robert Hunter Wade


1st April 2005 - Robert Hunter Wade, The Guardian (UK)

Paul Wolfowitz's nomination to be the next president of the World Bank was accepted by the board of the bank yesterday without dissent. Yet privately many, probably most, of the board members and their governments had serious doubts about his suitability.

The Europeans were particularly outraged, given Wolfowitz's advocacy of US unilateralism and his lack of contrition for the debacle in Iraq. Development NGOs reacted with dismay at the nomination, and 92% of World Bank staff expressed a negative response.

So why no significant opposition from the board? There was, after all, a precedent.

When the German chancellor, Gerhard Schroder, nominated Ciao Koch-Weser, then the senior official in the German finance ministry and former managing director of the World Bank, to be the next head of the International Monetary Fund (IMF), the US treasury vetoed his nomination. The Europeans were asked to come up with a second nomination. They could have reciprocated this time around.

It is ironic that while the UN security council is likely to be restructured in line with the current distribution of economic power between states, the World Bank and the IMF remain firmly locked into the post-second world war settlement.

Europe's acceptance of Wolfowitz as the next bank president, despite widespread public opposition and private doubts, highlights the underlying common interest of the US and Europe to reserve most of the world's top international posts for Americans or Europeans.

The French and German governments expressed their reservations forcefully in private communications with the White House, only to have them brushed aside. The Europeans then decided not to pick a fight with the Americans over this issue because they fear other looming confrontations with the US, notably over Iran. Also, they fear that a fight would give developing countries an opportunity to nominate their own candidate for the presidency of the bank - not a silly idea given that the bank's borrowers are all developing countries.

Faced with a possible threat to their joint oligarchy, the Europeans preferred to concentrate on extracting concessions from the Americans in return for their support. They have Iraq-induced outrage to bargain with, which they claim needs assuaging.

The game was complicated, because each European state was trying to stitch its own deal with the White House at the same time as it tried to cooperate in a common European front. The deals mostly concerned the allocation of top posts in international organisations - which country's national will head the World Trade Organisation, the United Nations High Commission for Refugees, and the United Nations Development Programme; and which country will get to put up one of its own as Wolfowitz's number two at the Bank.

It is striking how little role the World Bank's second biggest shareholder - and the world's second biggest economy - played. Japan tends to docility in international organisations anyway, but the government is especially concerned to cling to warm relations with the US right now for both security and economic reasons. The Japanese are worried about China/Taiwan and North Korea, where they need American security help; and they fear American economic warfare in response to Japan's massive trade surplus. The US president, George Bush, recently took the trouble to telephone the prime minister, Junichiro Koizumi, to read him the riot act on improving access to the Japanese market for US beef.

As for why the White House nominated Wolfowitz in the first place, several reasons contributed.

The White House wanted someone who would enthusiastically embrace US foreign policy objectives, as James Wolfensohn, the outgoing president, did not - notably in Iraq reconstruction. Also, the White House was beginning to panic as the deadline drew near because it could not come up with plausible names from within its own circles, the administration having put together an economic team that is scandalously weak.

Wolfowitz at least has the credibility of having been dean of a prestigious school of international affairs and an ambassador to Indonesia. Also, he had been passed over for top jobs at the national security council and in the intelligence hierarchy, and he knew the White House was unlikely to burn up its political capital with Congress in securing approval for him to succeed Rumsfeld as secretary of defence.

The World Bank presidency looked like a good consolation prize.

There may be silver linings. One is that Wolfowitz has come out in favour of debt forgiveness for Iraq, which may pave the way for him to make a mark by supporting a policy of wider debt relief.

Another is the possibility of a "Nixon in China". As a trusted Bush administration insider, Wolfowitz may swing the US towards more support for the bank and thereby subject the US to more multilateral discipline. Ironically, the US may end up being more, rather than less respectful of international norms.

Wolfowitz is also known as a passionate democratiser, and may use the bank to push a "good governance" agenda. Some development analysts would approve.

More radical NGOs also see an upside: the anti-bank and anti-globalisation movements may get lots of opportunities for joint action against the Wolfowitz-led bank. In one scenario, Wolfowitz so blatantly turns the bank into an instrument of US foreign policy that developing countries finally get the courage to demand that the next president be appointed by a process in which they have some chance of one of their own being appointed.

For the moment, though, the major players act in the spirit of the Chinese proverb, "If it is inevitable, welcome it". But next time around it must not be inevitable that the Americans automatically appoint the president through a completely opaque process.


Robert Hunter Wade is a professor of political economy in the Development Studies Institute at the London School of Economics.

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