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Does Wolfowitz need to go?

The World Bank, under two successive leaders, has made the fight against global corruption a significant issue. The former President, Jim Wolfensohn, in the mid-1990s referred to corruption in governments in the developing world as ‘the cancer of development’ and challenged the political taboo that prevented the topic being openly discussed. Paul Wolfowitz followed Wolfensohn’s lead and continued the anti-corruption stance. Has Wolfowitz, by seemingly engaging in favoritism and abuse of the privileges of office, shot himself in the foot? Does he need to go?

What are the issues? With respect to calls for his resignation, there seems to be two issues. One is World Bank procedure and the other is failure of judgment.

Wolfowitz argues that he was delegated by the Board to deal with the issue of his relationship with a Bank employee. He asked to be excused from this task and this was refused. If this is the case then this shows a lack of judgment on the part of the Board. The World Bank has an ethics committee and has clearly thought about issues that such a committee normally deals with. Normally, the Bank has strict rules. There is a gap in the system but ‘good governance’, a cause preached by the Bank and other developmental agencies, requires that the appropriateness of actions should be considered and that decision-making should be transparent. It was only with the adverse publicity in the New Yorker and the Financial Times (London) that what was rumored within the Bank came into public view. In not having a proper and de-personalized and transparent system in place, the Bank failed itself.

Does this absolve Wolfowitz from responsibility? The case against him seems to have more than one strand. Any organization that preaches against moral failure must be very certain of the ground on which it stands. This is simply political common-sense. Any failure needs to be addressed and addressed quickly. Rumor circulated for a year within the Bank. Wolfowitz himself has said in the past that no standard can be high enough. In his own terms, then, there is a failure here. But this is not all. Wolfowitz’s judgment has been at fault several times over this episode. In the first instance he seems to have resisted the idea that his friend should leave the bank in order to avoid preferential treatment. Acting on instructions, he then proceeded to give her preferential treatment, the action that transfer was supposed to avoid, before she left the Bank. Fine, if the move was essentially involuntary on the part of his friend then some compensation may be justly called for, but any such settlement ought to have been handled neutrally. The final failure of judgment is that for a whole year he denied any involvement in the process.

There are other failures of judgment too. His approach to fighting corruption has been seen to be erratic. His critics would argue that an anti-corruption policy has to be tough, consistent and fair. Wolfowitz has wobbled over Chad (first cutting off aid and then backing down), helped Kenya, punished Indian education and ignored the issues of corruption in China. No doubt the political issues are complex and no doubt that the role of the President of the World Bank is a political role. Attributes required in this role and in the context of anti-corruption practices are transparency, personal integrity, clear rules and procedures and consistent and considered judgment.

Wolfowitz’s internal credibility and his external credibility have been damaged. Those who argue for reform of World Bank governance have been given a golden opportunity. It probably would be best for the Bank that Wolfowitz resigns though it is clear that dismissal would be difficult. He is appointed by the President of the United States and Bush has given his public backing (‘full confidence’). No Board has ever fired a Bank President though it has technically the authority to do so but it would be politically difficult given Bush’s support. It is high time that the position be based on merit and not on political patronage and hence open to international competition. There are some interesting potential candidates out there: Tony Blair is one and Ngozi Okonjo-Iweala (the anti-corruption former Federal Finance Minister of Nigeria), is another.