World Bank President Paul Wolfowitz is embroiled in scandal. A controversy surrounding the treatment given his girlfriend, another World Bank employee, has damaged Mr. Wolfowitz’s credibility and that of the institution he heads. Mr. Wolfowitz may gain approval to stay on, but continuing in his post would be a mistake if he truly believes in the bank’s mission.
Mr. Wolfowitz went to the World Bank after serving four years as the U.S. deputy secretary of defense, the number two in the Pentagon. While Mr. Wolfowitz was one of the intellectual architects of the Iraq war, he also served as ambassador to Indonesia and has had a long-standing interest in development issues.
Scandal has erupted over the role Mr. Wolfowitz played in arranging a temporary post at the State Department for his girlfriend — who also works at the bank — that involved promotions and high pay raises. The particulars of the deal were arranged by Mr. Wolfowitz in violation of the World Bank’s personnel policies. At first, Mr. Wolfowitz denied any role in the favorable treatment, but later conceded involvement, and admitted to having made mistakes in handling the issue.
Unfortunately for Mr. Wolfowitz, this controversy is only the most recent episode in what has been a very tumultuous tenure. His involvement in the Iraq war was worrisome for many observers and many World Bank employees, and his push to accelerate lending to Iraq and open a branch office in Baghdad was seen as an attempt to push the Bush administration’s agenda. Others argued that the Iraq lending program was an attempt to expiate his guilt. Either way, the effort was considered premature by many within the World Bank and suffered from a lack of qualified personnel; eventually the governing board agreed to a $500 million loan program but required regular updates, an unusual oversight provision.
In addition, the staff that Mr. Wolfowitz brought with him clashed with regular World Bank personnel. Their power and perquisites added to the friction and distrust among staffers. Finally, Mr. Wolfowitz has championed an anticorruption campaign among recipients of World Bank loans that has worried many donors. They are concerned that it will politicize the institution. Many at the bank and in the aid community see overly intrusive lending conditions as impinging on the sovereignty of recipient governments. For them, the World Bank’s mission is alleviating poverty; the anticorruption program is an attempt to impose a particular form of governance on recipient countries and represents the imposition of an ideological agenda on the institution. For these critics, focusing on corruption risks diluting the bank’s primary mission. As a result, the bank’s governors last year rejected Mr. Wolfowitz’s original plan; chastened, he revised the plan and has appointed someone to make a strategic review of bank operations.
It is hard to argue against greater accountability and ensuring that money intended for national development is not being pocketed by the officials of recipient governments. The problem of course is that Mr. Wolfowitz is no longer in a position to demand such transparency and accountability.
Last weekend, finance officials from the World Bank and member governments issued a communique expressing “great concern” about the bank’s future. That time was spent discussing Mr. Wolfowitz’s status and its impact on the institution — rather than bank lending — is one indication that the scandal is having an impact. Worse, however, is the recognition that the World Bank’s credibility has been damaged as a result. As the grandees explained, “The current situation is of great concern to all of us. We have to ensure that the bank can effectively carry out its mandate and maintain its credibility and reputation as well as motivation of the staff.” While that may read like a normal statement of concern, among diplomats, it is the equivalent of a slap across the face.
Mr. Wolfowitz maintains that he can do the job. After the development committee issued its statement, he replied that he continues to “believe in the mission of this organization and I believe that I can carry it out.” The United States and some member governments — including some African nations — are still behind him. Others, including European allies, have lost the faith.
His future is likely to be decided by politics — in particular, relations between the U.S. and Europe. But great damage has been done. Mr. Wolfowitz’s lack of judgment is a distraction and a damning indication. How can the world’s lending institution demand higher standards from its loan recipients than it does from its top executive? If Mr. Wolfowitz believes in the World Bank’s mission, then he should step down to eliminate the cloud that now hangs over the institution.