Wolfowitz at the World Bank

by on May 15, 2007 at 12:53 am in Current Affairs | Permalink

In an excellent piece, Sebastian Mallaby writes:

…the biggest misconception about the bank is that it needs the goading
force of Wolfowitz to fight graft in poor countries.  Even before
Wolfowitz arrived in 2005, the bank was trying to plug leaks in
government budgets, reform civil services and back new anti-fraud
units: From 2000 to 2004 the bank’s lending to improve public-sector
governance grew 11 percent annually.  Wolfowitz’s goal was to take these
anti-corruption efforts to the next level.  The instinct was noble; the
implementation horrible.

As an outsider it is hard to judge many aspects of Wolfowitz’s tenure.  I take his continuing unwillingness to resign to be the biggest argument against his managerial abilities.  He has lost the public relations battle and can no longer be effective.  Why should he want the job any more?  The obvious hypothesis is that he is emotionally committed to a losing battle, and is not placing much weight on the long-term interests of the institution he is running.

Addendum: Chris Masse points me to this good article on the crisis facing the World Bank.  I would add that the real "corruption" problem is that the Bank’s board expects lucrative "development" contracts to be given to national firms of France, Germany, U.S., etc.  In the final analysis the Bank has a strong incentive to push through loans, whether it should or not.  Recipient nations have learned how to game this system very well.  I believe this more or less legal form of corruption is well understood by Wolfowitz and his ultimate goal was to challenge the institution at its core.

Tino May 15, 2007 at 1:22 am

Another obvious interpretation is that the entrenched bureaucracy of the bank is pushing him out for political reasons, based on bogus charges. He is fighting back due to a sense of justice or in the best case due to a sense of responsibility.

This is similar (but of course no where near as scandalous) as the Summers-Harvard controversy. Fine, Summers lost the “confidence† of the organisation. But if the “organisation† has it’s own agenda it is not automatically given that the best thing is that president always gives in as soon as his enemies find an excuse to “lose confidence†.

An equally important question is if we should accept their grievousness as fair. If the WSJ is right that they ethic committee *themselves* suggested that the women should get a raise to compensate disturbance to her career than the charges are not just. In that case perhaps the American and Europeans taxpayers should “lose confidence†, and fire the board of the bank?

Will May 15, 2007 at 2:10 am

I hate to see MR go to the dogs like this… :-)

Barkley would you agree Tito’s first two paragraphs represent a plausible alternative hypothesis as to why Wolfowitz hasn’t stepped down?

Joe Bingham May 15, 2007 at 3:35 am

I can see the point that W should resign just because he’s ineffective now (i.e. people believe a story about him), but he certainly has a case to make that if anyone can make someone “ineffective” with false accusations to a remarkably stupid media (whatever the true story is, the coverage has been incredibly unthorough) it’s a setup for future problems. If he is indeed telling the truth, he probably shouldn’t cave, if only for the sake of precedent. Don’t let them think they can get away with that sort of thing, blah blah blah.

Just saying he has an argument there.

JustTheFacts May 15, 2007 at 5:34 am

Let’s start with neutral points that should apply in every situation:

1) Lying matters. It matters especially in a leader. Who will follow a leader they cannot trust?

2) Confidence matters. Fair or unfair, if the people underneath you think you are a chump, you aren’t going to get anything good done.

3) If you keep a non-trusted leader in a position of leadership, you run a very real risk of weakening, and in some cases even killing, the institution being led. If you are running a big organization, and if you are not a totally self centered egoist, you understand going in that in the final analysis what’s good for the organization is what counts, not what’s fair to you.

4) Any public organization is weakened if its clients and supporters feel that there is a hidden agenda at work in the way it approaches its work.

5) Leaders of large global organizations have be street smart and savvy enough not to fall into obvious traps. If they expect the world to be fair or situations to be clear on the surface, they are out of their depth.

Now let’s review some neutral historical facts on the Wolfowitz situation:

1) The situation with his girlfriend was a sticky situation. Handled at the best of times (before he signed his contract and came on board) and in the best of ways, it wasn’t going to be easy to resolve given her legitimate interest in her own career.

2) The ethics committee did not go out of their way to be helpful to Wolfowitz. Whether this was due to laziness, stupidity, spinelessness, or strategic game playing is hard to tell, but it is clear that they did not act to make it easy for Woflowitz.

3) What Wolfowitz did went beyond what they told him he could do.

4) What Wolfowitz did went way, way beyond any salary increases his girlfriend could have expected to have won in the normal course, and had an outsized impact on her likely pension even beyond the salary.

5) Wolfowitz omitted (and evidence shows, deliberately omitted) to inform the ethics committee or the board of the specifics of how he resolved the situation.

6) Wolfowitz has falsely claimed that he did disclose all. He now admits that he was not the source of any disclosure, but points to an anonymous communication from a disgruntled World Bank employee as the source of the claimed disclosure. Given the sheer ludicrousness of taking credit for an anonymous complaint as his own disclosure, Wolfowitz has followed his earlier lack of candor with deliberate deception.

7) The bank’s fight against third world corruption did not begin on Wolfowitz’s watch, but before, although Wolfowitz and his apologists have attempted to portray it as his idea.

8) There are legitimate questions about whether Wolfowitz has been neutral and evenhanded in the way the bank has handled the anti-corruption campaign. Cutting off Uzbekistan is hard to argue with given the regime in place there, but questions arise as to why it happened only after Uzbekistan broke with Wolfowitz’s old buddies in the Pentagon, and to why similar sanctions are not being applied against equally corrupt regimes friendly to US interests (e.g., but not limited to, Pakistan). Bank staffers opposed to the way Wolfowitz has “fought corruption” are not necessarily opposed to a fair, neutral and well implemented fight against corruption.

Now some conclusions:

1) Wolfowitz’s behavior in granting the raise was questionable at best, and his defense has been untrustworthy.

2) If Wolfowitz was not corrupt, he was naive, and running an organization like the World Bank is no place for someone who can’t spot traps being set. (Cf. running Harvard, which is no job for someone who spouts off at a conference like it is a dorm room bull session, failing to understand in that position and that setting that every word needs to be measured and calculated lest it be too easily twisted.)

3) Wolfowitz’s handling of the anticorruption campaign has been clumsy at best, and directed by an outside agenda at worst. If the Bank is perceived to be an agent first and foremost of US foreign policy, its effectiveness is weakened. If the anticorruption policy is perceived to apply only to non-allies of the US, its seriousness is in doubt.

4) Whatever Wolfowitz has said about corruption in the past, given his own history, he will have no credibility on the issue going forward, and, predating Wolfowitz, it is an important issue for the bank to address.

5) Wolfowitz no longer has the confidence of important constituencies at the bank, including most of the employees and the European nations that provide most of the budget.

6) A person concerned about the welfare of the bank in Wolfowitz’s place would have resigned for the good of the bank.

7) A US patriot in Wolfowitz’s place would have resigned to ensure that US control over the bank was not endangered.

Some questions:

1) Given that Wolfowitz really will be unable to lead the bank effectively, why isn’t he resigning?

2) Is he just hanging on to get a large severance package, the bank and US interests be damned? Is there any truth to the rumor that he gets a $400k severance package if he can just hold on to June 1?

3) Whatever cupidity or ego drive motivates Wolfowitz, are the people propping him up playing a deeper game, with the end game being the weakening, and potential destruction, of the World Bank as a major international player? Do they want a weakened Wolfowitz in place, or a destructive board fight, as a means to achieving a larger goal of crippling the bank? Does anyone think Dick Cheney, who appears to be managing this for the administration, has the bank’s best interests at heart or believes in its mission?

happyjuggler0 May 15, 2007 at 12:36 pm

I have a great idea that will end this fight once and for all. Kill the World Bank. It is superfluous at best, and a disincentive for dictators to create institutions that create wealth. Not to mention the opportunity cost of the money and brains being wasted at the World Bank.

Murphy May 15, 2007 at 2:39 pm

What Wolfowitz is doing is indicative of the administration he came out of. Power for power’s sake. He certainly is not doing it for the money. With his political connections one of these rich rich Private Equity Funds would snap him up in a minute, the compensation there dwarfing anything he can or will get at the World Bank.

Just like the old line, no one should be allowed to be President of the United States who wants to be President. The desire in and of itself is proof of lack of competence for the job. Precisely because Wolfowitz wants the job so badly, he should be terminated.

Barkley Rosser May 15, 2007 at 6:01 pm

Will and Constant,

Yes, of course the WB staff does not like PW and never did. He should have known that. Therefore he should have
been all the more careful about his conduct and made greater efforts to get along with these people and not give
them red meat by engaging in personally corrupt conduct. It is rather like Bill Clinton’s problem. He should have
known that he had enemies out to get him, especially on any kind of immoral conduct. Thus, he goofed.

And, of course, the basic problem with Tino’s first paragraph is that the charges are not bogus, and PW has
openly lied about the whole business.

I would note a further point here. Not only did he engage in all this favoritism for Riza, but he brought in
a pair of completely inexperienced hacks from the administration with him, got them overblown salaries, and
one of them, Robin Cleveland happens to have a record of corruption in steering contracts to her brother. This
is how one fights corruption? You folks really don’t get it, do you?

As for Summers, let me emphasize, he did not fall because of his comments about women. He fell because he
lied to the faculty about Shleifer. This has been reported, although lost in the shuffle. Basically, Summers
and Wolfowitz have the same problem, lying to overseers and associates out of sheer arrogance. Summers was made
to leave. Wolfowitz should leave also, and for his own good he should have resigned.

Josh Weinberg May 15, 2007 at 11:23 pm

“From 2000 to 2004 the bank’s lending to improve public-sector governance grew 11 percent annually.”

Mallaby gives a perfect example of one of the (many) critisims Easterly has leveled at the World Bank: using dollars lent (inputs) rather than amounts of curruption (outputs) as a measure of the bank’s sucess.

JustTheFacts May 16, 2007 at 5:04 am

“Wolfowitz didnt grant the raise, the ethics board commitee did.”

Booshwa. The committee agreed that some settlement should be made that involved a raise. The magnitude of the raise – several times what she could have expected under the best of circumstances – was not set by the committee, and, Wolfowitz’s lying claims to the contrary, was not disclosed to the committee.

One of the things that bothers me about Wolfowitz is that much of his defense involves made up, patently false “facts” such as this one. He didn’t start the anti-corruption drive at the bank, and there is a fair argument that he derailed it by subverting it to US foreign policy concerns. He did set the level of the raise, right down to specifying that she would receive uniformly high performance reviews in the future. He did not disclose the contract he dictated to the bank, but instead told those involved in it to not disclose it to seemingly essential overseers such as the bank’s general counsel. It is not a legal settlement, because the bank is immune to lawsuits. The list of falsehoods disseminated by and for Wolfowitz could go on, and on, and on, all of which further define his mandacious and self-centered character.

As for why people don’t leave the bank – setting aside the power of inertia, or the desire to finish up the time to a nice pension, there is the possibility that some of them actually believe in the bank’s mission and feel (however wrongly) that they are doing important work. It’s like asking why a law professor writing about and teaching tax policy doesn’t leave academe to practice – sure, they could, in a heartbeat, but maybe they prefer the psychic income to the cash, given that they have enough cash income as it is.

I still don’t get why anyone defends Wolfowitz. He is not a nice man. He is not a competent man. Last but not least, he is not a man to put any cause – whether it be his country, or an institution – ahead of his personal interest.

rluser May 20, 2007 at 2:13 am

happyjuggler0 hits it dead on

why does this institution exist? we should praise anything that ‘discredits’ it

unless it seems marginally appropriate to appropriate from some to give to others for .. umm.. marginal utility

we’d be better off buying bonghits for each of our undergraduate friends in academia (they’d think more clearly)

or … perhaps you’d care to name one successful (10 year) project of the institution

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