Forces of Corruption at The World Bank

With the passage of each day, it becomes less and less likely that World Bank President Paul Wolfowitz will be able to hold on to his post. World Bank directors have concluded that Wolfowitz had a conflict of interest in arranging for a pay increase for his girlfriend, Shaha Ali Riza back in 2005 and one of Wolfowitz’s key advisors, Kevin Kellems, has chosen to resign. Adding to the pressure for Wolfowitz to step down is the formulation of a deal in which, in exchange for acquiescing to Wolfowitz’s departure, the United States would be given the chance to choose the next bank chief. (Traditionally, the United States does choose the President of the World Bank, with Europe choosing the head of the International Monetary Fund in exchange). All of this comes despite the fact that even as the World Bank directors concluded that Wolfowitz had to go, they also concluded that the ethics advice that Wolfowitz received was “less than clear and evidently subject to misinterpretation” and that Wolfowitz has only been given 48 hours to respond to the allegations of the Bank directors.

While ethics allegations should not be dismissed casually, it bears noting that much of the fuss about Wolfowitz stems from policy disagreements. The European bloc at the World Bank is in favor of greater aid to poor countries. Wolfowitz is not against aid per se, but he is seriously concerned and outraged about the corruption practices that accompany much of the implementation of World Bank aid policies. On this and other policy issues, Wolfowitz has made powerful enemies, such as German Chancellor Angela Merkel who has sparred frequently with the World Bank President. Wolfowitz has also been in policy battles with the current British Chancellor of the Exchequer Gordon Brown, who is expected to be the next Prime Minister of Great Britain when Tony Blair steps down. Now, with Wolfowitz facing allegations of a conflict of interest, his political enemies naturally smell blood and are willing to use the conflict of interest charges to arrange for his ouster.

But even if Wolfowitz goes, many of the problems at the World Bank will remain. Chief amongst them is the issue of how the World Bank’s aid policies are hampered by corruption. In a comprehensive report regarding Wolfowitz’s World Bank leadership in general and his anti-corruption campaign in particular, the New Yorker notes just how deeply rooted corruption is at the Bank. As the article makes clear, Wolfowitz’s habit of suspending aid when corruption issues are not resolved to his satisfaction did not go down well with many of his colleagues at the Bank. Many of those colleagues accuse Wolfowitz of a certain high-handedness in conducting his anti-corruption campaign and the case might be made that Wolfowitz could have played the inside game better at the World Bank. But even if we grant that Wolfowitz was impolitic in conducting his anti-corruption campaign, his lack of bureaucratic savvy is a trivial issue when compared to the degree to which corruption has pervaded the Bank’s lending practices.

Indeed, even if Wolfowitz had played the bureaucratic game better, he still might have run afoul of the institutional powers at the Bank, which either would have forced him out quickly on other grounds or prevented him from remaining at the Bank past the end of his current term, which is due to expire in 2010. As this article by Bret Stephens points out, whistleblowers of all stripes who raise concerns regarding the Bank’s practices often find themselves out in the cold. Corruption and inefficiency are endemic to the World Bank and woe betides anyone with the temerity to point out that the Bank is in serious need of reform.

It should come as no surprise that the very forces of corruption Paul Wolfowitz has battled against are agitating for his ouster and are in a prime position to take over and ensure the continuation of the status quo in a post-Wolfowitz era. According to this article, Mark Malloch Brown, the former UN official who worked to obstruct the institutional reforms there pushed for by former UN Ambassador John Bolton and glossed over the seriousness of the Oil for Food scandal that plagued and discredited the UN, is one of the prime officials seeking to oust Paul Wolfowitz from the World Bank. Given Malloch Brown’s own lack of credibility, his own mismanagement and consistent refusal to deal effectively (really, at all) with scandals at the UN and the World Bank should cause more than a little bit of concern among those genuinely interested in World Bank reform.

At the end of the day, this controversy is less about the approval of a pay raise for Paul Wolfowitz’s girlfriend and more about the outrage Wolfowitz stirred in challenging the World Bank’s culture of corruption. If anyone violates ethics rules, they should pay the consequences. But that does not and should not detract from the legitimacy of the campaign against corruption at the Bank, or against the people who are all too willing to let corruption continue to reign simply because they have become much too comfortable with it.