The great Christopher Caldwell, the finest of American journalists covering Western Europe fulltime, has a column in today's Financial Times on the criminal debacle of what he calls 'adventure philanthropy' and its attempted abduction of children from Chad. Required reading for the international NGO community, I think. Here (open link for now).
(Update: See this opinion piece by the great Norman Borlaug, in the Wall Street Journal, open link here, Sunday, July 22, 2007.)
Well, I have long known about Norman Borlaug, now age 93, as I have long done international development work. But my kid has never heard of him nor, come to that, students at my law school. Good for Gregg Easterbrook for pointing out that Borlaug has saved more lives than anyone living today. Here from the Huffington Post:
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Today in Washington I was in the room as the greatest living American received a medal. George W. Bush, Nancy Pelosi and others were present. But will you ever hear this event occurred? To judge from tonight's major network evening newscasts, perhaps not. Cameras were allowed at the ceremony but I saw none from the major networks, though the international press was significantly represented. And will you recognize this great man's name when I say it?
The greatest living American is Norman Borlaug, who won the Nobel Peace Prize in 1970, and joins Jimmy Carter as the two living American-born laureates around whose necks this distinction as been placed. Do you know Borlaug's achievement? Would you recognize him if he sat on your lap? Norman Borlaug WON THE NOBEL PEACE PRIZE, yet is anonymous in the land of his birth.
Born 1914 in Cresco, Iowa, Borlaug has saved more lives than anyone else who has ever lived. A plant breeder, in the 1940s he moved to Mexico to study how to adopt high-yield crops to feed impoverished nations. Through the 1940s and 1950s, Borlaug developed high-yield wheat strains, then patiently taught the new science of Green Revolution agriculture to poor farmers of Mexico and nations to its south. When famine struck India and Pakistan in the mid-1960s, Borlaug and a team of Mexican assistants raced to the Subcontinent and, often working within sight of artillery flashes from the Indo-Pakistani War of 1965, sowed the first high-yield cereal crop in that region; in a decade, India's food production increased sevenfold, saving the Subcontinent from predicted Malthusian catastrophes. Borlaug moved on to working in South America. Every nation his green thumb touched has known dramatic food production increases plus falling fertility rates (as the transition from subsistence to high-tech farm production makes knowledge more important than brawn), higher girls' education rates (as girls and young women become seen as carriers of knowledge rather than water) and rising living standards for average people. Last fall, Borlaug crowned his magnificent career by persuading the Ford, Rockefeller and Bill & Melinda Gates foundations to begin a major push for high-yield farming in Africa, the one place the Green Revolution has not reached.
Yet Borlaug is unknown in the United States, and if my unscientific survey of tonight's major newscasts is reliable, television tonight ignored his receipt of the Congressional Gold Medal, America's highest civilian award. I clicked around to ABC, CBS and NBC and heard no mention of Borlaug; no piece about him is posted on these networks' evening news websites; CBS Evening News did have time for video of a bicycle hitting a dog. (I am not making that up.) Will the major papers say anything about Borlaug tomorrow?
Borlaug's story is ignored because his is a story of righteousness -- shunning wealth and comfort, this magnificent man lived nearly all his life in impoverished nations. If he'd blown something up, lied under oath or been caught offering money for fun, ABC, CBS and NBC would have crowded the Capitol Rotunda today with cameras, hoping to record an embarrassing gaffe. Because instead Borlaug devoted his life to serving the poor, he is considered Not News. All I can say after watching him today is that I hope Borlaug isn't serious about retiring, as there is much work to be done -- and I hope when I'm 93 years old I can speak without notes, as he did.
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What I do recall, back in the early 1980s, were complaints from environmentalists with whom I was working at the time in Colorado, that the Green Revolution was environmentally bad because it promoted monocrop agriculture and faciltated population increase. The "deep ecology" view, as I heard it at the time, was that the Green Revolution was bad because it increased the technological dependence on cereal crops, but mostly that it facilitated population growth. As Easterbrook points out, in fact the fastest way to decrease fertility is to increase wealth, including by not starving people.
As William Easterly says, it is much too soon to say whether some favorable economic growth and development trends in parts of sub-Saharan Africa will be permanent. Political instability, for example, can wipe out years of slow improvements in a historical heartbeat. Nonetheless, he says, it would be a mistake not to recognize such improvements as are occurring, in no small part because they indicate the path forward. In the LA Times, here, "What Bono Doesn't Say About Africa," July 6, 2007, opinion page:
In truth, Africans are and will be escaping poverty the same way everybody else did: through the efforts of resourceful entrepreneurs, democratic reformers and ordinary citizens at home, not through PR extravaganzas of ill-informed outsiders.The real Africa needs increased trade from the West more than it needs more aid handouts. A respected Ugandan journalist, Andrew Mwenda, made this point at a recent African conference despite the fact that the world's most famous celebrity activist — Bono — was attempting to shout him down. Mwenda was suffering from too much reality for Bono's taste: "What man or nation has ever become rich by holding out a begging bowl?" asked Mwenda.
Perhaps Bono was grouchy because his celebrity-laden "Red" campaign to promote Western brands to finance begging bowls for Africa has spent $100 million on marketing and generated sales of only $18 million, according to a recent report. But the fact remains that the West shows a lot more interest in begging bowls than in, say, letting African cotton growers compete fairly in Western markets (see the recent collapse of world trade talks).
As time goes by, Easterly is decisively winning the intellectual battle between his approach to poverty reduction and economic development and that of his main intellectual rival, Jeffrey Sachs. The two share some important things in common, true, but Sachs, over the past few years, has gradually evolved a top-down, 'aid money is the fundamental factor', Soviet-style central planning quotas-and-goals, five year plan approach that has proved so useless in the past. It dovetails with Sachs' position as UN advisor on how to create precisely such command-economy five year plans at the grand UN level. It is profoundly reactionary. And it's a great pity, because Sachs is obviously brilliant and committed - but his ideas, at this point anyway, are wrong and known to be wrong on the basis of what has gone on before in Africa and elsewhere. This is not to exaggerate the ability of markets and trade to address extreme poverty in Africa - there is an enormously important role for public investment and public goods, in such things as counter-malaria, counter-AIDS, education, public health, etc. - but without the engine of trade and markets, Africa will at best remain the world's begging bowl.
Sometimes I wonder why someone so obviously brilliant as Sachs would move in this kind of direction, against strong evidence over decades. Unlike many of his confreres in international organizations, he is not simply a reactionary socialist under an "internationalist" label. It seems to me that a certain amount of it reflects the impatience of an aging - and, let's be honest, massively egotistical - man who wants to see it happen in his lifetime - does not want to accept that the better path will take longer than he himself has got. After all, Easterly's fundamental intellectual point is that development of the kind that Sachs today advocates is essentially a strategic endeavor - one that aims to move massive amounts of money in a short period of time at the macro-level.
Whereas the fundamental problems of poverty reduction for the very poor of the world are at the micro-level. They are today tactical rather than strategic - the resources at the level of global grand strategy have been repeatedly deployed over the last few decades, but they are derailed over and over again by failures at the tactical level, at the end user, last mile (or two or three) level - through corruption, failure to follow through at the village or city level, etc. And those problems have to be addressed individually, at the retail rather than wholesale level. They have to be addressed at the level of political society, which means at a minimum the level of nation-states as well as more local levels. Which means time and more time: this is not a recipe for inaction or complacence, but for long term attention to the task at the microlevel.
Or, to put it quite a different way, Sachs, Bono, all the rest, propose to be the Wilberforce of our time. I applaud this, quite sincerely. I was profoundly moved a couple of weeks ago to see the portrait of Wilberforce in Britain's National Portrait Gallery, as well as a large scale painting of one of the founding meetings of the anti-slavery society in Britain. But what Andrew Mwenda says (interpolating freely my own views into his lines) is that growth in Africa means that its people must eventually be drawn into the global market and become "ordinary" producers and consumers in that market - whereas the most that the Wilberforce moralizing approach will accomplish for economic development in Africa is the begging bowl. Economic growth can, and should, be conceived at one level as a Wilbeforcean moral cause for Africa, but slavery and the slave trade also have certain great dissimilarities with economic growth and poverty reduction, not the least of which is that at some point, the begging bowl must end and "ordinary" market relations obtain - and under some circumstances, attachment to the former can tragically forestall the latter. The two need not be at odds - the model of public investment in vital public goods, for example, while building the connections of trade and markets that produce "ordinary" production and consumption - but they can become so.
(Whoops, as I write, Wolfowitz has resigned - WaPo evening breaking news story here. For those, especially at the Bank, who think this signals a new day dawning for the poor of the world, well, call me unimpressed. Why was it again that we need this institution?)
(See my earlier posts here (on Sebastian Mallaby defending the mission of the Bank), here (on the Bank mission and the Bush administration), here (my piece in the Financial Times criticizing the Bank's ethics committee) and here (responding to criticism on my Financial Times piece), and finally here, (arguing that the next US administration, rather than take on issues like Bank reform, will simply opt for "meek multilateralism," the go-along, get-along approach of the early Clinton administration).)
(ps. Welcome instapunditeers and thanks Glenn! I've corrected the grammar in a couple of places, and improved it in a couple of others, including some bits that Instapundit was kind enough to quote - I don't think I've changed the meaning.)
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Of the main press stories out there in the Thursday, May 17, 2007 papers ... the Wall Street Journal news story on the front page is the best and most detailed, shows actual familiarity with the documents, reports, board reports, and does not seem merely sourced to inside sources with their own agendas at the Bank, the administration, or elsewhere. It's not that inside sources are unhelpful - but if you haven't read the underlying documents, then as a reporter, you can't really know how you're being spun, and it is 100% that you are being spun. Unfortunately, the story is behind the subscriber wall.
Bret Stephens has an opinion page story on yet another of the many ethical lapses at the Bank - yes, yes, Mallaby tells us that the Bank is no more corrupt than other international organizations, but isn't that damning with the worst kind of faint praise? - open link, here. It is about allegations of an affair by Thomas Scholar, an official of the Bank.
It isn't surprising, by the way, that so many of the ethical issues at the Bank and other international organizations involve sex. International organizations, in light of their long questionable practices concerning promotion of women and other gender issues, were forced by feminists, many of them Americans, to adopt sexual harassment and related policies which, while standard at American corporations, nonetheless have never culturally been taken on board by the rest of the world even as they mouth the proper form of words. One might hope that the kind of gender issues involving the UN and international organizations wouldn't so frequently be, for example, twelve year olds being prostituted by UN workers in Africa, but, well, there you have it. The official response is the twinned one of announcing "zero tolerance" of child abuse and rape (never, of course, actually followed) and a call for everyone to adopt a "gender perspective" - take a look, for example, at the September 2005 General Assembly UN reform document - every other line, more or less, calls upon everyone to adopt a "gender perspective" as a cure for everything from child rape by UN staff in Africa to AIDS. Seems as unlikely in the former as the latter.
One of the many ironies in the Wolfowitz affair, however, is that in many respects, the target of the Bank staff seems to have been as much Riza as Wolfowitz - she is a true believer in feminism, and as a true believer, she seems to believe that so many, many things can be traced back to misogyny - and, as a true believer in misogyny, was more than willing to throw fits to get her way by playing the gender card. She deserved, in my view, her raises as compensation for the ending of her career at the Bank, and an institution which makes as much out of gender equity as the Bank theoretically does should be prepared to have its staff demand that it do so even if, to someone outside the institution's official ideology, it constitutes playing the gender card. It seems clear enough that Riza played the gender card on the compensation issue, because she was known for playing the gender card everywhere. And everyone, starting with the Ethics Committee and the human resources department, seems to have preferred to avoid her rather than face a scene. In important ways it was the unwillingness even to face, even to have a meeting with, an angry Muslim feminist whose career, after all, was being sacrificed on the altar of her paramour that is a central reason why that political hack (now hacking away at UNDP, but then the two deserve each other) Ad Melkert would not meet with her and dumped the whole thing back on Wolfowitz. Back in those days, compared to a scene with Riza, it seemed like a good way to handle it, stuff it into the shredder and forget about it. Wolfowitz says as much when he says that everyone at the Bank sought to avoid battle with an angry Riza - people did not want a battle with her, did not want her as a supervisor, pretty clearly feared her in a Bank with Wolfowitz running it, and so would not settle for the usual recusal deal that governed other senior staff relationships. They wanted her out, and got it. Vive la sisterhood of the Bank.
So the rest of the world, starting with the staff of the Bank, may talk the gender talk - but it doesn't mean it, at least not in the way that Americans, following conditions laid down by a combination of Mackinnon and the US Supreme Court, understand it. Maybe they're right and we Americans are wrong - I'm not a feminist and see many problems with how the United States has evolved on these things. But in any case, in an international organization, these gender rules seem inevitably on a collision course with the fact that, among other things, extramarital and other affairs are socially acceptable at the Bank and the UN and all sorts of international institutions, no American puritanism for them - a collision course, that is, unless the institution reconciles them with a large, large dollop of hypocrisy and double standards. Which is the usual attitude I have found at international organizations. For that matter, I recall, while serving as a general counsel for a large transnational charity, having to deal with the outrage - much of it from very committed feminists in Western and Eastern Europe - at the attempt, in the interests of avoiding liability in NY courts, to impose an American sexual harassment standard on the global organization. They didn't buy it, and my experience of Europeans - and Asians and Africans and people from many places - is that although political correctness of the kind that infuses institutions like the Bank and oozes from its many pores and orifices is the official line, it is not really adhered to and not really believed. And since there is no recourse to American courts, which do believe it, it is honored in the time honored fashion of European diplomatic hypocrisy, an elegance of words but something quite different in the way of action.
Well. The Washington Post story is pretty good today, as well. Here, by Paul Goodman. He, too, seems to have read the documents and talked with more than just a coterie of Bank sources. The New York Times, as has been usual in this as well as other international organization scandals, fares the worst, with Steven Weisman's front page story (behind the subscriber wall) simply seeming to channel Bank insiders. Who knows, maybe he diligently combs through everything, but it sure doesn't show up in the reporting.
The reporting is shifting, with a certain relief it appears, away from factual reporting to soft opinion journalism about the mission and future of the Bank. Not investigative, not reading documents, but interviewing some talking heads on one side or the other. Mind, this is an important discussion, but it has not been very helpful to have it shoehorned into a (non) scandal that is really about corporate governance, or the lack thereof at the Bank - and I refer to the Bank board, and its ethics committee, and its former general counsel - not anything as highminded as the Bank's mission. I've posted here earlier on the fundamental weaknesses of its mission/business model, but that's not what the Wolfowitz affair is all about.
Sebastian Mallaby is very smart, and there are few people on the outside more knowledgeable about the World Bank than he, so this column from the Washington Post, Monday, May 14, 2007, A14, is must-reading. As is his 2004 book, The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations. Mallaby is a hard-headed, tough-minded journalist and policy analyst in the area of development and global poverty reduction, one of the smartest and best informed outsiders.
Sebastian - I know him a little bit - appears to have been reacting in his WP column to this George F. Will column, also in the Washington Post. Will is not an expert on the Bank or international development; his column appears to have been written after some discussion with one or more of the Bank's critics. Mallaby appears to be out to marshall a lot of facts about the Bank and its work that Will and his readers are not likely to know much, if anything, about.
In taking down Will's column, however, Mallaby sacrifices a lot of legitimate criticism and the possibility of radically rethinking the Bank - radical criticism that he himself is much more willing to consider in his book. I understand that an 800 word column does not allow much room for subtlety. Still, that acknowledged, I don't quite think the column admits what Mallaby himself otherwise would say about the shortcomings in the Bank's business model. I fear that in this column, Mallaby is, alas, simply channeling the Bank.
(I leave aside as unserious the column's opening argument that one can look at the Bank simply like any other company and therefore the board of directors should fire Wolfowitz for having lost their confidence and having lowered share price. The remainder of the column, after all, is one long argument as to why the Bank cannot be treated merely as any private company. If it were a private company, after all, well, it wouldn't exist. As to the bizarre analogy to falling share price, it is inapposite not just because the Bank doesn't have one - rather, the larger point of the remainder of the article is that the Bank cannot, by definition, be measured according to such criteria. It is nearly as idle as the analogy sometimes bandied that US voters are "shareholders" who should fire Bush as "company president.")
Mallaby points out that approximately half of the Bank's outflows last year went to poor(er) countries if one includes, as properly one must, the Bank's soft loans and grants programs - these being the general evolutionary trend of the Bank. This is his main point of attack against the Will column; the (almost certainly correct) dangling implication is that Will has no idea about this. There is, in other words, a story beyond the statistic Will cites that 27 middle income countries received 90% of the regular lending of the Bank.
Fair enough. But one might conclude that this is precisely this statistic that should cause one to wonder why the Bank exists as a bank. Sebastian defends the middle income lending - which, after all, still amounts to over half the Bank's outflows - with the throwaway line that much of it goes to countries like China or Brazil that have many, many poor people. Sure, but how that regular lending really, genuinely, measurably affects outcomes for those very poor people is very murky - perhaps someone more expert than I can explain it, but I haven't seen measurable data to that effect - in large part because of the question of what role it plays in countries that do indeed have access to private capital that far exceeds the capital flows of the Bank.
It is far from clear, at least to me, that such regular lending to middle income countries has positive longterm impacts for the very poor of those countries. In part this is because money is fungible. In order to demonstrate that these funds make a difference to these poor people, it is not enough to show that it increased aggregate capital flows. It is not even enough to show that it was, in the first instance, specifically targeted toward those poor people - because, after all, the inflow of Bank funds, might simply have allowed other funds to be siphoned away. Anyway, the incentives from a financial statement point of view for the Bank to want to make loans to those safe middle income countries is a strong reason at least to wonder what the economic benefit is for the very poor in Bank lending to middle income countries and to want to see strong, reliable evidence for it. Perhaps it is there and, although I do tend to follow this literature, perhaps I have simply missed it - and Sebastian knows this literature, I'm sure, as well or better than anyone, so I would be happy to be pointed toward the papers on SSRN or elsewhere.
But assume for a moment, arguendo, that the criticism I make above about middle income lending is so. In that case, Mallaby's argument falls back on the fact that slightly less than half of the Bank's outflows come in the form of soft loans and grants. But that fact is lukewarm at best and really cuts both ways. The argument radical reformers of the Bank make is that there is little reason why the Bank should not be reorganized to give up the private capital market-intermediation-subsidized lending to middle income countries altogether, and focus entirely on the soft loan-grant programs, to the poorest countries. Of course private capital markets cannot do everything, as Mallaby says - but that is not the argument that the radical reformers make and is surely a straw man.
The problem of the Bank qua bank is that it seeks to intermediate private capital markets (with a subsidy), to try and do precisely what Mallaby suggests private capital markets cannot do because capital markets cannot solve all of poverty's problems. The reformers would suggest that the subsidy in the case of the Bank's ordinary lending to middle income countries is not really enough to compete with the functioning of the private markets; the Bank's lending really is a fifth wheel, and it should give that up in favor of activities for which it is not merely a fifth wheel. (As for crisis lending to middle income countries that Mallaby mentions, well, what is the IMF for? And - I don't know the answer to this - how great was the role of the World Bank in liquidity terms in the Asian crisis compared to the Fed?)
In the case of the poorest countries, however, lack of capital is genuinely an issue. So is the ability to repay any loan. So is technical assistance, and so is any improvement in governance. Why not cause the Bank, therefore, reorganize without the middle-income country intermediation-banking function, and focus solely on soft loans/grants and, let us not forget, technical assistance and governance advising. And focus on countries, societies, that are the poorest. Why endorse half measures?
For if that's what the real value added is, it is far from clear why anyone needs the Bank's goldplated operations -they cost what they cost in part because they are designed to interface with the private capital markets, and to pay the people who do those functions a respectable civil servant salary commensurate with financial professionals in the public sector. In my experience, it is not what one would pay program officers in a foundation dealing with local poverty matters on a grant-making basis, who do not have and do not need the banking credentials on which the Bank prides itself. There are comparably serious skill sets that these anti-poverty program officers need, yes, but frankly they can be obtained at a lower cost, in part because they are not so readily placeable in the private sector. Why not reorganize at a cheaper cost along the lines of far more efficient, far more locally oriented (because less capital markets oriented), far cheaper in terms of transaction costs European aid agencies? (I do not suggest under any circumstances modelling anything on US AID, which is a waste of oxygen.)
If these functions were being carried out by the Dutch, the Swedes, the Norwegians, the Swiss, through their national development aid agencies, how would they do it and what would they pay? Would they pay for a whole banking staff when in fact the operation is aimed at grantmaking anyway, and the money would come from governments in any case, not from the capital markets and relent at a subsidized interest rate? They would - they do - engage in a certain amount of on-lending in which they really do expect to get repaid, but that is far from being the core, let alone over half, of their work.
Why, in other words, should the World Bank continue simply for historical reasons as a bank, a bank designed in cost structure, skill sets, etc., to interface with private capital markets? Why share the pleasure Mallaby takes in noting that slightly under half the bank's outlays went to soft loans and grants - why not think those things should essentially be the whole thing? Why take pride in half-measures that continue precisely the sins that Sebastian correctly sees in thinking that it all can all be done by capital markets? Why not sever the relationship to the capital markets altogether and concentrate on poverty reduction as such?
(ps. The column also mentions in passing that Bank salaries, once you take into the account the tax adjustment and long summer vacations, are comparable to academic salaries. I'm told there is a link to a paper by an economics professor in the online version, which I will look up. But as someone who is a college professor, and who is married to someone who used to work in an international organization with similar salary structures and arrangements and who, hence, paid very close attention to comparative salary issues - well, at least if you were not an American and not subject to tax on your salary, it was a very favorable deal. The tax break was amazing for non-Americans. I simply don't understand what Mallaby is suggesting here - it is not our experience at all. As for summer vacations - every dean and professor I know understand perfectly that summer vacation is simply the research semester, it's not vacation, at least if you plan on getting tenure, getting a promotion, getting a raise. It's a 12 month job like any other. And now I have to get back to it.)
(pps. Or consider this short op ed by AEI resident scholar Desmond Lachman, here. It argues for a World Bank that gives up the middle income lending function altogether, along with the proliferating mandates at the Bank that increase its unaccountability.)
Not being in any highfalutin' political loops about the Bank and Wolfowitz, either international circles or in DC, I have been puzzled as to why the Bush administration has been so lackadaisical in defending Wolfowitz. The occasional word from Bush, but really very little said. Sometimes I have even far-fetchedly wondered whether the Bush administration's secret plan was to appoint but Tony Blair. In any case, the message taken away in foreign capitals from the lack of visible support surely would have to be that the administration would not care one way or the other what happened, at least so long as the US retained the informal right to appoint the Bank head. The view from Europe is summed up in this Financial Times editorial, here; it is essentially a rebuttal to the Wall Street Journal's editorials of the past few days.
According to the US papers today, however, the Bush administration has belatedly started to respond and defend Wolfowitz, including State and Treasury. The Wall Street Journal news pages have a good summary, behind the subscriber wall, Thursday, May 10, 2007, A6, Neil King Jr. and Greg Hitt, "Rice Launches Wolfowitz Defense." The Washington Post has an article in the business section today, John Ward Anderson and Peter S. Goodman, "Europeans Wince, Wait for Wolfowitz Saga to End," Thursday, May 10, 2007, D1, here. The WP piece seems to have been written and researched almost entirely from the European perspective, and says very little about US lobbying efforts on Wolfowitz's behalf.
The Washington Post also has a personality profile piece that finally shows a little sympathy for the woman who has really paid the career price for this, Shaha Riza. I have never met her, know nothing about her apart from what is in the papers and the blogs. I have to say, though, a surprising number of the comments posted on Bank-staff-related blogs show an utter viciousness toward her; some of these folks appear to be not such nice people, at least when concealed behind the internet veil of anonymity. (Washington Post article, here.) Indeed, to judge only by comments on the Bank-staff blogs, one might think that this campaign is essentially about getting her, even more than getting Wolfowitz.
I am also pleased to note that my Financial Times comment appeared in Arabic today, May 9/10, 2007, in the respected Beiruit newspaper An-Nahar, for those - alas, not I - who read Arabic, here, or so I am told. I've also been contacted by Le Monde about it appearing in French, but haven't seen it so far. But of course it is a modest piece, reflecting a corporate governance lawyer's concerns about what the publicly released documents show about the process and questions of fiduciary duty.
There are larger issues of policy about the Bank, obviously. Joseph Stiglitz raised some of them in his Financial Times comment, also May 7, 2007. I myself have views on some of them, although I have kept them quite separate from the narrow, lawyerly issues of fiduciary duty and corporate governance in the Wolfowitz affair. I do have another life in development finance, however. Curiously, because most of what I do pro bono as a corporate finance professor has to do with a nonprofit development fund, a nonprofit venture fund that engages primarily in lending and investment, I have a certain appreciation for what the Bank has traditionally used as its development strategy - a combination of subsidized loans and technical assistance, because that is what the organization I work with does.
One thing is clear from that kind of activity - if you are a nonprofit with a mission, but a mission driven nonprofit that nonetheless acts like a venture fund or bank, then you have to be very careful in how you target your loans and investments, because, presumably, it matters whether you get repaid or not. That is absolutely true in the case of my organization - if we lose the money, eventually donors will get tired of this and stop funding us and we are out of business. As a consequence, the places and circumstances where we can make investments are limited - places so poor that projects will not manage to repay loans don't work, nor do places where governance and rule of law is so poor that we could not hope to enforce our legal contractual rights. That leaves a circumscribed range of countries and societies in which it fits our mission to lend, but where we have a reasonable chance of repayment on a sustainable (albeit subsidized) business model.
In the case of the World Bank, something akin to the mission/lending tensions also applies - although the prospects of it going broke because its funders give up on it are vanishingly remote. The safest thing to do is borrow on the capital markets at a discount, combine this with various additional funds from donor countries, but then lend to places where you are likely to get repaid. You lend at a subsidized rate, but you don't really risk massive default. That leads you, however, not to the poorest countries, for which loans don't make sense, but to middle income countries.
The problem with middle income countries is that although they fit the business model, they don't really fit the mission of getting to really poor people. The proof, ironically, that they do fit the business model is that these countries can today tap the private capital markets. Sure, of course anyone who can get cheaper capital through the Bank will do so - in my nonprofit venture fund, we constantly get proposals from businesses that don't fit our mission profile but naturally like the idea of subsidized loans well below local rates, who wouldn't? But as I recall from Adam Lerrick, the Bank's lending in the past five years has been something like 90% to a group of 27 middle income countries, and that Bank lending was well under 1% of the total private capital market capital tapped by those countries. The Bank's lending was entirely superfluous to what the private markets were already doing - safe from a business perspective, but largely pointless from a mission perspective.
I have long accepted the Allan H. Meltzer proposals (quick summary 2 page PDF, here) - long rejected, naturally, at the Bank, since its professional structure is largely built around the Bank as a lending institution to stand-in for private capital markets - for the Bank to focus on the world's poorest people and turn itself into a grant making/technical assistance institution. If you do that, however, you don't need much of the existing machinery or, really, highly paid, highly skilled financial professionals whose task it is to manage the interaction of the Bank with its borrowings on the capital markets. You more likely need more locally focused people who can operate much closer to the "retail" level of economic development. Wrong structure, wrong set of staff, wrong focus. To be fair, the Bank has developed the world's leading expertise in poverty reduction studies - what works, what doesn't - and the world's greatest expertise in technical assistance. Compared, for example, with the corresponding UN programs, the Bank is the most important repository of knowledge, best practices, etc. - despite my criticisms here, I do acknowledge that and the accumulated intellectual capital it represents. But that is, curiously, still adjunct to its now largely overtaken financial and banking mission.
(George Will summarizes some of this thinking, largely drawn from Meltzer and Adam Lerrick in today's Washington Post, here. I think the Bank's intellectual capital in the areas of technical assistance, best practices, etc., is considerably more robust than Will and others who don't work in the area would admit.)
In addition to the Meltzer proposals to convert to grant making, rather than middle income lending, there is a second policy issue at the heart of the Bank professionals' objections to Wolfowitz (apart from everything else, I mean). That is the question of whether the function of the Bank, the measure of the Bank's success, is to shovel money out the door in a kind of European style welfare program gone global - essentially, an attempt at global income redistribution. The alternative is to focus on governance, and condition aid on governance reforms, as Wolfowitz and the American government has generally favored, in which aid is seen as an investment in the future, including governance reform, anti-corruption, all the rest, rather than simply income-shifting today, and in particular as an investment that draws in private direct foreign investment which, in the case of those countries which have lifted themselves out of poverty, has been the economic engine. (I discuss some of those questions tangentially, in a discussion about the relationship between microfinance and globalization, free download pdf at SSRN, here.)
It seems pretty obvious that the Europeans and the Americans fundamentally differ on the approach to global poverty. The same debate figured in the 2005 UN reform arguments over the Millennium Development Goals, where, for the UN bureaucracy and the Europeans, the issue was simply more and more money. Two different approaches - yet where there is no clear evidence that the World Bank-European approach has made any positive long term, generational difference to world poverty, and, to be fair, just as there is no evidence that the American preference for governance reform in fact makes any difference over the generational long term. No one, frankly, has any evidence-based method for international public institution intervention for poverty reduction.
In that case, perhaps the best thing would be to create two different institutions and let them compete in the global poverty market and see which works better. The Europeans can have the Bank, and pay for its goldplated operations; the Americans could perhaps ramp up the Millennium Development Corporation and put the money otherwise devoted to the Bank there. In a generation, maybe it will start to become clearer which approach works better - although, to be sure, as the parties become invested in their approaches, it is unlikely that either side would admit of anything.
But despite the virtues of a policy competition in something as unknown and fraught with uncertainty as this, the exhausted Bush administration, and future American administrations, are unlikely to try anything so ambitious. The reason is that the Bank is no longer really about poverty reduction for the US government. It is, instead, a place for the Americans, and for future administrations, to demonstrate their multilateral sincerity and bona fides. Serious intellectual challenge to the policy model takes a backseat far behind the need to show that the US is a team player, even if the team's policies have little to show in the past and little reason to predict that they will pay off in the future. The US is likely to seek, for a while to come, venues in which it can show itself to be a good, meek multilateralist.
The price paid in a healthy competition over effective policy on global poverty reduction - where the questions are genuinely open on both sides, and maybe what is needed is something altogether different from either one - is unfortunately considered collateral damage alongside the short term political need to demonstrate multilateral solidarity in an arena in which the costs of multilateralism - the costs of the failures of any particular anti-poverty strategy - are paid by neither the Europeans nor the Americans.
(ps, May 11, 2007. Marcela Sanchez, in the Washington Post, here, on Latin American countries, and not only those leaning Chavist, moving away from the IMF and the World Bank in favor of other sources of capital.)
PPS, May 11, 2007. Steven Weisman's New York Times account of current pressures by the Europeans to make it impossible for Wolfowitz to stay, behind the subscriber wall, but May 11, 2007, A14, notes the threat by European governments to reduce their contributions to the Bank if Wolfowitz stays. One might have thought this ... unilateralist. In any case, one wonders what they might do with the funds instead. Weisman says they would possibly contribute them to European aid agencies, and I'm sure that's so.
Why that would be such a terrible thing, however, I don't know. They would thereby shift funds from the World Bank to European aid agencies that would do approximately the same thing with the funds - although likely those agencies would put much less of that money into middle income country lending that is good for the Bank's balance sheet but not very relevant to economic development, particularly not of the world's very poor people. And my experience of the European aid agencies is that they are closer to the ideal I mention above. In my experience, they are less goldplated in their operations because they are not paying wages tied to the presumed skill sets of knowing how to tap into the private capital markets. They tend to be more efficient, much closer to what is going on at ground level, and define ground level much more as the world's poorest people.
Again, I emphasize, as I said above, I do respect the Bank as a repository of expertise on poverty reduction even if I don't think its core lending business makes sense anymore. Still, when it comes to delivery, I think the European country aid agencies - the Nordic countries, the Dutch, the Swiss, especially, do the best job I have seen of any governmental or intergovernmental agencies. The British are a mixture of the worst of the Americans and the Europeans - European in the sense of proposing to spend lots of money and measure success by spending lots of money, and American in the sense of not actually doing it - very Blairite, in the sense of the faux-solidarity Blair, really wonderful, Churchillian speeches by the Claire Shorts of this world, but then no money and no real follow through. I prefer the stolid, stodgier, but frankly much more stick-to-it Nordics - phlegmatic but dogged.
(US AID, it goes without saying, remains the bureaucratic nightmare it has always been - a trainwreck of an aid agency. Anyone who gets involved with US AID gradually shifts their orientation away from those they are supposed to be aiding and towards the worship of the bureaucracy of Washington. US AID needs to abolished and the US start over from scrach. But reforming the US delivery of poverty reduction aid is a whole other story.)
Far from being a threat, for European governments to shift financing from the Bank to their own aid agencies seems like a good idea in any case. I don't really see the downside, except, of course, if you're the Bank.
Well, it is not exactly news now that the World Bank board committee report is out. I don't have much more to add.
Have I learned anything out of this process? One is that journalists and many other people opine freely on factual issues in which it seems doubtful that they have read the underlying documents. I have read the underlying documentary record, at least the public parts, and I am dismayed to conclude that, whether one thinks Wolfowitz is guilty as charged or not, few of the people writing the accounts that the rest of us read have actually read that record. The cautious journalists frame their reporting in ways that suggest, but don't actually affirm, that the reporter has read the stuff versus relying on someone else's account of it; the less cautious and many of the commentators simply use a Duke lacrosse-lite approach and go with what has come to be known as "narrative reporting" - frame the narrative and then select what you report in order to confirm it, and don't ask skeptical questions that might force you to have to think again.
Obviously I'm not one of the great pooh-bahs in all this - Mark Malloch Brown, Joseph Stiglitz, all the rest - the guys who seem to imagine themselves as the Big Men (African tribal style) of our planet. I'm just a humble lawyer. But I am one who is fairly good at actually, you know, reading things. I have no idea what plots and machinations and political deals lie behind all of the ethics charges. (The Wall Street Journal editorial page, here, Wednesday, May 9, 2007, suggests some possibilities.) I am reasonably experienced at going through piles of documents and reports and testimony and examining whether breaches of fiduciary duty have occurred. It's a modest skill, sure. But reading over what the Great and Good have had to say about all this, I don't see much reason to think that they have actually read the underlying documents either. I suppose I don't really expect them to, because for them all this rises or falls on political calculations in which the truth or falsity of the underlying charges is not really relevant. But in that case, honest people leave aside the charges on which they have no particular knowledge, and make honest cases on policy grounds. Naive, I know.
(ps. excerpts from the WSJ editorial, Axis of Soros, from the open link.)
***
Axis of Soros
The men and motives behind the World Bank coup attempt.
Wednesday, May 9, 2007 12:01 a.m. EDT
Wall Street Journal, editorial
Mark Malloch Brown spoke Monday to a crowded auditorium at the World Bank's headquarters, warning that the bank's mission was "hugely at risk" as long as Paul Wolfowitz remained its president. Only hours earlier, news leaked that a special committee investigating Mr. Wolfowitz had accused him of violating conflict-of-interest rules. A coincidence? We doubt it.
Mr. Malloch Brown, remember, was until last year Kofi Annan's deputy at the United Nations. In that position, he distinguished himself by spinning away the $100 billion Oil for Food scandal as little more than a blip in the U.N.'s good work, and one that had little to do with Mr. Annan himself. Last week, Mr. Malloch Brown was named vice president of the Quantum Fund, the hedge fund run by his billionaire friend George Soros. A former World Bank official himself and ally of soon-to-be British Prime Minister Gordon Brown, Mr. Malloch Brown would almost surely be a leading candidate to replace Mr. Wolfowitz should he step down. Not surprisingly, Gordon Brown cold-shouldered Mr. Wolfowitz at a recent meeting in Brussels.
The bank presidency would be a neat coup for Sir Mark, and not just because the post has heretofore gone to an American. He also stands for everything Mr. Wolfowitz opposes, beginning with the issue of corruption. Consider Mr. Malloch Brown's defense of the U.N.'s procurement practices.
"Not a penny was lost from the organization," he insisted last year, following an audit of the U.N.'s peacekeeping procurement by its Office of Internal Oversight Services. In fact, the office found that $7 million had been lost from overpayment; $50 million worth of contracts showed indications of bid rigging; $61 million had bypassed U.N. rules; $82 million had been lost to mismanagement; and $110 million had "insufficient" justification. That's $310 million out of a budget of $1.6 billion, and who knows what the auditors missed.
Mr. Malloch Brown also made curious use of English by insisting that Paul Volcker's investigation into Oil for Food had "fully exonerated" Mr. Annan. In fact, Mr. Volcker's report made an "adverse finding" against the then-Secretary-General. Among other details, the final report noted that Mr. Annan was "aware of [Saddam's] kickback scheme at least as early as February 2001," yet never reported it to the U.N. Security Council, much less the public, a clear breach of his fiduciary responsibilities as the U.N.'s chief administrative officer. Mr. Malloch Brown described the idea that Mr. Annan might resign as "inappropriate political assassination"--a standard he apparently doesn't apply to political enemies like Mr. Wolfowitz.
Mr. Malloch Brown never made any serious attempt to reform the U.N. beyond the cosmetic, while doing everything he could to block the real reforms proposed by Americans Christopher Burnham and former Ambassador John Bolton. He was, however, energetic when it came to lecturing Americans about what they owed the U.N., such as joining the "reformed" Human Rights Council (whose only achievement to date has been to castigate Israel), pursuing a "new multilateral national security," and otherwise empowering the likes of Mr. Malloch Brown, his multilateral mates and their tax-free salaries.
Views like these help explain why Mr. Malloch Brown is in such favor with Mr. Soros, who has publicly suggested the U.S. will need a "de-Nazification" program to erase the taint of the Bush Administration. So close are the two that Mr. Malloch Brown lives in a suburban New York home owned by Mr. Soros. Mr. Malloch Brown says he pays market rent, though reporting by the New York Sun's Benny Avni disputes that. In any case, it's safe to assume that Mr. Soros's widely published views are close to Mr. Malloch Brown's somewhat more guarded ones.
So it's not surprising that many on the World Bank staff would cheer Mr. Malloch Brown: He's perfect for an institutional culture in which "progressive" thinking goes hand-in-glove with a tolerance for corruption. That culture has been on vivid display in the Euro-coup against Mr. Wolfowitz. This weekend the committee investigating the claims dropped 600 pages in the president's lap and told him he had 48 hours to respond--in direct violation of World Bank staff rule 8.01, 4.09, which states that "the amount of time allowed a staff member to comment [on an investigative report] . . . will not be less than 5 business days." Following protests from Mr. Wolfowitz's lawyer, the committee gave him 72 hours.
This is the same kangaroo court that last month leaked its guilty verdict to the Washington Post before Mr. Wolfowitz even had a chance to plead his case. Our sources who have seen the committee's report tell us it is especially critical of Mr. Wolfowitz for daring to object publicly to the committee's methods and thereby bringing the bank's name into disrepute. The Europeans running this Red Queen proceeding prefer that they be able to smear with selective leaks without rebuttal.
Mr. Malloch Brown warned on Monday that, if Mr. Wolfowitz stayed as president, European countries might withhold funding from the next financing round for the bank's International Development Association. We hope he's right, though we know few European finance ministers who aren't eager to throw good money after bad. Still, it's a remarkable bit of chutzpah for the man who downplayed corruption at the U.N. to seek the ouster of the man who has fought to reduce corruption at the World Bank.
If the Bush Administration now abandons Mr. Wolfowitz as he faces a decision from the bank's board of governors, it will not only betray a friend but hand the biggest victory yet to its audacious enemies in the George Soros axis.
The comments people have put up on my blog re Wolfowitz and the Bank have generally been reasoned and civil, even when they disagreed with me. Knowing the nature of much of blogosphere, I appreciate that very greatly. That is unfortunately not true of a number of the comments posted to some of the World Bank staffer blogs - David Ignatius described them as "shrill"; I would describe a goodly percentage of them as considerably more vicious than that. However, this email arrived at my office a few minutes ago, from one Mohamed Cassam, cassamm@aol.com, and while it is probably not very unusual a communication for people who write on these topics, for someone like me who teaches pretty prosaic areas of corporate finance, governance, nonprofits, business transactions, etc., it is a bit startling.
***
Why such animus against Wolfie? Hostility to his "reforms"? So you ask.
What world do you live in?
Wolfie, Feith, Kristol and all the other Likudist gangsters who cooked up the Protocols of the Elders of....................................................................Neo Connery
are responsible, to date, for the murder of 1 million Irakis and smashing the lives of 22 million others by invading their country on false pretences for Israel's benefit.
You being a Hoover Institute hack couldn't give a damn how many Ai-Rabs the DoD kills, being the NAZI you are (North American Zionist+Israeli) Any way, congratulations on getting equal time with that Nobelisto JS on the FT..not bad for 3rd rate academic at a soso degree factory.
However you are on the right track regarding the spousal benefits that the senior Bank management cook up and enjoy. Go after them!
Mohamed Cassam
How the ethics committee failed Wolfowitz
Kenneth Anderson
Financial Times,
May 7, 2007
The World Bank’s ethics committee should have a sign on the door warning: “Caveat emptor –don’t rely on us.”
The absurd controversy over the tenure of Paul Wolfowitz, World Bank president, whose longstanding romantic partner was at the bank years before he was, can be traced to that committee’s incoherent advice.
The ethics chairman who proffered advice to Mr Wolfowitz when he joined the bank is now backpedalling furiously. In loosing the hounds to bay after Mr Wolfowitz and his friend, the institution has set in train a process that will inevitably draw attention to the varied personal relationships and salary levels of other bank administrators and directors.
In 2005, the ethics committee rejected Mr Wolfowitz’s workable proposal to recuse himself on all personnel matters concerning his friend. Instead, it ruled that she would have to leave the bank altogether, disrupting her career and making her forgo a promotion for which she had been shortlisted.
It was an extraordinary decision, raising important questions of gender equity at the bank.
Some have mistakenly supposed that the “advice” was a reflection of settled bank rules. But, in fact, it was quite different from the treatment accorded to some other couples who work there.
Mr Wolfowitz’s friend, Shaha Riza, whose dignity and reticence have been trampled by the bank, testified last week before an ad hoc investigating committee of the bank board of executive directors. Ms Riza said: “I could not understand at the time or now why I was being singled out for this treatment when the then managing director Shengman Zhang’s spouse . . . was working at the bank and before her . . . Caio Koch-Weser’s spouse, when he was managing director. Neither wife was asked to leave the institution.”
Mr Zhang, a Citigroup vice-president who formerly served as the second highest ranking official at the World Bank, has suggested that the analogy is unfair, arguing that wives and husbands have more latitude to work together under “circumscribed conditions” than do persons in less traditional relationships.
But the bank’s staff manual states, in rule 4.01, paragraph 5.2, that spouses and registered domestic partners are forbidden from working in any situation where one “supervises the other, directly or indirectly”, or where they will be brought by their duties into “routine professional contact”. This might seem to apply to Mr Zhang. What is more, rule 3.01, paragraph 4.02, says in the case of more informal relationships, such as that of Mr Wolfowitz and Ms Riza, simply that the supervisor “shall be responsible for seeking a resolution of the conflict of interest”.
But if the bank’s former number two manager cannot recall the rules and exceptions that actually applied to him, how can anyone else be expected to know what they mean?
With perverse illogic, after insisting that Ms Riza must leave the bank, the ethics committee directed that Mr Wolfowitz himself must take care of the terms of her departure, including appropriate compensation for career damage. It mandated the very conflict that Mr Wolfowitz had aimed to avoid yet gave no instructions on how to carry this out. He took the matter to the human resources department, and the ethics committee later issued two reports pronouncing itself satisfied with the outcome.
Ad Melkert, former ethics committee chairman, now creates the impression that the matter was handled under the table, but he ignores the plain language of his committee’s reports. Ms Riza testified that “during my negotiations with [the bank vice-president of human resources], neither he nor anyone else ever suggested to me that my compensation package might violate bank policy in any way.”
If the ethics committee was not “consulted” beforehand on the terms of the Riza negotiation, it is because Mr Melkert refused to deal directly with Ms Riza or consult the head of human resources on what to do in order to give Ms Riza an adequate, yet not excessive, buy-out. If he was unaware of terms of the compensation package, it was because he washed his hands of the matter. His complaints today are opportunistic and smack of a political agenda.
Why such animus against Mr Wolfowitz? Some say it reflects hostility to reforms and others point to the interest of European contributors in a chance at the bank presidency.
Whatever the case, the board is frothing, with many directors apparently seeking any excuse to fire the boss. Its ad hoc investigative report is due at any moment.
But the facts before the board show that the real scandal does not centre on Mr Wolfowitz. The real scandal is the arbitrariness of an ethics committee and its muddled advice, and the astonishing way in which that committee’s failures have metastasised into an ethically dubious venture to bring down the president. None of this speaks well of the bank’s internal processes, or the likelihood of effective internal reforms that would enable the bank to carry forward its important work.
The writer is a law professor at American University and a research fellow of the Hoover Institution.
The Wall Street Journal editorial page, open link here, notes that nearly 1,400 employees at the World Bank make more than Condi Rice. Not to mention that it is tax free for non-US employees, plus school and housing allowances and such goodies.
While it is true, as the Journal points out, that Bank employees are far from under a vow of poverty while presumably battling poverty, I myself am not unduly upset by the salaries. Yes, they are high by market standards. Yes, you could get at least as a good a quality of service at much lower wages; the actual quality of the Bank's work depends not merely upon the paper credentials of its staff and how happy they are with their compensation, but with the visionary esprit of the organization and its sense of vocation: it seems to have been a long time since the Bank had any sense of vocation, if ever.
On the other hand, I chair the board of a modestly sized nonprofit venture fund organization, and while our salaries are much, much, much, much, much, much, much lower than the World Bank's, ideally I would like to raise them to levels at least within eyeshot of the Bank's. (And if I could go to the US government for $7 billion or so, and to the Europeans for gazillions, too, I could.) As a nonprofit director, I want to be able to keep the people the organization needs over the long term, and that means that you seek to enable them to live a more or less upper middle class professional lifestyle - send kids to college, buy home, fund retirement. Upper middle class professionalism is not a vow of poverty and never was.
No, the real issue for me is that ordinarily the tradeoff is between tenure and salary. By professional lawyer standards, I don't get paid a huge amount as a law professor. Clearly I could make a lot more in practice, even in the nonprofit world - it's not revealing any secrets that I made more as a law firm associate than I do as a professor, and made more as general counsel to a large charity than I do as a professor. What I do have as a professor, besides a better lifestyle, is tenure. I'm pretty good at what I do, and I'd like to think my dean agrees with that, but the reality is that part of the tradeoff is a tenured sinecure that replaces salary. At the World Bank, however, you get them both - salary and tenure. That's a big problem - and a bigger and bigger problem the higher the salary and the fact that World Bank people are typically not really placeable, after very many years, anywhere outside the multilateral institutions. (The same, by the way, is true of law professors; I'm not being mean, it's just a fact of many professionals.) It's a mistake to hand out both tenure and salary.
I have long been a supporter in the nonprofit and government worlds, including the multilateral organization world, of complete disclosure of all compensation arrangements. I think foundations and charities and nonprofits should post all compensation arrangements, contracts, salaries, for each compensated person, to the web as part of their annual filings. Same for government agencies and international organizations. That transparency in organizations which deal in the public trust would go a long way. I suppose, in the real world, the best one could hope for is a going-foward rule, along with pressure on the existing staff voluntarily to do what Ban Ki Moon rather admirably did (and Annan did not - nor, for that matter, that supposed paragon of virtue, Ad Melkert, who according to Inner City Press has still not submitted his own financial disclosure forms at UNDP, quite apart from his own ethics-in-hiring issues at UNDP) and disclose his financial statements publicly.
So I think the World Bank staff who have made an issue of Riza getting paid more than Rice have done themselves and the Bank no favors. The Journal gets it right:
Mr. Wolfowitz was directed by the bank's ethics committee to find a new job for Ms. Riza, a longtime bank staffer, when he became president in 2005, despite his requests to be recused from the matter. The committee suggested an "in situ promotion" to the next paygrade or an "ad hoc salary increase" as part of a "settlement of claims." The offer was intended to be generous, given that Ms. Riza--who already had been shortlisted for promotion--was being forced out of the bank, possibly for good, for a conflict she did not create and to a job she had not sought.
Ms. Riza was eventually given an external assignment at the State Department with a salary (paid by the bank) of $193,000, up from the $133,000 she had previously made at the bank. To Mr. Wolfowitz's critics, this was improper and excessive, especially given that Condoleezza Rice makes about $10,000 less. But this is highly selective outrage given normal procedure at the bank.
Of its roughly 10,000 employees, no fewer than 1,396 have salaries higher than the U.S. Secretary of State; clearly "fighting poverty" does not mean taking a vow of poverty at "multilateral" institutions. At the time of Ms. Riza's departure from the bank, she was a Grade "G" (senior professional) employee; the typical salary in that grade hovers around the $124,000 mark. For the next level, Grade "H"--the level to which Ms. Riza was due to be promoted--salaries average in the $170,000 range, with an upper band of $232,360. No fewer than 17% of bank employees are in this happy bracket.
Even sweeter, all of this is tax-free to non-Americans. U.S. employees have to pay U.S. tax but have their income taxes reimbursed by the bank. As with any public bureaucracy, these jobs are also impossible to lose for anything other than gross incompetence or venality. Some of Mr. Wolfowitz's accusers--notably, former general counsel Roberto Danino--are angry precisely because he upset their lifetime sinecure by demanding higher performance.
These details are common knowledge within the bank itself, so it's only fair that they be made public to the American taxpayers who finance this comfortable poverty-fighting lifestyle. Alison Cave, the head of the bank staff association leading the campaign against Mr. Wolfowitz, ought to be the first to make her salary and performance reviews public--in the name of restoring the bank's "credibility," to borrow one of her favorite words.
Steven R. Weisman has a story in today's New York Times, Thursday, May 3, 2007, A6, "Committee Is Likely to Say Wolfowitz Broke the Rules." The article largely summarizes the state of play, largely as seen from the hands of European governments and players seeking to oust Wolfowitz. (Update, May 3: I have other posts on the Wolfowitz affair here, here, here, and here (last part of post). Or check under the tags for World Bank.)
The last three paragraphs of the article introduce something quite astonishing, however - quite amazingly, the question of whether the Bank's personnel rules are anti-gay - into this debate over whether Wolfowitz acted inappropriately in his dealings regarding his long time companion and Bank staffer, Shiha Riza. The article quotes from the former number 2 official of the World Bank, former bank managing director Shengman Zhang, who left the Bank shortly after Wolfowitz's 2005 arrival.
Zhang's wife also worked at the Bank - the same situation was true of at least one other senior Bank manager - and the Bank had taken the position that so long as the senior manager recused himself from personnel dealings with his spouse, it was not necessary to require that the wife actually leave the Bank. Wolfowitz had initially sought the same arrangement for Riza - his recusal from any personnel matters dealing with her, but had been rebuffed by the Bank's internal ethics committee, which had ruled, quite harshly from the standpoint of gender equity, that only Riza's actual departure from the Bank would suffice to avoid conflict of interest issues. It was the ethics committee - under the chairmanship of Ad Melkert, now at UNDP (where, as noted in the post below, he has his own considerable ethics issues that bear, one might think, on his credibility in the Wolfowitz matter) - that insisted that Riza leave the Bank.
The questions of special treatment arise from the fact that the committee refused to treat Riza as it had treated wives of other senior bank officials - through recusal - but at the same time it required that, because Riza was being forced to leave the Bank for no reason related to her or her professional performance, she be given some form of buyout compensation.
Wolfowitz had pointed out, early in this process with the ethics committee, that the Bank already had precedent, in Zhang's case and others, for recusal rather than forcing the spouse to leave the Bank, as the proper procedure. Now come the astonishing paragraphs in the Times article. On Wednesday, May 2, Zhang - no longer at the Bank, but formerly its number two manager - circulated a statement throughout the Bank
"expressing irritation that Wolfowitz had cited the fact that, because Mr. Zhang and his wife both worked at the bank, there should be considered a precedent that would allow Ms. Riza to remain there."
So what was the difference between Zhang's position and Wolfowitz/Riza's? According to Zhang, that they were married, and not merely in a sexual relationship. The Bank's rules, according to Zhang - and presumably he should be in a position to know as the Bank's number two manager - permitted
"husbands and wives to work at the bank under circumscribed conditions, which he said he followed, but that they barred anyone from having a sexual relationship with a top bank official outside of marriage." (emphasis added)
Do we understand this correctly? People who come into the Bank, such as Wolfowitz, with a long standing "sexual relationship" that is "outside of marriage," cannot operate on the same basis of recusal and professional relationships that people who are married - not just married, he says, but specifically "husbands and wives" - are permitted to do under the Bank's rules. Gay couples who are not "husbands and wives"?
This is breathtaking. I knew that the Bank had governance problems. And like all these institutions of global officialdom, it has limitless rhetoric on diversity, gender sensitivity, etc., etc., which, as this demonstrates, is often no more than a micron thick. But I would not have thought that it would have facially discriminatory, anti-gay-couple rules. But if Zhang is correct, that's what it is. A gay couple, because they are not married and are not "husbands and wives," would not both be able to remain at the Bank if one of them were a senior official - whereas a married couple would. As Zhang added:
"'I trust this clarifies the misleading attempt to equate my case to that of Mr. Wolfowitz', said Mr. Zhang, now a senior vice president at Citigroup in Hong Kong. 'My wife and I worked at the bank under a rule which expressly permitted it. Mr. Wolfowitz attempted to have Ms. Riza work for him in defiance of an express prohibition'."
Well, this certainly clarifies what Zhang thinks separates his case from Wolfowitz's - viz., being husband and wife. I hope that clarifies things for the progressive community, and perhaps the Human Rights Campaign folks as well. Husbands and wives, apparently, don't engage in wrongful professional pillow talk; lovers and partners who are not blessed by the legal status of being husbands and wives apparently might. Perhaps the Europeans, so eager to remove Wolfowitz, or at least to end his anti-corruption campaign by fatally weakening his leadership, might want to ask in what progress consists.
Is this really the Bank's rule? Could it really, truly be that the World Bank would have a rule so nakedly anti-gay? I asked informally - I didn't talk with the Bank's lawyers, as it seemed unlikely anyone would dare respond - and no one seems to know. Zhang calls it an "express prohibition." But where is it written down?
It seems quite possible it is written down somewhere. It seems quite possible it is not written down anywhere - and that the Bank, if pressed on this issue by some NGO group, would deny having any such rule. It also seems quite possible that the Bank has indirectly addressed some such question in some obscure memo from the ethics committee, or some internal employment review panel, or some internal thing - which maybe counts as "express" or maybe just counts as something that no one quite knows about but which can be triumphantly pulled out of a file as needed - or, on the other hand, quietly forgotten if not.
One of the insistent lessons of the Wolfowitz affair with respect to Bank governance is that the Bank manages that great bureaucratic feat, so reminiscent of the "soft" Communist regimes of Yugoslavia, Hungary and today, China (and Zhang's language sounds less like a banker than that of a Chinese Communist Party functionary, does it not?), the twin, simultaneous qualities of infinite discretion combined with infinite rules. A bureaucracy that has a rule for every occasion - and the discretion to ignore them whenever and however it feels like. No wonder the institution is so resistant to Wolfowitz's rule of law agenda.
(Update, May 3: Thanks Glenn for the Instalanche!)
(Update, May 5, Added "personnel" to the above discussion of recusal - sorry, should have caught that. My thanks to the commenters, who have been uniformly courteous and polite, which is not always the case on blogs.
Meanwhile I've had a chance to read through the Bank's personnel rules re domestic partnerships and other relationships. As written they are admirably progressive, and per one of the comments, as an outsider to the Bank around DC, I haven't ever heard of anyone complaining about the Bank as being anti-gay. Far from it. That is why I was so surprised to read Zhang's understanding of those rules in the NYT, and what he thought they meant, because his understanding of them draws a quite invidious distinction between married husbands and wives and all the rest.
But if the number two manager of the Bank can't manage to get straight the rules on something with profound implications for him personally, how is anyone else supposed to do so? Well, in that case, one looks to internal interpretive structures such as the ethics committee for guidance. One may agree or disagree as to whether Riza's departure from the Bank was essential; certainly it was both Wolfowitz's right to ask that she be allowed to stay, just as it was the committee's right to say that she had to go. The comment in the post below that Wolfowitz had asked that the recusal be limited to personnel matters was misconduct seems to me quite wrong; he could ask for it, and the committee could, and did, not only turn him down, but take an even more drastic step. All within the committee's pregrogatives, even if it was at considerable variance, one could argue, with how similar situations had been treated at the Bank.
However, given the baroque complexities of the Bank's rules, and the vagaries of their interpretation, it was not within the committee's prerogatives simply to leave the question of how to comply with its ruling unanswered - or, at least, if if choose, as it did, to leave all those matters open, twice say that the outcome was fine, and only then come afterwards and claim noncompliance and bad faith, in the way the Ad Melkert now does. The expectation after the fact seems to be that Wolfowitz was to read the mind of the committee in how he must comply - in a situation of heads I win, tails you lose. It is very easy, obviously, to say afterwards, well, any reasonable manager would have known that we meant that you do x, y, and z. Anyone can say that and never be wrong. It is, however, an exercise in bad faith, and that, it seems to me, is how Melkert has responded, with whatever larger political agendas he might have.
While we are on the subject of Ad Melkert, formerly head of the World Bank's ethics committee and now one of Wolfowitz's chief accusers while at the United Nations Development Program, it bears noting that he has ethics issues of his own at UNDP. Since some part of the questionable accusations against Wolfowitz depend on Melkert's credibility, it is worth bearing in mind that over at UNDP, he has proceeded to hire, outside the competitive hiring process, a politician from his own Dutch Labor Party. See the Inner City Press stories, here and here (these folks, by the way, do genuine investigative, shoe leather reporting and spare no one - well, enough said by way of comparisons ...). As the Inner City Press story said:
"UNDP's hiring of Eelco Keij of the Dutch Labor Party is another example of Melkert "making the best" of the UNDP rules -- that is, bending or breaking them, as is alleged of Wolfowitz at the World Bank."
Also, according to Inner City Press, it might well be that this whole fabricated coup against Wolfowitz is under the direction of Mark Malloch Brown in pursuit of the goal of becoming Wolfowitz's non-American replacement. See the same stories, above.
One additional point. I have never met Paul Wolfowitz. I'm not raising these questions because I have any relationship whatsoever with him or anyone around him; I hold no political positions or anything else - I'm just a very ordinary professor in DC. I am astonished and appalled that powerful people - in the administration and out - who were responsible for putting him at the Bank have not come to his aid - he appears to have no friends in DC, so far as I can tell, besides Christopher Hitchens. I generally agree with Wolfowitz's policies for the Bank and for development, particularly African development. He was naive about the Iraq war; I've written my general views of neoconservatism and Wolfowitz's naive version of neoconservatism, here and here. But I think the ethics charges amount to nothing and are merely the means for a disgruntled staff and its European allies to stage a coup because they hate him and the Bush administration for the Iraq war, among other reasons, and because they don't really have all that much against corruption as such, either in the Bank or among its clients. That's what it comes down to - venal means in pursuit of a political coup.
(Update, Wednesday, May 2, 2007. On the (very) off chance that Steven Weisman has actually seen this post, I want to apologize for my pissiness below - I'm taking out the more peevish stuff. I also want to add that I do know well and have often worked with Bank staff on various things, and many, many of them are very dedicated and able. The comments that people have posted have been courteous and worthwhile, and my thanks for that.)
(Let me respond, though, to two comments on this post. The first observes, quite correctly, that Wolfowitz's problems ultimately stem from politics, which was the source of his appointment. True enough, but not a reason, surely, to attack him on what I regard as baseless ethical issues as politics by other means; surely, too, it was no less politics in the case of Wolfensohn or any other Bank president. As to the second comment, which provides a sample of what Wolfowitz, it is said, ought to have done - well, I am struck, in regards to this comment and many others floating around the blogosphere, that this is more properly what these commentators seem to wish that the ethics committe had done, and had instructed Wolfowitz to do. To fault Wolfowitz for following the ethics committee's (seemingly intentionally) vague instructions rather than faulting the ethics committee for not being clear what procedure should be followed - well, having been a general counsel for a large philanthropy, sure, one can fault anyone for what they should have done or should have known to do - but the buck stops, so far as I can tell, with what the committee charged with setting out the procedures and instructions said and didn't say to do. Not with Wolfowitz. And if that's a hanging offense - not to read the minds of the ethics committee - then the Bank is a good deal less transparent than even I would have guessed. And its governance - not Wolfowitz's governance, but the Bank's overall governance, preceding Wolfowitz and persisting, is in even greater disarray than I would have imagined.)
The New York Times' Steven R. Weisman has a story in today's paper, "Former World Bank Officials Detail Discord Over Wolfowitz," NYT, Wednesday, May 2, 2007, A11, behind the NYT subscriber wall.
The story recounts statements given to the World Bank board, released yesterday, that dispute Wolfowitz's accounts. One of them, from former Bank general counsel Roberto Danino, is reproduced in the comments in the post below. The other is from Ad Melkert, the former head of the Bank's ethics committee who, according to the story, is "deeply hurt by efforts to manipulate information." [Deleted by author as pointlessly pissy.]
Weisman offers a reasonably straight account of what the two statements said. Fine. But shouldn't the article not merely reproduced their allegations and Wolfowitz's counterclaims - but actually go to the documents at issue to see whether they support one claim or another? If Weisman has spent hours and hours going through the ethics committee's earlier reports on the matter, great, but it is not evident in the reporting.
Consider, for example, Danino's point 17(i) (see comments to post below for complete Danino text):
17. In my opinion, this was incorrect because: (i) PW was in a de facto conflict of interest under Staff Rule 3.01, paragraph 4.02, which should have precluded him from providing these benefits to the very person who was part of the conflict.
Well, maybe. But Weisman's reporting does not go back to the Ad Melkert-chaired ethics committee's minutes of August 29, 2005, which state that:
"Members of the [Ethics] Commitee 'cannot interact directly with staff member situations'. Therefore, the Chairman appropriately declined to meet with the staff member concerned as the Requestor had suggested. Instead, it was proposed that the VP HR be instructed by the Requestor to do so."
Might it not be reasonable to think, on the basis of what Ad Melkert's own report from the time said, that Wolfowitz was forcibly reinserted back into all this on the Bank's ethics committee's own instructions? Sure, I suppose you can have all sorts of discussions from that point forward about what that meant, and who should conduct it, and so on - but doesn't Weisman have some obligation to his readers to point out that on the basis of one of these officials' own report from the time, there is an explanation and it is not consistent with what is being asserted now?
Moreover, reading the remainder of the statements, including Riza's, along with the ethics committee's repeated statements from the time that there was nothing wrong with these arrangements, it remains as hard as ever to see what the scandal is supposed to be about. The evidence seems to say that Wolfowitz went to the VP per the ethics committee's instructions, and told the VP to see what Riza wanted in the way of a package that, in the circumstances, amounted to a buy out for her lost opportunities (which, considering what she gave up through yet with no fault on her part, seems cheap at the price - a few tens of thousands of dollars? With every good reason, the salary hike was not considered an issue at the time, because it wasn't and isn't, especially if one looks at World Bank pay scales.).
Riza brought her own lawyer to the meeting, and apparenlyt there were some strong negotiations. Isn't that what lawyers are for? Yet, as Riza says in her statement and I am not aware has been disputed (although, mysteriously, I suppose, as with so many matters involving Ad Melkert in this affair, it might yet suddenly be), no suggestion was made that the terms were inconsistent with the Bank's far from transparent rules. There was no request, for example, by the Ethics Committee that this should be reported back to them, nor was there guidance whatsoever as to what the pay level within the GH range should be.
If all of this is so dead wrong, as Bank staff now claim post hoc, well shouldn't any of this stuff - even to rebut it, even to show that Weisman is aware of the documentary story, even to state how and why it is wrong - show up in the Times' reporting? Should the reader have to do all the background checking and investigative work?
I'm linking here a few articles on Wolfowitz I don't want to lose track of. (Update, I'll probably add a few more over time. Also, see things in the comments, such as the FT document of Danino's statement.)
David Ignatius, Washington Post, May 2, 2007, here, endorsing the lynching on the grounds not that the scandal was a scandal but that Wolfowitz brought it on himself by being a neocon ... fairly typical of Ignatius, I guess, chanelling the spirit of the Bank's high-toned mobocracy but not admitting it, and endorsing the idea that the only way to "reform" the World Bank is to do ... what the senior professional staff wanted all along. Ignatius wraps this in the "more in sorrow than anger," but aimed at declaring Wolfowitz's departure a done deal. What Ignatius describes as the intellectual arrogance of the Bank staff would be better described as its own very special internal culture of impunity. (Oh well, catty but true, Ignatius' new novel is not very good, either - I read a big chunk of it hanging out at Barnes & Noble over the weekend but realized I'd never manage to get all the way through it. Cover photo is great, though.)
Bret Stephens in the WSJ, here, May 1, 2007, noting that Wolfowitz followed the advice of the Bank's very own ethics committee - and that the Bank has a long history of special deals and conflicts of interest and all sorts of sorry stuff.
My own view is that Wolfowitz ought to call for full disclosure by all Bank personnel of all contracts and compensation arrangements, and that in the interests of complete transparency, they should all be posted as a matter of policy to the internet. That would reveal, I am quite certain, an amazing number of special arrangements, private deals, inequities in compensation. (I would make this a requirement of nonprofit corporate governance across the board.)
Indeed, my experience of nonprofit organizations - many of which have long traditions of lack of transparency in such matters despite the issues of public trust - suggests that organizations where employees cut many special deals have a particular tendency to shaft the women in the organization. For what it's worth, my experience in the nonprofit world suggests that maximum transparency tends to favor gender equity. And that secretive organizations like the World Bank often conceal considerable gender inequity through lack of transparency.
No doubt the staff kicking and screaming surrounding a call for compensation transparency at the Bank would make it impossible to implement. So I would urge Wolfowitz to announce his own, personal transparency - let him post his tax returns and any contracts and arrangements on the web - and call for voluntary compliance by people of integrity at the Bank. Grandfather the existing staff, while calling on them to do as Ban Ki Moon has done - and Annan never did - and make a completely transparent financial disclosure. Let's see who is willing to go public and who not.
The Wall Street Journal has an editorial in yesterday's April 30, 2007 paper dissecting the trail of bad faith at the Bank, and the members of its ethics committee in particular, here.
The Washington Post has a story on Wolfowitz's defense of himself by staff writer Karen DeYoung, here, that actually shows that a reporter has read the documents produced by the Bank's ethics committee. It is a cut above the rest of the reporting, particularly the execrable work done at the Financial Times.
Andrew Young has an op-ed supporting Wolfowitz in yesterday's April 30, 2007 Washington Post, here. I don't suppose it will sway any Euro-grandees of the Bank, but perhaps it will give the White House some backbone, or anyway some cover to support Wolfowitz.
***
The Right Man for the World Bank
By Andrew Young
Monday, April 30, 2007; A15
Wash Post
"Daddy King" -- the Rev. Martin Luther King Sr. -- was always reminding us that "hate is too great a burden to bear." Even after a childhood of racist oppression and the cruel assassination of both his son Martin by white men and his wife by a deranged black man as she sat at the organ of Ebenezer Baptist Church playing the Lord's Prayer, he daily affirmed that we must never stoop to hate.
Yet I came closer to hating Paul Wolfowitz than I ever came to hating Bull Connor, the Ku Klux Klan or the killers of Martin Luther King Jr.
You see, I saw Wolfowitz as the neocon policy wonk who led us into a war in Iraq but who had never even been in a street fight himself. My personal fantasy was to catch him alone and give him a good thrashing.
It seems our European friends are now indulging my fantasy. But I've come to realize how wrong that impulse is and how right Archbishop Desmond Tutu is when he says there's "no future without forgiveness."
I've also come to believe that the impatience of Wolfowitz and others with Saddam Hussein's violence grew from a more massive destruction than the world could ignore -- Hussein's murder of more than a million Shiites, Kurds, Kuwaitis and Iranians, even without possessing atomic weapons. I was in Kuwait after the Iraqi invasion of 1990. I saw the horror and bloodshed of their occupation, and I knew Hussein had to be restrained. I may disagree with the means that were used, but not with the problem.
At the World Bank, however, an aggressive impatience with the evils of disease and poverty is exactly what is needed.
I first spent time with Paul Wolfowitz in Anacostia in 2005, when I participated in a program of the Operation Hope financial literacy initiative. In reading the program notes, I discovered that his PhD from the University of Chicago concerned the politics and economics of water resources management and that George Shultz had been his mentor at the State Department. When he was Treasury secretary, Shultz took me on my first trip to Africa as a congressional delegate to a World Bank gathering in Nairobi. Shultz also opened the diplomatic dialogue with the African National Congress at a time when much of Europe and America wrote off Oliver Tambo, Nelson Mandela and Thabo Mbeki as hopeless communist terrorists.
I therefore decided to work with Paul Wolfowitz as a brother, and I have not been disappointed. We were together in Nigeria in 2006 for a Leon H. Sullivan Summit. I saw his effectiveness and warmth at work in a setting of 12 heads of state and 2,000 delegates from 22 countries.
His commitment and aggressiveness in promoting African development, as well as his abhorrence of needless bureaucratic "CYA" behavior, have been welcomed by those who love Africa and the developing world as well as by those willing to admit the complicity of the haves in the crisis of the have-nots.
It is my sincere hope that our European friends and allies can make the distinction between the U.S. Defense Department and the World Bank. While we still abhor the mismanagement and hubris of the Iraq invasion, we can share an aggressive impatience with poverty, disease, illiteracy and bureaucratic nitpicking and get on with our efforts to prevent the future wars and environmental crises.
France, Norway and the Netherlands have always been at the forefront of this struggle. I'm hopeful they will see the greater good of working together at the World Bank on these present evils and allow history, the World Court or the United Nations to judge Wolfowitz on his role in our previous conflicts.
We must get beyond the current crisis at the World Bank, a careful examination of which will show that Wolfowitz was operating in what he felt was the best interest of the institution and with the guidance of its ethics committee.
This crisis also should not redound to the detriment of Wolfowitz's companion, Shaha Riza, a British Muslim woman who is an admired World Bank professional and a champion of human rights in the Muslim world.
I am a Protestant Christian minister, a product of America's excessive Puritanism. I've always looked to Europe for sophistication, temperance and the tolerance the world needs to survive. It is my appeal that we offer Paul Wolfowitz the same chance to learn from the misjudgments of the past and move on together to construct a more just, prosperous and nonviolent world.
Andrew Young has served as executive director of the Southern Christian Leadership Conference, as mayor of Atlanta and as the U.S. ambassador to the United Nations. He is co-chairman of Good Works International, a consulting firm offering advice in emerging markets in the Caribbean and Africa.
Sam Rich has an assessment of Jeffrey Sachs' Millennium Village Project in the new Wilson Quarterly, although it does not seem to be online - available, anyway, in most college bookstores or libraries. I've read it and found it very sensible - I also recommend highly Tyler Cowen's summary of it at Marginal Revolution, here. I think Cowen somewhat overstates things in his formulation "wonderful but oversold" - the weaknesses in the model are more than just the fact that it is not readily scalable, as Rich's article makes clear.
I have favorably commented on Sachs' general approach to poverty reduction in the past couple of years on this blog. With the process of UN reform in 2005, however, I found myself much more focused on the Millennium Development Goals and what Sachs really means by them, once attached to his own targets and numbers and so on. When all this is translated into real policy, it looks a lot less attractive and a lot more like simply another Potemkin Village-Five Year Plan at which the UN already excels, to no point whatsoever. I am increasingly persuaded that William Easterly, who operates as Sachs' general critic, is right in emphasizing that poverty reduction in the world is essentially a retail, tactical, bit by by effort. Sachs, by contrast, seems to think that it can be solved at the grand strategic global level. The problem, however, seems to be a radical disconnect between plans at the strategic level and the ability to implement them at the tactical level. For his pains - because it runs counter to the command-and-control, left over central planning that the UN continues to love so much in its bureaucratic bones - Easterly is isolated within official circles as a curmudeonly dissenter, while Sachs is lionized. But the cold reality is that Sachs' grand plans have little to show for themselves except as plans - leaving the Millennium quota defenders to fall back inevitably on the claim that failure was due not to the plans being flawed, but by the failure of funders to hand over sufficient money. At bottom, this is Sachs' big claim, and Easterly's big skepticism.
That, and the fundamental question of political stability, the rule of law, property rights, transparency, decreasing corruption, and reducing rent seeking by government officials standing in the way of private direct investment in reducing poverty. Paul Wolfowitz has been smeared by his underlings and by European grandees, abetted by the media, and in particular in this country by the New York Times and Washington Post, whose reporting seems to consist not of actually reading underlying documents, but reproducing the whispering campaign against Wolfowitz.
For quite a while, I was too busy and distracted to do anything other than follow the stories as the NYT and WP issued them, and assumed that Wolfowitz had screwed up and put himself in this position. Then I went back and looked at the actual documentary history - and it suddenly looked really, really, really different. I can't see whereas Wolfowitz has anything to apologize for, and I hope the White House finds a little backbone and holds firm. Wolfowitz is right on the substance of the reforms he is pushing on an arrogant and recalcitrant World Bank, and hasn't done anything that he wasn't essentially told to do by the Bank's own ethics committee. This is a political smear, aided in no small part by media hacks at the Times and Washington Post who, so far as I can tell, can't read.
Ruth Wedgwood has it right, in an op ed originally appearing in the Los Angeles Times, but also running in the Dallas News. And she is especially right to point out how anti-professional-women the whole contrived scandal is - not that you would know it, once again, reading the Times and the Post. Excerpts:
***
Ruth Wedgwood: A bum rap at the World Bank
Wolfowitz and his partner had been rightly cleared before
Dallas News
09:08 AM CDT on Thursday, April 19, 2007
On taking office, World Bank President Paul D. Wolfowitz set two priorities for the world's premier development institution. He asked for a focus on Africa's persistent poverty, and he targeted corruption that diverts aid dollars from the poor.
African leaders endorsed this vision, but not all bank bureaucrats were thrilled by Mr. Wolfowitz or his policies. Still, any friend of the bank's work should be dismayed by the disruption caused by a manufactured scandal at a time when the bank needs to replenish its coffers. The imbroglio rattling the World Bank during its spring meeting of finance ministers is a rehash of its clumsy attempt to resolve the status of Shaha Ali Riza, a veteran bank professional and Mr. Wolfowitz's longtime romantic partner.
The authors of this acrid affair have nakedly forgotten the standards of fairness and due process owed Ms. Riza, who is a member of the bank staff association and entitled to its fiduciary protections. And the scandalmongers have recklessly ignored a written record of bank documents that serves not to condemn but to exculpate Mr. Wolfowitz.
Moreover, the case reveals the bank's executive board and its ethics committee as organs of haphazard judgment. In 2005, the ethics committee surprisingly denied Mr. Wolfowitz's written request that he be allowed to recuse himself from all decisions touching on Ms. Riza's status because of their relationship. Then it disqualified her from remaining at the bank yet insisted that she be compensated for this disruption to her career. Next, it insisted that Mr. Wolfowitz re-enter the chain of command to execute its advice concerning Ms. Riza. And now, board members apparently have criticized Mr. Wolfowitz for doing exactly what the ethics panel directed.
To be sure, news stories about Ms. Riza have revealed that the pay of World Bank staff far exceed what comparable professionals would earn elsewhere. The public rightly might be dismayed to learn that Ms. Riza and other World Bank "lead" professionals can earn from $132,000 to $232,000.
But this does not excuse a mob mentality that abuses the reputation of a particular female professional, much less a bank president. The internal documents released last week – at Mr. Wolfowitz's request – show that this slow-moving institution had no protocol for figuring out how to accommodate the career of a professional woman when her spouse or partner came to work in the same chain of command. This is becoming a more serious problem in today's workplace.
Ms. Riza was a veteran of the bank, working as a senior communications officer in the Middle East/North African public outreach program before Mr. Wolfowitz was picked as bank president in 2005. With more than 15 years' experience in the field, able to speak Arabic, English and French, she was short-listed for a senior-level job. The bank's ethics committee in July 2005 gave "informal" advice that Ms. Riza had to give up her eligibility for promotion and leave the bank. It acknowledged that this step would disrupt Ms. Riza's career for a substantial period. For a 52-year-old bank employee facing mandatory retirement at age 62, losing a promotion and a long period of service is not trivial. The ethics committee thus reasonably concluded that Ms. Riza should receive some compensation for her forced transfer.
According to the documents on the bank's Web site, it was the ethics committee's own idea to give Ms. Riza a promotion as she was being moved out for four years. She was transferred to the U.S. State Department to work on a grassroots democracy project that has been praised by Secretary Condoleezza Rice. She was given the mid-range salary for her new level.
It was certainly not a corrupt favor to a girlfriend.
All the facts were reviewed for a second time by the World Bank ethics committee last year, and again it found nothing wrong. The chairman of the ethics committee pronounced in a Feb. 28, 2006, letter that "the ethics committee decided that the allegations ... do not appear to pose ethical issues." It is hard to square the record with the entertaining claim that the World Bank's president somehow concocted a do-nothing job for his girlfriend. It's a bum rap, and one that female professionals in dual-career families might worry about.
Ruth Wedgwood is professor of international law and diplomacy at Johns Hopkins University's School for Advanced International Studies.
