One of the few people who can claim to be a staunch loyalist of U.S. President George W. Bush and still command esteem in capitals around the world, Robert Zoellick was a natural choice to succeed Paul Wolfowitz as president of the World Bank. The former U.S. trade representative and deputy secretary of State should be able to quickly heal the rift between the U.S. and other World Bank member governments over Wolfowitz’s resignation, Bank officials say. Restoring order and a clear sense of purpose at the Bank will be much more difficult.
European leaders appear eager to bury the hatchet with Washington. Heidemarie Wieczorek-Zeul — the German development minister who had been one of the first to call for Wolfowitz’s resignation over his handling of a transfer and pay increase for his girlfriend, Shaha Riza — welcomed the May announcement of Zoellick’s nomination, calling him a “good candidate with extensive international experience.” Zoellick, 53, a protégé of former secretary of State James Baker, was the senior U.S. official in the negotiations that led to the reunification of Germany in 1990.
Most developing countries, though eager to end U.S. and European control over top jobs at the Bank and the International Monetary Fund, also looked set to endorse Zoellick, who would take over the Bank at the end this month. Reflecting a growing consensus, South African President Thabo Mbeki signaled his approval of Zoellick but called for future presidents to be selected by an open process rather than an American diktat.
Zoellick will need plenty of goodwill. He must win pledges of $30 billion from donor governments this year to replenish the International Development Association, the Bank’s arm for making concessional loans to the poorest countries. Some European members had threatened to withhold IDA contributions unless Wolfowitz resigned.
Putting that money to effective use will be an even bigger challenge. For the past two months, the Bank has been paralyzed by the dispute
over Wolfowitz, who was found by an ad hoc investigation to have violated Bank rules by involving himself in Riza’s transfer from her position as a Middle East adviser at the Bank to the U.S. State Department.
Few observers believe the issue would have brought down a strong and popular president; Wolfowitz was neither. He came into office two years ago widely distrusted for his fervent advocacy of the Iraq war while at the Pentagon; once at the Bank, he alienated staff and foreign governments by installing two former Bush administration lieutenants in key positions and appearing to favor U.S. allies in pursuing the Bank’s war on corruption.
Wolfowitz “didn’t have an approach that was consistent with the multilateral and multicultural nature of the institution — he trusted only a small coterie of people,” says Amar Bhattacharya, an East Asia expert who recently left the Bank after 27 years to run the Washington secretariat of the Group of 24 developing nations. The damage Wolfowitz caused, Bhattacharya says, “is repairable with good, professional leadership.”
In addition to restoring peace at the Bank, Zoellick must redefine the mission of the institution at a time when its relevance and effectiveness are in question.
Allan Meltzer, an economics professor at Carnegie Mellon University and the author of a critical U.S. report on the Bank published seven years ago, says Zoellick should order an outside audit of the effectiveness of Bank programs and accelerate a shift from loans to grants.
“The Bank has been in business for 60 years,” Meltzer tells Institutional Investor. “Large parts of Africa don’t have potable water, aren’t inoculated against measles, don’t have mosquito nets. Isn’t that an indictment?”
The Bank also faces a challenge from an increasingly confident China. It was a striking coincidence that on the day that Wolfowitz resigned, Beijing disclosed that it would invest $20 billion in infrastructure and trade finance to Africa over the next three years, nearly double what the Bank extends. As Bhattacharya puts it, “The underlying mission of the Bank is probably more challenging now than at any time in its history.”
Bank officials and member governments believe the institution should play a key role in coordinating the efforts of private and governmental donors, but to do so, it needs broader legitimacy — and that in turn means breaking the U.S. lock on the presidency.
“It’s just a joke that an Asian can’t be head of the IMF or the World Bank,” says Kenneth Rogoff, a Harvard University economist and former chief economist at the IMF. “When the World Bank and the IMF don’t reflect economic reality, it’s hard to get buy-in from Asian countries.”
