Who should replace Wolfowitz? Tony Blair. See commentary, http://villagebraniac.blogspot.com

Well-put, and a good antidote to George Will’s ideological nonsense (which appeared to be ghost written by the Cato Institute). Contrary to what he claims, the International Financial Institutions are hardly bastions of statism. Indeed, what one longs for as a result of the Wolfowitz business — probably in vain, alas — is a rethink of the IFIs’ staunch neoliberalism and too-frequent reduction of the role of “governance” in development to just fighting corruption (as important as that is).
Marc Cohen
International Food Policy Research Institute.

Everything Nancy Birdsall says here makes excellent sense. If the World Bank is going to provide more advice relative to cheap money than in the past, then it needs to finance that advice directly rather than pushing loans as the only way to pay for its other activities, including research. And if it is to tackle global goods problems, the financing and administration of those activities need to be global also. Let me add two more suggestions, with which I hope Nancy will agree. First, what the Bank does not need is a new president who will want to reorganize the place, except as may be needed to meet the two things that do count. Neither should he or she start off on the wrong foot by bringing in advisors chosen more for their ideological alignment than their knowledge of development. In both these respects, the staff need to be shown, very clearly, that their competence is valued and that they can be trusted. Otherwise morale, already at an all-time low, will sink to the point where anyone with alternatives will want to get out, further weakening the institution. Second, the Bank needs to get away from the trust-fund financing that undermines its work in two important ways. It gives individual governments control over projects and research, instead of collective decisions through the Board. And it forces staff to spend much of their time chasing after small amounts of money with which to hire consultants or undertake research, sums that are trivial relative to the Bank’s loans. To far too great an extent, the Bank has turned into a beggar institution. Of course, the Bank can’t end that situation without the member governments of the richer countries recognizing the damage it does, and agreeing to return to putting their funds in a common pot for all purposes instead of buying individually and at retail. This is the other side of the need to pay for advice: countries paying the Bank individually for its expertise makes sense; trust funds contributed by donor contries that break down the global decision making needed, don’t.

Nancy Birdsall makes an articulate and well argued plea that the Wolfowitz fiasco must be seen as an opportunity for reform of the World Bank, rather than its death knoll. She says rightly that two of the Bank’s critical roles are deploying knowledge about what does and does not work in development, and supporting “global public goods.” She also states that the Bank needs to subject its knowledge services to a market test.
I would add just one nuance to this argument: in a world where poverty in developing countries can generate insecurity in rich countries, the most important “global public good” in the Bank’s portfolio is development itself. If development is a global public good, and it most surely is, then, as Nancy argues, it will be underfunded if left to individual countries, especially poor countries. This is an argument not only for global action, but for subsidizing the Bank’s operations, including knowledge services. The operative word here is “subsidize.” Giving away services is a recipe for abuse.
In my last assignment at the World Bank, we developed a unique knowledge-based program for Kazakhstan in which the Government and the Bank shared in the program’s cost. This was not simply fee for services, but a program in which both parties were accountable substantively and financially. The Kazakhstan Joint Economic Research Program is working very well. That it or something similar is not (yet) common practice among the Bank’s middle income country clients is but one indication of the need for reform at the Bank.

I had the opportunity to watch the discussion on the PBS news hour on Tuesday evening, and I was struck by Nancy’s seeming inability to grapple with the issues raised by the interlocutor. At one point Nancy gave the simple excuse that she had not read the documents available on the issue. a pretty lame excuse to give in front of a very large television audience to which you have been brought as some kind of expert. Or is Nancy more comfortable writing group letters to the FT.
Perhaps it is time for Nancy to consider stepping down in favor of someone who is willing to be more forthright in presenting their convictions. How about Amb Andrew Young?
It has been painful to observe the evisceration of the Bank by a group that seems to be so driven by a political agenda that it seems to be pursuing a scorched earth policy. It appears that the latest irony is the May 14 report by an Ad Hoc group of Executive Directors which is assessing the performance of the Board of Directors and of the (so inappropriately-named) Ethics Committee (also made up of Board Members). In this report the Ad Hoc group of Board Members is quick to denounce “conflicts of interest” of several of the parties to this issue, without at all realizing that the fact that members of the Board are themselves evaluating the Board in itself constitutes an egregious conflict of interest. The only proper way to address such an issue would be for an independent evaluator to take up the task. (Where is Alan Greenspan when we need him? And Paul Volcker is already tied up elsewhere.)
I was also very puzzled why this latest Ad Hoc Group report does not seem to have addressed the fact that the Ethics Committee returned to the issue of Ms. Riza’s secondment contract in January/February 2006, following an anonymous e-mail to the members of the Board. On this second occasion it appears that the Ethics Committee reviewed the facts of the issue and determined that there was no need to reconsider the case. If that was the case at that time, why has the issue now become such an important one? Only after a media smear campaign was launched this spring?

I don’t think that Bank advice can be divorced from its lending, cheap and unneccssary as it might be outside of sub-Saharan Africa. Bank staff’s expertise comes from experience gained through projects and programs that it finances, and helps implement, backed by research and monitoring. How else can a the Bank constantly add to its knowledge bank? I certain amount of “hands-on” involvement is essential.

I am sorry that Mr/Ms J. Young interpreted my e-mail as a “ranting comment”. I will try to maintain the level of decorum appropriate to this blog. As a 24 year veteran of the Bank, I hate to see it eviscerated in this manner by a group of people who have a political agenda quite unrelated to improving the operation of the Bank and to achieving the goals enumerated by both Nancy and Ms/Mr J. Young. I hope that in some way my own modest efforts while at the Bank were in some way a positive force for “the mothers, fathers and children in poverty stricken nations that desperately need the assistance the World Bank.”
If postive and lasting changes are to be achieved in an institution, it is difficult to do so in the atmosphere of a smear campaign such as the soap opera we have observed over the last few months. Hopefully the integrity of some of the operational work being carried out, e.g., by the IFC, some of whose SME work has been merged with the Bank, will not suffer from an exodus of able people to the private sector and other institutions.
Unfortunately, the Bank is always going to be subject to the “political agendas” of the various Board members and the blocs on the Board. And there will always be the outside agitators from all sides of the political spectrum who may seem to aim at the demise of the Bank. It is utopian to expect otherwise and no amount of fiddling is going to change this, any more than in any other multilateral agency. (One of my bosses at the Bank always reminded me of the golden rule: “he who has the gold, rules.”)
Rather, what is need is a high level of transparency and clear accountability. These are two characteristics which have too long been sadly lacking at the Bank and — especially — at the Board. (I will not bore you with the details of a story of a $300 million credit/loan to Egypt in the late 90s of which $1 million ended up being disbursed; a loan sent to the Board by a Bank Regional Vice President — against the advice of a review panel — who has of course gone on to bigger and better things.)
Much of the blame for the current state of affairs rests with the Board and especially the Ethics Committee. I continue to maintain that the Ad Hoc Committee is not qualified to evaluate the Board members performance or to honestly identify conflicts of interst.
(An aside: a couple of years ago I had one of those “cushy” retiree assignments — two weeks in Mauritania shortly after a coup attempt — to look at the HIPC process. In my report I pointed out a conflict of interest in how the Bank operated the process. My comments were excised from my report. The Bank seems to have an institutional “tin ear” for suggestions of internal conflicts of interest, but is very quick to condemn others.)
Returning to the PBS show of Tuesday, I was quite frankly surprised at the perspective which Amb. Young took on the machinations of the Board. This is a resource which it behooves CDG to exploit, especially given the shared interests in sub-Saharan Africa.
In the end I fear we are going to come out with a weakened and skittish Bank which has been forced to run the guantlet of its detractors from both the right and the left in a far more damaging manner than in the past. It is going to be very hard to restore to the institution the reputation it had some thirty years ago as the world’s premier project lending institution. Those who are responsible for the erosion of the Bank’s capacity in the last quarter century know very well who they are. No need to name names here.

We need to thank Nancy for the bold comments. The problems of the world has always been there, times like this call for opportunity to reflect over the parformance of the institution and chart a new direction.
The problem is not that of the President of the World Bank alone, both the Board members and the Bank’s member Governments need to use the opportunity of the present situation of Wolfowitz’s exit to reapraise the issue of corruption and quality leadership in the Institution, and how far the World Bank has been able to ressolve the pressing world problems. As the world awaits the choice of the next World Bank President, the global needs awaits solution.

Giorgio’s suggestion to choose a Development and Poverty Reduction Expert instead of a Defence Expert for the job of WB President is interesting. Bill Easterly has my vote, and Jeff Sachs is totally unqualified for the job.
But why limit ourselves to the position of President of the Bank. Perhaps the Executive Directors representing the member governments should also be appointed through the same process as which Giorgio describes.
This is, of course, totally unrealistic. On another CDG blog we have observed that all the EDs of the WB are political appointees. This is not going to change. One should not be surprised that the choice of the President is also essentially a highly politicized process.
Merit, managerial experience, understanding of development issues, etc., would be among the useful talents, although they may have been in short supply among the WB presidents for some time now. Actually, Paul Wolfowitz has been one of the few WB presidents of the past forty years (or more) who has actually lived and worked in a developing country (Indonesia).
However, one of the real advantages of past WB presidents was that they had a good senior staff. Those of us old enough can recall J. Burke Knapp and Warren Baum. Then came Ernie Stern. Unfortunately, Wolfensohn broke the tradition by instead surrounding himself with yes men/women and toadies, and proved unable to establish priorities. The technical qualifications and experience of Bank staff continued the decline which had begun with the 1987 reorganization. During the two years of Wolfowitz’s term, he did not have the seasoned senior advisors to guide him in reinstating this managerial tradition and recapitalizing the Bank’s human resource base.
As I mentioned on the other blog, I wonder if the task of overseeing the WB can really be left to “the nations of the world” — i.e., a bunch of politicians. Perhaps there should instead be introduced a more important role for the capital markets to exercise a major part — if not all — of that oversight, by removing any vestige of guarantee for the WB bonds by the member states, which is currently the case. Can you imagine a weekly conference call between the WB Senior Management and the major participants in the world money markets discussing the WB’s financial performance and projections, such as GE or Credit Suisse or ABN AMRO has to do? The results of those conversations could be immediately visible in the value of the WB’s outstanding debt instruments! This might do a whole lot more for transparency and accountability than utopian political approaches to the problem.