Can Wolfowitz put poverty before politics?

By Andrew Balls and Demetri Sevastopulo

Financial Times

Published: March 30 2005

When the World Bank's 24 executive directors file into the boardroom on the top floor of the bank's Washington headquarters on Thursday morning, two big items will be on the agenda. The directors, representing the 184 member countries, will be asked to endorse bank sponsorship of a dam project together with the communist government of Laos, and to approve the nomination of Paul Wolfowitz as the bank's new president.

Both are seen as foregone conclusions. The US, the bank's largest shareholder, has nominated Mr Wolfowitz, its deputy defence secretary, to take over when James Wolfensohn steps down at the end of May, and no other member country has indicated it will oppose the appointment. Laos's dam would meanwhile not have made it to the stage of final approval if that approval were not assured.

But the coincidence of these two items highlights how Mr Wolfowitz, after a career in US government service in which promoting democracy has been a key theme, will have to work in his new job with governments that are not democratic. Equally, developing countries will be expected to work with Mr Wolfowitz following a selection process that is itself very far from a democratic ideal.

Many representatives from developing countries and from Europe - not to mention development and environmental campaign groups - are displeased that the job is going to a leading neo-conservative and the chief advocate within US President George W. Bush's administration of going to war in Iraq. Neo-con policy is characterised by a belief in the use of US military might to advance democracy in the world. So some are concerned that Mr Wolfowitz might use the bank's financial firepower for the same end.

Others worry that the appointment of a figure so closely identified with the Bush administration might affect the legitimacy of the bank in the developing world, to which it last year provided $20bn (£11bn, €15.5bn). Economic reformers in developing countries who work with the bank already face criticism from their opponents that the bank is merely a tool of US financial, corporate and strategic interests. This may now get worse.

People inside the bank say that, since his nomination, Mr Wolfowitz has stressed his ability to listen, his intention to build consensus and his belief in the bank's mission of combating poverty rather than pursuing the political ends of its biggest shareholders. Allan Meltzer, a professor at Carnegie Mellon University, says: "You can only win over your critics by showing you are not what they say you are."



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Mr Wolfowitz has worked in six administrations, moving between the Defence and State departments. A rounded picture of him thus requires going beyond his advocacy of the invasion of Iraq. As a former US ambassador to Indonesia (see below), he has more experience of living and working in a developing country than any former World Bank president. As dean of the School of Advanced International Studies (Sais) at Johns Hopkins University in Washington, he headed an academic institution without, according to most accounts, bringing a political agenda to the role.

Mr Wolfowitz, 61, was born into a Polish-Jewish immigrant family. He majored in mathematics and chemistry at Cornell University and - against the wishes of his father, a mathematics professor at Cornell - went on to pursue his interest in politics and policy rather than hard science, studying for a PhD in political science at the University of Chicago.

This decision at least partly reflected the influence of the late Allan Bloom, a professor and mentor at Cornell who was a follower of Leo Strauss, a political philosopher at Chicago. Strauss, a German-Jewish immigrant, is an influential figure in neo-conservative thinking, even though he died in 1973 and his academic work barely touched on matters of his day. Strauss focused on classical and medieval philosophy and he was a passionate advocate of moral absolutes. In The Rise of the Vulcans,which examines the careers of Mr Wolfowitz and other leading foreign policy advisers to Mr Bush during his 2000 presidential campaign, James Mann writes that Mr Wolfowitz has often been seen as a torch-bearer for Strauss, in particular in "his emphasis on stopping tyranny and condemning evil".

In Republican foreign policy rhetoric, Ronald Reagan's characterisation of the then Soviet Union as the "evil empire" and Mr Bush's focus on good versus evil and "regime change" can be seen as Straussian echoes, though much of the influence on neo-con thinking has come from followers such as Bloom. Mr Wolfowitz, for his part, has played down the influence of Strauss on his thinking. Though he took courses with the philosopher at Chicago, he was not close to him. He has instead pointed to other influences, notably the late Albert Wohlstetter, a mathematician, political scientist and nuclear strategist who advised Republican and Democratic governments during the cold war. "I tend not to see myself in various moulds that people fit me into," Mr Wolfowitz said in a recent FT interview.

Jessica Einhorn, who replaced Mr Wolfowitz as dean of Sais, says that, although the minds of students can be shaped by great professors, "Paul Wolfowitz has had a life of such active engagement in international affairs that it's difficult to embrace the simplistic formula regarding his understanding of international affairs".

Mr Wolfowitz, interested from the start in applying political science to policy matters, wrote his thesis under Wohlstetter's guidance on the threat of nuclear proliferation in the Middle East, concentrating on the very practical matter of nuclear-powered water desalination. Though he and other neo-cons have been accused of cleaving too closely to Israel, his thesis shows equal concern about nuclear proliferation in that country, and pro-Israeli groups have criticised him for placing too much emphasis on the plight of the Palestinians during his career.

What is beyond debate is that, as the modern intellectual high priest of the neo-conservative movement, Mr Wolfowitz has spent much of his career advocating American values. He is unlikely to leave these ideas behind. "There is no doubt that he sees America as a force for good in the world," Mr Mann says. "I think that will apply to his work at the bank. If there are people who tend to see - and there are - America as a malign force in the world, they will probably find themselves that Wolfowitz will be challenging those views."

One former senior official who has worked closely with Mr Wolfowitz said his tenure at the State Department and Pentagon had been marked by a soft-spoken but tough approach. It is the kind of description that comes up often. At the State Department, Mr Wolfowitz spent more than five years running the policy planning office and then serving as assistant secretary of state for East Asian and Pacific Affairs before he moved to Jakarta - though he has his critics there too, he is seen at least in the US as having been a good envoy. Then, at the Pentagon, before taking on the job he now leaves, he had been undersecretary for policy during the first Gulf War.

While there has been much criticism of Mr Wolfowitz's role as the architect of the latest war in Iraq, the troubled aftermath of the conflict is relevant to his new role. For more than a year, Mr Wolfowitz has faced criticism from congressional Democrats, and increasingly Republicans, who have questioned whether he allowed his zealous optimism - that Iraq oil revenues would pay for reconstruction, that the US did not need hundreds of thousands of troops because they would be greeted as liberators - to trump any more sober projections of post-war scenarios.

Within the bank there is a clear view that the US administration - through ideology or lack of understanding - wanted to treat Iraq as a transition economy, such as Poland and Hungary, that needed only to be reoriented towards market capitalism, rather than a country where the economy needed to be stabilised and rebuilt.

In spite of such criticism, Prof Einhorn says Mr Wolfowitz's intellect and self-confidence mean he will enjoy working with and learning from the bank's top economists and financial experts. "He has a great respect for knowledge and learning." Mr Wolfowitz is a foreign policy analyst, not a development economist or financial expert. Yet the bank is a knowledge-based organisation and Mr Wolfowitz is a former academic. He has public management experience and has said he comes with an open mind on many of the technical issues, rather than being there to represent the US view.

Many of the difficult questions the bank faces go beyond technical economics. The Nam Theun II dam in Laos, for example, is a fairly simple economic proposition, a project expected to generate good returns in a country with few development options. The difficult questions are political - chief among them, whether there will be sufficient transparency in the use of revenues from the project to ensure that the proceeds are well used.

The dam illustrates a challenge for Mr Wolfowitz: to bring a clearer focus on projects that produce the intended results in terms of economic growth and poverty reduction. Mr Wolfensohn, in his 10 years running the bank, has not clearly enough defined its priorities, goes a common refrain. Many see the institution as unwieldy, undermanaged and poorly focused.

"Wolfowitz will not be as effective as Jim Wolfensohn at making speeches but I hope he'll be more effective in following through," says Mr Meltzer, who chaired a congressional commission that in 2000 recommended slimming down the bank's role to promoting development in the world's poorest countries. "What the bank lacks is coherent ideas on how it is going to bring poverty rates down."

Another issue for the new chief is governance. Development experts question the legitimacy of selecting the president of the World Bank and the managing director of the International Monetary Fund under the convention whereby the US and the European Union, which together dominate the boards of the institutions, carve up the top jobs. A suggestion by some European finance ministers that Mr Wolfowitz should choose a European as his number two - a mirror image of the arrangement at the IMF - would extend this. Nancy Birdsall, president of the Center for Global Development, a Washington think-tank, says: "The appointment exacerbates the idea that, because the selection process is controlled by the US, the policies and choices of the bank are also selected by the US."

The bank encourages pro-poor policy choices but, she argues, many of those choices also come across as pro-globalisation. The lack of legitimacy in the selection process may make it harder for reformers in developing countries who wish to follow the bank's advice. "If their constituents hear that they are promoting US financial and corporate interests, the bank has a problem," she says. "Countries may not want to deal with the bank if it is seen as a Trojan horse of Washington."

For someone so closely identified with the Bush administration, and who has consistently made the promotion of democracy the top goal, Mr Wolfowitz's more persistent challenge may be to demonstrate his ability to lead an institution of all the bank's members. He says he will not use the World Bank to further democracy but argues that democracy can be a side product that emerges from economic and social development. Other officials point out that, as a former cold warrior, he has long recognised the advantages of tolerating some regimes, however autocratic. Mr Wolfowitz has also worked closely with Saudi Arabia, one undemocratic Middle Eastern country, while promoting democracy for another, Iraq.

Bank insiders stress the importance of delivering a consistent message across countries, be they Egypt, Iran or Pakistan. On the bank's board, for example, the institution's increased involvement in Iran over the past four years has been opposed by the US. Mr Wolfowitz could fairly quickly distance himself from that stance.

Irwin Stelzer, fellow at the Hudson Institute in Washington and editor of The Neocon Reader, a book on new conservative thinking, says the question will be Mr Wolfowitz's approach to promising development projects in undemocratic countries. "What happens when you have pretty good transparency and a dictatorial regime? My feeling is that Wolfowitz will find it hard to say that you can achieve transparency in an undemocratic environment. He will feel that you cannot stamp out corruption when the rulers are beyond the reach of the governed."

Indonesian initiation wins mixed reviews

In the weeks since President George W. Bush nominated Paul Wolfowitz to head the World Bank, Mr Wolfowitz has repeatedly cited his time in Indonesia as the foundation of his development experience, writes Shawn Donnan.

“I’ve seen first-hand what poverty is like in a developing country,” Mr Wolfowitz, who served as US ambassador to Jakarta from 1986 to 1989, said in an interview published this week.

Many in Indonesia’s political elite remember Mr Wolfowitz as an effective and dynamic ambassador who developed a genuine passion for the country. “I think he has good reason to believe his experience in Indonesia . . . was an important one,” says Juwono Sudarsono, defence minister.

But if Mr Wolfowitz is eager to cite his experience in Jakarta so are his critics. In the late 1980s Indonesia was a showcase client of the World Bank a nd Mr Wolfowitz a champion of good relations between Jakarta and Washington. Yet development experts argue Mr Wolfowitz supported policies that contributed heavily to Indonesia’s becoming the hardest hit of the economies that foundered during the 1997-98 Asian financial crisis.

Human rights activists say they do not remember his speaking out against the abuses of the authoritarian President Suharto. Anti-corruption campaigners say they never felt Mr Wolfowitz was on their side.

“It turns my stomach that Paul Wolfowitz is going to run the World Bank,” says Emmy Hafild, a former rights campaigner who now runs the Jakarta office of Transparency International, the anti-corruption watchdog.

Mr Wolfowitz’s backers argue that he was far from alone in keeping quiet about human rights and corruption, or in having seen an economic miracle where there proved to be none. They also cite a May 1989 speech in which he called for more “openness in the political sp here”. That, they argue, contributed to Indonesia’s eventual pursuit of democracy.

Critics dispute that, however, pointing out that Mr Wolfowitz remained a defender of the Suharto regime through the 1990s.

During a January 1998 hearing into the Asian crisis by the US House of Representatives’ banking and financial services committee, Mr Wolfowitz urged the autocrat to “broaden participation in government”. But he also praised Suharto’s “extraordinary leadership”. In particular, he recalled a friend’s explanation that the difference between “Ferdinand Marcos and President Suharto is that Marcos was despised by his people, whereas Suharto is admired by Indonesians”.

Four months later, Suharto was forced to step down amid widespread popular unrest.

In that testimony, some development experts say, he also revealed a misguided view of the robustness of the Indonesian economy, declaring that the 7 per cent average growth it had recorded over two decades “was not a mirage”. The Asian crisis, they argue, proved that this growth had been based on shaky foundations.

Jeffrey Winters, an Indonesia expert who co-edited the 2002 book Reinventing the World Bank, argues that as ambassador Mr Wolfowitz helped push a development agenda that advocated liberalisation at all costs, ignoring the need to build up institutions to rein in corrupt cronies.

“That’s really what set the trap that Indonesia fell into,” Mr Winters says. “Wolfowitz was fully on board with that.”

In an Indonesia where the war in Iraq was immensely unpopular, some of Mr Wolfowitz’s friends also express a gentle reservation. Even viewed positively, says Mr Sudarsono, “whether that experience [in Indonesia] is too distant from this current tumultuous time is still difficult to say”.

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• The World Bank is the world’s leading development organisation and is made up of 184 member countries. In 2004 the bank provided $20.1bn for 245 projects in developing countries

• The organisations of the World Bank group are owned by the governments of member nations, which have the ultimate decision-making power. Member countries are represented by a board of governors. The governors delegate responsibility for the conduct of the bank’s general operations to 24 executive directors

• Five executive directors are appointed by the members with the largest numbers of shares - the US, Japan, Germany, the UK and France. The other executive directors are elected by the other members

• The bank’s president is selected by the board of executive directors and by tradition is a national of the largest shareholder, the US. Elected for a five-year renewable term, the president chairs meetings of the board of directors and is responsible for overall management of the bank. James Wolfensohn has been president since 1995

• The bank employs more than 10,000 people from about 160 countries in its Washington headquarters or in its 109 country offices