Leadership shifts at World Bank

Monday, May 21, 2007 | 12:00 a.m. CDT; updated 7:39 a.m. CDT, Sunday, July 20, 2008
Stuart Loory, who holds the Lee Hills Chair in Free-Press Studies at the Missouri School of Journalism, is the moderator for the weekly radio program “Global Journalist.” It airs at 6:30 p.m. Thursdays on KBIA/91.3 FM or at

Editor’s Note: This program was taped for KBIA/91.3 FM on Thursday, several hours before the resignation of Paul Wolf­o­witz as president of the World Bank was announced.

Loory: It has taken the World Bank and the Bush administration much time to find a way to remove Paul Wolf­o­witz as the bank’s president. The World Bank has 185 nations as members and has given billions of dollars in loans to struggling economies to help them gain economic stature. Wolf­o­witz took over the bank presidency two years ago. As one of his first acts, he gave his girlfriend who also worked there a big raise, a promotion and then a transfer to a position with the State Department. When officials discovered his conduct, he admitted to it and said it was caused by a lapse of judgment on his part and murky ethics advice from the bank’s board of directors. Now, he refuses to resign because of unethical conduct even though a committee of the bank’s international board of directors said he was grossly unethical. On May 16, reports said Wolf­o­witz was willing to negotiate his resignation with the bank’s board if it would not charge him with any wrongdoing. The Bush administration supported Wolf­o­witz in that position. On the surface, this is an open and shut case, but the controversy has been going on for six weeks. Why didn’t the bank board just send Wolf­o­witz packing?

Joel Havemann, economics and international trade correspondent, Los Angeles Times, Washington, D.C.: The bank board wants to work out an amiable solution. There is no precedent for the board to fire the president, and the board doesn’t know how to go about doing it. From its point of view, a graceful, quiet departure by Wolf­o­witz would be nicer than a messy firing.

Loory: Why is Wolf­o­witz holding on so long? Why doesn’t he resign?

Havemann: Wolf­o­witz is convinced that he’s right and that he did nothing wrong with his girlfriend’s salary arrangement. He says his actions were at the behest of the ethics committee of the bank’s board.

Loory: Is the Bush administration wrong to support Wolf­o­witz?

Nadia Martinez, co-director, Sustainable Energy and Economy Network, Washington, D.C.: The Bush administration is wrong for not admitting that Wolf­o­witz has done something wrong and that he should go. With things not going well in Iraq, it is not simple for the administration to admit that they’ve chosen the wrong person or done a wrong thing.

Paul Reynolds, correspondent, BBC, London: Wolf­o­witz brought this on himself through his personal behavior. He would be settling into the bank reasonably well, but he handled this very badly. However, his behavior was approved of twice by the ethics committee. The first time was when he told the committee of the financial deal for his girlfriend, and the second time was when a staff member sent an e-mail of complaint about it. He then cleared his actions with the ethics committee again. The committee has some questions to answer as to why it didn’t dig deeper into this. Under the World Bank’s rules, any sexual relationship has to be declared. Wolf­o­witz did declare the relationship. He then asked for advice from the ethics committee, which gave a rather unclear response. He took that as a green light to forge this hugely beneficial deal for her.

Loory: So the declaration of Wolf­o­witz’s relationship with his girlfriend was very important?

Reynolds: He declared the relationship and then he was told she should be promoted and moved away from direct responsibility under him. It was difficult to see how that could be achieved, so he suggested that she should be transferred to the State Department. He laid down what salary she should get, including an annual increase that was double what she should have gotten.

Martinez: Wolf­o­witz was controversial from the beginning because of his role as the main architect of the war in Iraq. He constantly clashed with senior Bank managers during the last two years over his appointments of close allies. A lot of people were concerned that the Bank under Wolf­o­witz was taking a line that was quite similar to that of the Bush administration. The hands-on management style was found to be controversial. Examples include the rewriting of country strategy papers, taking out references to things like reproductive health in the strategy for Madagascar and editing the language in another paper that had to do with climate change. So, there were some controversial things going on under his leadership that went beyond just his personal affairs.

Havemann: The staff resented him from the beginning because he tended to ignore their advice and follow the advice of his close advisers. There is nothing more one can do to make an organization angry than to ignore its members’ expertise. He also set up an office in Iraq.

Loory: What was wrong with setting up an office in Iraq?

Martinez: Many people inside and outside of the Bank were concerned when Wolf­o­witz came to its helm that he was there to engage with Iraq. Iraq was seen internationally as a situation that wasn’t resolved to the point that the World Bank should get involved.

Loory: Wolf­o­witz came into office with a determination to clean up corruption within developing countries around the world. Has he made an impact?

Havemann: Some recipient governments, particularly in Africa, have cleaned up their acts in response to Wolf­o­witz’s demands that they do so in order to qualify for World Bank aid.

Loory: Are Western European countries using the current situation to regain some leverage against the U.S.?

Reynolds: The Europeans, particularly that oppose the war in Iraq, aren’t using this as a stick to beat the Bush administration. That doesn’t mean that they aren’t quietly satisfied. Wolf­o­witz has gotten his comeuppance if you like, but they haven’t engineered it themselves.

Martinez: The Europeans aren’t making Wolf­o­witz’s departure a political issue because everyone benefits from maintaining the status quo. So, they’re not going to rock the boat too much. The ones who are making a big deal of it are countries in Latin America where the World Bank has just about lost all legitimacy. President Hugo Chavez of Venezuela announced that his country was pulling out of the World Bank, and he paid back all his loans to the institution.

Loory: If Wolf­o­witz resigns, how will he be replaced?

Havemann: History has shown that when a World Bank term comes up near the end of the second term of a U.S. president, the party that controls the White House consults with the opposing party before making an appointment. In other words, a certain amount of bi-partisan comity has gone into previous appointments. With Bush’s second term running down, he will try to get Democratic support for whomever he appoints.

Reynolds: Whomever the Bush administration appoints will be a much quieter figure. The World Bank needs to reconsolidate, to rethink and to get on with its work. It needs to quiet down after this little scandal.

Loory: The U.S. certainly has been taking hits around the world for the Iraq war, for its failure to produce any meaningful peace negotiation in the Middle East and for its policies in Latin American. Now, the country has this fight on its hands. It would seem an easy matter to solve, but it will take an admission that a key administration man did wrong.

Producers of Global Journalist are Missouri School of Journalism graduate students John Amick,

Devin Benton, Hyun-jin Seo and Catherine Wolf.

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