The scandal that led to the forced resignation of Iraq war guru Paul Wolfowitz as head of the World Bank “is just the tip of the iceberg,” Nadia Martinez, who co-directs the Institute for Policy Studies’ Sustainable Energy and Economy Network, wrote earlier this month. The looming iceberg, in her view, is “doubts about the World Bank’s credibility, legitimacy and capacity to fulfill its stated mission of eradicating world poverty.”
Wolfowitz’s role in arranging a controversial pay and promotion package for his companion set the scandal in motion, but his troubles “reflect much bigger problems” at the bank and its sister institution, the International Monetary Fund, Mark Weisbrot of the Center for Economic and Policy Research wrote recently.
“The appearance of nepotism at the highest levels of an institution that lectures poor countries about governance was apparently too much for many people, including World Bank staff, to ignore,” Weisbrot said, but the concerns go much deeper.
“The majority of the world, in developing countries, have fewer votes than the United States and almost no voice within the IMF or the bank,” he said. This reflects the bygone world of 1944, when the two institutions were created. “At the time, the United States was practically the only power in the developed world, and many of the countries now included in the Word Bank were still colonies of Europe.”
Today, said Weisbrot, “the World Bank is thus seen in much of the world as a neocolonial institution, and all its preaching about ‘governance’ seems little more than a way for the bank to cover for the failure of its own economic policy prescriptions. The bank has little to show for its tens of billions of dollars of development lending. The vast majority of the countries that have followed its policies have suffered a sharp slowdown in economic growth over the last 25 years, and a resulting decline in progress on social indicators such as life expectancy and infant and child mortality.”
The failed policies he cited include insistence that developing countries indiscriminately open themselves to foreign trade and investment and prioritize the needs of foreign corporations. Others cite World Bank/IMF pressure on governments to cut social spending and slash their public sector.
Wolfowitz’s resignation, announced May 17, drew a sharp response from critics of the bank.
“Paul Wolfowitz, now exposed as a corrupt liar, has been an invaluable asset in exposing the fundamental illegitimacy and institutional corruption of the World Bank,” Sameer Dossani, executive director of the 50 Years Is Enough Network for Global Economic Justice, said in a statement.
The network calls for transforming the bank and IMF to end their imposition of neoliberal economic programs on developing countries, and to make the development process “democratic and accountable.”
Kenyan activist Njoki Njehu, executive director of Daughters of Mumbi Global Resource Center, commented: “Just as Wolfowitz plunged the bank into disrepute and refused any accountability, so the bank has been damaging our peoples and walking away without a scratch. The failures of the World Bank’s neoliberal ideology, such as privatization of basic services, user fees for primary education and health, and the rapid deregulation of trade and investment, have been measured in death, marginalization and impoverishment.”
Weisbrot noted that the German government joined the call for Wolfowitz’s resignation, in a rare break with Washington.
Bush’s appointment of Wolfowitz in 2005 was “deeply offensive to the Europeans,” Weisbrot said. “Here was an architect of the Iraq war, which most of Europe considered an illegal and extreme manifestation of the Bush administration’s unilateral arrogance. Making him head of the World Bank was a public display of how little the Europeans’ opinion mattered.”
An open letter circulated by the New Rules for Global Finance Coalition says, “Paul Wolfowitz’s problems at the World Bank stem in part from a widespread perception that he disproportionately represents U.S. interests rather than objectives that command a global consensus.”
The coalition, which includes nongovernmental groups and think tanks, called for ending the practice in which the U.S. president picks the World Bank president and a handful of European finance ministers names the IMF head.
Otherwise, the letter warns, “the leadership crisis at the World Bank is unlikely to be fully resolved” even with Wolfowitz’s departure.