Zoellick's Clean-Up Duty
The World Bank tries to silence its anti-corruption unit.
Thursday, May 31, 2007 12:01 a.m. EDT
Having published at least a dozen of Robert Zoellick's op-eds over the years, we know him as a man who neither minces his words nor takes easily to editing. If that's an indication of the management style he'll bring to the World Bank, then President Bush has nominated a fine successor to outgoing bank president Paul Wolfowitz.
Mr. Wolfowitz was removed from the bank in a bureaucrats' coup via a made-up scandal, the real purpose of which was to undermine an anti-corruption agenda that threatened the bank's zero-accountability, self-dealing culture. Mr. Zoellick seems to have been recommended by Treasury Secretary Hank Paulson in part because he has experience building international coalitions and is well known and liked by Europeans. But if he is to succeed as president, Mr. Zoellick will have to do more than become a mouthpiece for the bank's shove-money-out-the-door culture.
Mr. Zoellick's first test will come early. As we go to press, sources inside and outside the bank tell us that a follow-up to the putsch against Mr. Wolfowitz is being engineered by Managing Director Graeme Wheeler and Staff Association Chair Alison Cave against Suzanne Rich Folsom, who runs the bank's Department of Institutional Integrity, or INT. Ms. Folsom, an ethics lawyer brought in by former president Jim Wolfensohn and promoted to her current job by Mr. Wolfowitz, has been aggressively pursuing corruption investigations, much to the alarm of some at the bank.
Prominent among those investigations is one concerning an Indian health project. Irregularities in the project, including indications of bid-rigging and bribery, led Mr. Wolfowitz to veto further loans to India in 2005 while the investigation unfolded, despite fierce protests from the project's managers. Now that the INT is about to issue a report about the project, Mr. Wheeler has been lobbying the bank's executive directors to place Ms. Folsom on administrative leave, and for the INT's oversight responsibilities to be radically diminished. Among Mr. Wheeler's responsibilities at the bank is oversight of its works in South Asia. Mr. Wheeler and Ms. Cave were among the most outspoken bank employees calling on Mr. Wolfowitz to resign.
Mr. Zoellick can hardly allow this putsch to go forward if he means to safeguard the bank's integrity. Ms. Folsom was bound to make plenty of enemies by the very nature of her work; allowing her to be pushed out sends the signal that the job is a poisoned chalice to anyone who takes its work seriously. Mr. Zoellick must also insist that the INT get the funding that Mr. Wolfowitz requested last year from the bank's board of directors (he was turned down), and that the recommendations from a forthcoming report on the INT by former Fed chief Paul Volcker be heeded.
Beyond the INT, Mr. Zoellick would also do the bank--and the English language--a favor by abolishing the Independent Evaluation Group. Despite its name, the group, which is supposed to provide independent assessments of the effectiveness of bank projects, is staffed by bank employees who have every incentive to kiss the hand that feeds them. If the bank truly wants "independent evaluation," it would be better served asking Transparency International to set up a field office in the atrium of the bank's D.C. headquarters.
Then there's the bank's annual $23 billion loan portfolio. Why does the bank continue to lend to China, a country that has foreign-currency reserves in excess of $1 trillion? Why lend to Mexico or Brazil, two countries that can easily obtain credit in the private market? A "bank" that justifies its existence as an agent of the poor should make Africa its main focus.
The system by which the bank's executive directors approve loans is also geared to handing out money regardless of the intrinsic merits of the projects it funds. Between 1996 and 2003, fewer than half of the bank's 598 projects in Africa were judged to be "sustainable"--and that's according to the bank's generous self-assessment. Fewer projects, with better oversight and follow-up, could help turn that depressing record around.
The Wolfowitz putsch has also revealed a great deal about the bank's dysfunctional institutional culture--the way it winks at corruption, punishes dissent, and applies rules selectively to protect its hefty salaries and perquisites. Restoring whistleblowers who have been unfairly dismissed to their previous jobs would be a powerful way for Mr. Zoellick to signal his determination to reform that culture. If that makes him the victim of off-the-record sniping and media leaks, we'll know he's doing his job right.
In selecting Mr. Zoellick, Mr. Bush has at least quashed any illusions Europeans might have had that they could put one of their own in the top bank job. We have no brief for the 60-year tradition of having an American run the bank--or, for that matter, the tradition of giving the top job at the International Monetary Fund to a European. But there is no way the Europeans could be rewarded for trashing Mr. Wolfowitz's career in order to get his job.
As a former trade representative and deputy secretary of state, Mr. Zoellick understands modern markets and knows his way around multilateral institutions. His weakness is a tendency to be too-clever-by-half, as when he sold the Bush Administration's steel tariffs as a political concession for the sake of free trade, when what the world saw was U.S. hypocrisy.
For now, the challenge facing Mr. Zoellick is whether to be a change agent or just another fief builder who lectures Western taxpayers that they aren't giving the bank enough money. We'll get an early signal by how he handles the bank's anti-anti-corruption revolt.
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