Sunday, April 08, 2007

# Posted 6:58 PM by Ariel David Adesnik  

WHERE ARE THEY NOW? (PAUL WOLFOWITZ EDITION): Just yesterday I was thinking to myself that we haven't heard much from the former Deputy Secretary of Defense since he became president of the World Bank. Well, ask and ye shall shalt receive; the current issue of the New Yorker has a profile of Wolfowitz entitled "The Next Crusade".

No surprise, Wolfowitz is a bit controversial at the Bank. But is it because he is shaking up an lethargic bureaucracy or because he is a unilateralist and ideologue by nature? The New Yorker profile lets the advocates of both arguments have their say. It is also worth considering whether controversy is the natural baseline for a new president with new ideas. According to one Wolfowitz ally,
“If you had interviewed people at this stage in Jim Wolfensohn’s tenure, you would have concluded he was the Devil incarnate.”
Wolfensohn was the previous president of the bank. (Maybe the next two presidents will have surnames with the syllable "lamb".)

Wolfowitz's signature issue at the bank has been fighting corruption by governments who borrow from the bank. According to many Bank-watchers, its employees have a long history of measuring success in terms of how much funding goes out the door. Thus, there tends to be minimal concern about how much of that funding winds up in the pockets of corrupt officials, rather than the hands of the poor.

At times, Wolfowitz's approach to fighting corruption and other abuses has come across as heavy-handed. In May 2005,
The government of Uzbekistan had violently suppressed an uprising in the city of Andijan, in which as many as seven hundred people, including women and children, were killed. In July, Islam A. Karimov, Uzbekistan’s dictatorial ruler, ordered the United States to remove its troops and aircraft from the Uzbek base it had been using to support the military campaign in Afghanistan. Around the same time, the Uzbek government expelled a number of Western nongovernmental organizations.

Since joining the World Bank, in 1992, Uzbekistan had received more than five hundred million dollars in loans, mostly for rural water and health projects. In September, 2005, Wolfowitz withdrew an assistance package for Uzbekistan that was about to be presented to the bank’s board for approval. “It came out of the blue,” Dennis de Tray, who was country director for central Asia at the time, told me. “I got a call while I was on vacation and was told that he just did it. He didn’t even talk to the regional vice-president. We were all pretty shell-shocked.”

Wolfowitz told me that his action had nothing to do with military bases or the U.S. government. “Nobody was instructing me to get out of Uzbekistan,” he said. “My one concern, pure and simple, was that, given the human-rights violations, we couldn’t have any confidence in what was happening to our money.”
Now, cooperating with subordinates is never a bad thing in and of itself. But isn't a bit disturbing that an assistance package made it so far through the approval process right after such a horrific massacre? Although the Bank's employees may have been "shell-shocked" about Wolfowitz's sudden intervention from above, doesn't their surprise also say something about strong expectations that the massacre could be safely ignored?

Now, there are some fairly influential voices in the development community who believe that the Banks should focus on fighting poverty, without getting entangled in the issues of corruption and governance:
On September 13th [2006], six days before the Singapore meeting, Hilary Benn, the British Secretary of State for International Development, announced that the United Kingdom was withholding from the World Bank a fifty-million-pound payment, to protest the conditions the bank attached to aid. In a speech in London, Benn objected to Wolfowitz’s actions on corruption: “Where problems arise, some people argue that we should suspend our aid or withdraw it completely. I don’t agree. Why should a child be denied education? Why should a mother be denied healthcare? Or an H.I.V.-positive person AIDS treatment, just because someone or something in their government is corrupt?”
The answer to such questions, of course, is that the best way to provide a child with education or her mother with healthcare is not to wink at the corrupt officials who pocket a percentage of the health and education finds. The more you wink, the more the corrupt officials are willing to steal from the poor.

But if you confront the corrupt officials, you may (emphasis on may) be able to ensure that World Bank funds benefits their intended recipients. And worse comes to worst, you shift that funding to some other country that is willing to channel more of it to the needy. Ultimately, the bank has limited funds, which should be spent (or lent) where they can do the most good.

Now, it is worth pointing out that corruption, even widespread corruption, doesn't necessarily prevent economic development:
A number of economists criticize Wolfowitz for exaggerating the role that corruption plays in retarding economic growth. “There are a lot of countries that we know perfectly well are corrupt but which have done very well economically,” John Williamson, a senior fellow at the Peterson Institute for International Economics, said. “Suharto’s Indonesia is an example.” (Wolfowitz was Ambassador to Indonesia from 1986 to 1989.) Joseph Stiglitz, who served as the World Bank’s chief economist from 1997 to 2000, and later won a Nobel Prize, said, “China has had an impressive record of growth and poverty reduction, and yet by many measures it does not score well on corruption.”
It is true that both China and Indonesia have grown considerably in spite of pervasive corruption. What I'd be curious about, however, is whether World Bank projects damaged by lender states' corruption actually contribute to national development. Apparently, this point is at the heart of a compromise between Wolfowitz and the rest of the Bank when it comes to corruption:
Last month, Wolfowitz presented to the board a revised version of his anti-corruption paper, in which he made several concessions. While reserving for the bank’s management the right to suspend projects where graft was suspected, the paper asserted that the bank should remain engaged in countries with serious corruption problems and should consider suspending lending to a particular country only in “exceptional” circumstances. “Don’t make the poor pay twice,” the paper said. Wolfowitz also agreed to consult more closely with the board, which unanimously approved the paper, and to seek its support before trying to suspend lending to individual countries.
That seems about right to me. Priority number one should be cleaning up corruption that directly affects World Bank programs. That is tough enough, given the Bank's traditional resistance to addressing the issue. If Wolfowitz can get that much done, his tenure might be considered a success.

Of course, there is also the issue of corruption within the Bank itself. Some employees have insisted that Wolfowitz is a hypocrite in this regard:
The board of directors’ ethics committee took the view that [Wolfowitz's long-time girlfriend and Bank employee Shaha ALi] Riza should be transferred to a position outside his supervision. Wolfowitz asked that she be allowed to maintain her job at [with the Middle East & North Africa bureau] and to work with him as necessary, offering to recuse himself from any decisions concerning her pay and work conditions. “It really gave a bad impression, especially for somebody who was making a big issue of good governance,” a former senior official at the bank said. “The president is supposed to set an example to everybody, and yet here he wanted to have his girlfriend working with him, which is flatly prohibited under bank rules.”

Ultimately, Riza was seconded to the State Department. To compensate her for the disruption of her career at the bank, she was promoted to the managerial level, and she has received two pay raises, bringing her salary to a hundred and ninety-three thousand dollars—more than Secretary of State Condoleezza Rice makes. “The staff are very upset,” Alison Cave, the chairman of the World Bank Staff Group Association, said, explaining that the raises amounted to special treatment that violated established bank guidelines. Kevin Kellems told me that Wolfowitz had no involvement in Riza’s promotion or pay raises. “All arrangements concerning Shaha Ali Riza were made at the direction of the board of directors,” he said.
It seems like Wolfowitz could've handled that one better, although it would be a major stretch to call it corruption unless Wolfowitz actually pushed for Riza to get an unmerited raise.

Looking at the big picture, I'm glad that Wolfowitz had made corruption a priority and is challenging the Bank to live up to his standards. I think that leadership from the top is the only way to get the Bank to take the issue seriously. Wolfowitz's predecessor took some critical first steps in that direction, but the fight against corruption has only just begun.

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(16) opinions -- Add your opinion

You should read Al Kamen's followup to the story of Wolfowitz's girlfriend, who is the most highly paid person at the state department - including Condi Rice - and seems to work in the department of nepotism - her boss is Dick Cheney's daughter.
The Kamen story is here:
- roger
(this thing is making me sign in as anonymous
The issue with the girlfriend is disturbing, but what really struck me as Wolfowitz's being rather false was his mentioning the corruption and a kleptocracy of Mobutu.

Of course Mobutu was corrupt and the fact was well known since the late 1960's if not sooner. Mobutu probably had no better friend in the White House than Ronald Reagan who praised Mobutu as a "voice of good sense and good will", yet when Wolfowitz was in the DOS in the Reagan years did he voice any object to this support of Movutu?

It's hard to say, but if he was outraged by it, he certainly didn't voice much of that outrage, nor did his outrage rise to the level of resigning in protest. Instead he stayed in place, presumably ignoring it while eventually receiving the reward of being named ambassador to Indonesia.
Well at least we know he's not stealing the bank's money and spending it on socks...
Randy, I really think you've jumped the gun here. I have no idea what Wolfowitz's position on Mobutu was in the Reagan years, but when it came to East Asia (for which Wolfowitz was Assistant Secretary of State at the time) he had a very solid record of opposing corrupt dicatorships.

Most importantly, Wolfowitz was among the earliest supporters of the democratic opposition in the Philippines, which ultimately led to the overthrow of Ferdinand Marcos. In contrast, Reagan held on to Marcos until almost the bitter end -- yet Wolfowitz and his allies effectively outflanked the President, by getting influential Republicans to side with the democratic opposition.

Randy, you speculate without evidence that Wolfowitz became ambassador to Indonesia as a result of his cynical silence. Absolutely the opposite. He got the post because he was well ahead of the curve on democracy promotion, a cause belatedly embraced by Ronald Reagan.

That same lack of visible outrage also extended to Saddam Hussein, who had no better friend in Washington than Ronald Reagan. Wolfowitz did not come out puiblicly against Saddam until after he was no longer in the DOS.

The larger point I was trying to make is this: there's very little resigning in protest in the US, unlike the UK. Credit where credit is due regarding Marcos, but if Wolfowitz was outraged by the corruption in Zaire, he should have spoken out about it, even if he was working in another region. If he was outraged by the brutal regime of Saddam Hussein (whose worst outrages occurred during the Reagan years) he should have spoken up when what he said may have had an impact.

Instead, what we have is a culture of silence for fear of possible career suicide. I may have jumped the gun with my insinuation, but I believe that you're letting Wolfowitz off far too easy.
Ahh the irony!

World Bank: massacre your people? No problem, we'll give you money. But date a co-worker and all hell breaks loose.
Randy, although we correspond quite a bit, I have to admit that I don't know much about your professional background. Have you ever worked in a bureaucracy, especially a government bureaucracy?

I only have a couple years of experience with bureaucracy, but I've learned first hand just how much sh*t you have to take if you try to throw your weight around outside of your area of responsibility.

For an Assistant Secretary of State for East Asia to start making critical comments about US policy in Africa or the Middle East is essentially insubordinate. The fact that Wolfowitz was far ahead of his own Secretary of State and aggressively challenged his own President within his area of responsibility is pretty impressive.

If you want to give Wolfowitz a hard time, why not focus on Iraq? Because diplomats aren't bloggers. They can't just sound off about everything they dislike. (A privilege I enjoy considerably.)
When it comes to funding corruption, the operative question would seem to be, "What are the alternatives?" If all beneficiaries are excessively rotten, you're kind of stuck. But if there are some reasonably clean potential recipients who are being deprived, then it's fair ball to switch funding to them -- and make it public.
Date a coworker?

More like "get your girlfriend massive, unjustified raises that no other Bank employee gets." This is exactly the sort of basic corruption that Wolfowitz is supposedly against, yet he engages in it himself. Like so many neocons, it makes him a bit hard to take seriously.

And please, let's not hide behind the Bank's board. Just like Zimbabwe, we all know the real reason why she got the money against Bank regulations.

My Dad was a civilian employee of the US Army and I've worked for both government and the private sector for about thirty years, so I do know my way around bureaucracies.

That being said, Wolfowitz was recruited in the Reagan DOS, he wasn't career foreign service. He could have spoken up. He could have resigned in protest, not only over Reagan's obsequios support of Mobutu, but also his support of Saddam Hussein. It could have had a major impact.

Career diplomats much lower on the chain of command than Wolfowitz have done so recently.

Sorry, but I think the criticism is deserved. We'll have to agree to disagree.
Wolfowitz just apologized.

Also as a State Department Assistant Secretary, he was a political appointee, more akin to patronage in the Roman sense. As such he would be less interested in a career than in political viability. There is also a difference with political viability in appointed rather than elected positions; his constituency would be his boss, rather than an electorate or a government review board.
Original FT story.

"Paul Wolfowitz personally directed the World Bank’s head of human resources to offer Shaha Riza, a bank official with whom he was romantically involved, a large pay rise and a promotion as part of an external secondment package, according to two sources who saw a memorandum written by the bank president.

The memorandum, which according to two sources was dated August 11 2005, specifies in detail the terms that Xavier Coll, the World Bank’s vice-president for human resources, should offer to Ms Riza, who was subsequently seconded to the US State Department.

The memorandum sets out the salary that Ms Riza is to be paid, the arrangements for her promotion, and the basis on which her subsequent annual pay increases are to be calculated.

In addition to the two sources who saw the memorandum, and who recounted its contents in detail, the Financial Times has spoken to three other sources, who also attested to its existence. However, the FT has not seen the memorandum itself."

FT calls for Wolfowitz to resign.

"So far, then, so unproblematic. Yet, it is alleged, the terms of the appointment, which appear astonishingly generous, violate a number of Bank protocols. Worse, it now appears Mr Wolf­owitz personally directed the Bank’s head of human resources to offer his girlfriend these exceptional terms. Worse still, this has come out after misleading claims by a senior official that the ethics committee of the board, in consultation with the general counsel, approved the agreement.

What then do we see here? The answer is: an apparent violation of Bank rules; favouritism that borders on nepotism; and a possible cover-up. It is true Mr Wolfowitz and Ms Riza were put in a difficult position. Even so, what has come out would be bad in any institution. In an institution that spear-heads the cause of good governance in the developing world, it is lethal."

Wolfowitz admits getting his girlfriend her against-the-rules raise.
Still does not have the decency to admit his own base hypocrisy and resign, but hey.

"Looking at the big picture, I'm glad that Wolfowitz had made corruption a priority and is challenging the Bank to live up to his standards. I think that leadership from the top is the only way to get the Bank to take the issue seriously. Wolfowitz's predecessor took some critical first steps in that direction, but the fight against corruption has only just begun."

Another classic Adesnik quote. .
OxBlog always welcomes friendly voices with an interest in civil debate.

No question that new information made public since my original post makes Wolfowitz look very, very bad and probably undermines my hope that he can lead the fight against corruption.

In terms of political point-scoring, there is no question that I have to take a hit when someone I've spoken well of becomes the subject of a scandal.

Yet let me just make the point that my original post included an extensive quotation from the New Yorker describing why Wolfowitz's actions led many bank employees to label him a hypocrite.

I put all the relevant information on the table.
So ... do you think Wolfowitz should resign or not?
Wolfowitz will go this week. He is nominated by the US President whereas the head of the IMF is nominated by the Europeans. However, he sits at the pleasure of the World Bank Board of Governors which represents member states. He's clearly lost credibility with them. They met today and they've probably given him the opportunity to resign.

Gonzalez will go the following week after his Senate testimony. He'll probably crash and burn during the testimony and one of the Republican Senators will throw in the towel and ask for an adjournment. Then he'll similarly be given the opportunity to resign.
Githongo Calls on Wolfowitz to Resign

WASHINGTON, D.C., April 30 /PRNewswire-USNewswire/ -- Asserting that Western admonitions about corruption to Africa and other developing regions are undermined by the misbehaviour of World Bank president Paul Wolfowitz, Kenya’s former permanent secretary for ethics and governance, Dr. John Githongo, has called on Wolfowitz to resign his post.

“Corruption in Western capitals and in international financial institutions can do little but fuel the cynicism of corrupt officials in Africa and elsewhere,” said Githongo in a statement prepared for the news media. “When Paul Wolfowitz uses his influence as a US Government official and as president of the World Bank to fill the purse of his paramour (and, by inference, to line his own pockets as well), one can hear the cackling from state houses and presidential palaces all across Africa.”

Githongo said: “Paul Wolfowitz should resign now, before his poor example and bad judgment are emulated by petty dictators and venal middle managers throughout the developing world.”

He added: “Wolfowitz, of all people, should know better than to use his office for enrichment. He should be ashamed of himself.”

Since being forced into exile by a hostile political climate in his native Kenya, John Githongo has been a fellow at St. Antony’s College at Oxford University. In February, he accepted an appointment at Queen’s University in Ontario as a research fellow at the International Development Research Centre, where he is collaborating on a major research initiative on Ethnicity and Democratic Governance.

For further information, contact John Githongo at jgithongo@worldbank.org.
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