Good Governance Begins At Home

The whole sorry Wolfowitz affair looks like it is finally drawing to a close. It is hard to believe that he will stay on much longer at the World Bank, and it is time to start thinking more closely about the future of that institution. From the first, I was critical of the way he was chosen because I have long opposed the “old boy” agreement between the United States and Europe, by which the US always appoints the head of the World Bank and Europe the head of the IMF. This unspoken arrangement dates from the founding of the Bretton Woods institution at a time when colonialism was still alive, and makes no sense in the twenty-first century.

There are reports that European leaders have told the US that if they get Wolfowitz to step down quickly and quietly, they will be allowed to choose Wolfowitz’s successor. It’s easy to see why the US and Europe want to stick to business as usual, but such a deal would amount to a wasted opportunity. I can think of no better way to restore confidence in these two venerable institutions than to finally open up the way their presidents are selected.

One of the lessons of the Wolfowitz debacle is that it does actually matter how stakeholders and employees feel about the Bank’s leadership. The world was prejudiced against him from the start because of his involvement in the Iraq War. But people were willing to give him a chance. Some said that perhaps he would be another Robert McNamara, the US defense secretary who helped mire America in the Vietnam War, but used his service to the Bank as penance.

At first, there was reason for hope: Wolfowitz was forceful in arguing for debt forgiveness and an end to agricultural subsidies. But he also hired old friends and political allies – many of whom did not have experience in development – and sealed himself off from his staff, alienating the very people whose support he needed. As we learned from the case of Larry Summers at Harvard, relationships inside institutions (not just with donors and funders) matter. In this respect, Wolfowitz, while by all accounts an intelligent and pleasant person, did not do himself any favors.