It’s true: come June 1, Paul Wolfowitz will be President of the World Bank. It’s not a satire, a parody, or paranoia. It’s the Bush Administration proving, once again, that it can always out-do our worst expectations.

Paul Wolfowitz is currently the U.S. Deputy Secretary of Defense. He is best-known as the architect of and intellectual driving force behind the Iraq invasion and occupation. Now the man who fabricated a web of fables that allowed an eager President to plunge the United States into what must be what is likely its most colossally stupid, destructive, and expensive action since the Vietnam War, will, instead of being punished, fired, or otherwise held accountable, be rewarded with the top position at one of the world’s most influential financial institutions.

Wolfowitz’s most important qualifications for his new job are his U.S. passport and his loyalty to Bush. Adhering to the “gentlemen’s agreement” reached when the IMF and World Bank were founded in 1944, the President of the United States has been allowed to select, unilaterally through a closed process, the president of the World Bank. The Western European countries select the Managing Director of the IMF in much the same manner, making a mockery of the IFIs’ insistence on transparency and democracy in their borrowing countries. Wolfowitz had a constituency of one that he had to impress.

We could go on and on about Wolfowitz’s record, but some highlights will have to suffice. In struggling to argue that he has an interest in development issues, his advocates can only bring up his time in Indonesia, where he was the U.S. Ambassador in the late 1980s. In that position, he never said a word about the genocide committed by the Indonesian government in East Timor, which was approaching its 1991 peak. He defended Suharto’s record as recently as the late 1990s, and appears to have learned from him some lessons about “crony capitalism” to apply to the reconstruction of Iraq (recall Halliburton’s no-bid contracts).

In his early years in government he collaborated with Dick Cheney and Donald Rumsfeld to promote fantastic stories of Soviet military power that fuelled the Cold War. Those stories have been discredited, but are now recycled in the hysterical warnings about Saddam Hussein that led the U.S. into war. After serving in the administration of George H.W. Bush, Wolfowitz was a founder of the Project for a New American Century (PNAC) – the name alone screams “manifest destiny” – the doctrine that the U.S. is fated to lead the world. PNAC was a leading incubator for the “neo-conservatives” who today dominate the Bush Administration.

Where Were You When You First Heard “Wolfowitz for World Bank”?

The rumors started on March 1 with a front-page story in the Financial Times, normally the most reliable source on the World Bank and other such institutions. Jaws dropped around the world. With the rumor a day or two later that Carly Fiorina, the failed CEO of Hewlett-Packard, was also on the White House’s “ short list,” many of us felt safe in concluding that someone in the White House or the Treasury Department was having a good laugh at the expense of the reporters covering the World Bank beat. Speculation on a list of a dozen or so rumored candidates continued apace. (See www.worldbankpresident.org for an hour-by-hour record of the rumors – often quite amusing – since January 1. Another site, www.nowaywolfowitz.org, has now emerged to assist in the sport of Wolfowitz-watching, which has a scheduled five-year engagement.)
Then, just two short weeks later, the morning of March 16 broke like any other spring day in Washington … and then the journalists started to call. “Bush is going to announce it at 10:15: Wolfowitz for the World Bank.”

My jaw fell so hard it just about broke. Just the week before I had dissuaded a high-profile columnist from pursuing the rumor. I had failed to learn one of the most important lessons from the Iraq war: this Administration doesn’t restrict itself to the boundaries of (heretofore) normal political reality. Just when you think you’ve discovered the thing so outrageous that they would never dream of trying it – they just might do it.

How Could This Happen?

How could one administration – one person, really (Bush) – simply decide that one of the most despised and least qualified people on the planet (if you don’t believe it, ask the next non-American you meet – Wolfowitz is probably better known outside the U.S. than within it) will be the president of an institution that, with the IMF, makes economic policy for about a hundred countries? In case there was any doubt about who controls the global economy, this episode should put it to rest. The crass behavior of governments across the Global North amply demonstrates that the heart of the game is to keep power in the hands of those who already have the power.

When the Wolfowitz rumors first circulated, European officials made private assurances that any such nomination would not go unchallenged. Thanks to the anachronistic and undemocratic division of the spoils dating back to 1944, 11 of the 24 seats on the World Bank board are occupied by European governments (and another two by quasi-Europeans Canada and New Zealand). They could easily vote down a U.S. nomination.

There is no rule preventing other countries from nominating candidates for World Bank president, nor is there any rule that the U.S. candidate cannot be opposed. But there is tradition – a powerful force, when it works in support of those with power. The gentlemen’s agreement of 1944 hasn’t yet been broken; doing so now would imply a conscious decision to change the balance of power at the international financial institutions (IFIs).

Now a new tradition – one not, alas, intersecting with power, has emerged: whenever one of the posts is to be filled, the Financial Times, the Washington Post, the New York Times, the Guardian and others print commentaries and editorials decrying the out-dated and undemocratic selection process. In 2001 the institutions themselves joined in: the boards created a joint task force to recommend a better way to select the leaders. Within the bounds of IMF/World Bank logic, the results were reasonable: any country can nominate candidates, there would be no geographical restrictions, every candidate would be interviewed by the board, etc. The boards were very appreciative of the task force’s work, but declined to actually adopt the recommendations.

Responding to Carrots and More Carrots: No Resistance from Europe

Many observers thought that with Wolfowitz’s name on the table, the system would at last be challenged. The French and the Germans, so contemptuous of Wolfowitz’s war-mongering, would certainly want to prevent him from becoming President of the World Bank. And the first noises from Europe suggested there might be a real battle. For those of us in the U.S. exhausted by the perfidy of the Bush Administration, it is tempting to think of the European Union as a bastion of reason and fairness, a place where human principles continue to have meaning.

But in the end it’s a matter of conserving power. The French were bought off, probably with a promise from the U.S. to support Pascal Lamy as the next head of the WTO. In addition, the EU seems to have been promised, and the French seem to be trying to claim, a new position at the World Bank as deputy to the President. In other words, we get two moves that will insure the voice of the Global South is further submerged at two of the three major international financial institutions.

We would never have expected the U.K., with Tony Blair so loyal to the Bush Administration’s every whim, to oppose its choice for the World Bank. But its development minister, Hilary Benn, did make some very gruff noises. In the end, however, it was not surprising to learn that the nomination was submitted to Prime Minister Blair before any other foreign official; had he given a thumbs-down, it may not have gone forward. But he just smiled and nodded, and a month later it was announced.

The Germans, meanwhile, seem to have subordinated their interests in democracy and fairness to their desire for a seat on the U.N. Security Council. Perhaps more scandalously, the Brazilians have likely also bought support for their U.N. bid. True, countries like Brazil are in a more vulnerable position since they expect to be coming to Wolfowitz for loans. But starting with the Cancún WTO meeting in September 2003, Brazil has assumed the role of being a voice for the developing countries that don’t have the clout it does. And it was a staunch critic of Wolfowitz’s war. The decision by its leftist government not to oppose Wolfowitz, and the seeming endorsement by its geographical and ideological neighbor, Argentina, took the wind out of any opposition from the Global South.

And so we had the sorry spectacle on March 31: the board of the World Bank approved the nomination of Paul Wolfowitz. Unanimously.

What Does It All Mean?

There are various ways to answer this question.

One is that it demonstrates the cravenness of those who benefit from the status quo. More to the point, the acceptance of Wolfowitz at the World Bank confirms not only that the global economy’s direction is determined by the self- interest of governments in thrall to corporate interests, but that the goals of the global economic system are entirely continuous with those of the dominant military machine in the world today. Paul Wolfowitz is neither a military strategist nor an economist. He is a smart guy who is trusted by Bush and Cheney to advance the interests they want advanced on the international stage. Whether that means bombing a country or imposing a new set of economic conditions, he’s the man to get the job done.

In order to maintain his credibility at the World Bank, Wolfowitz may well take steps to suggest “independence” from the Bush Administration – publicly disagreeing with it, calling for more foreign aid, etc. But after 40 years of strategizing – and lying and bombing – on behalf of the empire, it is hard to imagine Wolfowitz suddenly reversing his priorities in a meaningful way.

For campaigners like the 50 Years Is Enough Network, Wolfowitz makes our job of de-legitimizing the World Bank much easier: the press and the public should be very receptive to our long-standing view of the Bank as a tool of economic domination used by the U.S. and its allies. With one of people most associated worldwide with the notion of U.S. imperialism now the president of the World Bank, we may be able to describe the Bank’s agenda as “imperialist” without raising too many eyebrows. The noble rhetoric employed by the World Bank is far less likely to distract people from the priority unfailingly granted to the interests of those wealthy governments that dominate the boards. It will be clear that at the World Bank, and its sister institutions like the IMF and the regional development banks, the bottom line will always be the bottom line of Northern multinational corporations.

What Will a Wolfowitz Bank Look Like?

The greatest fears expressed about a President Wolfowitz have been that the Bank will more actively, and perhaps more explicitly, favor countries that support U.S. foreign policy objectives (or penalize those which don’t), and that the perceived Wolfowitz “democratization” agenda will become the top priority for the World Bank.

The first possibility seems likely, though it should be borne in mind that the Bank has a long history of supporting friends of the U.S. (and Western Europe) and punishing its enemies. This tendency has been less obvious since the end of the Cold War, but has re-surfaced since September 11th – for example in debt relief packages for Pakistan and Tajikistan which went well beyond the level they would have ordinarily qualified for at the time.

Most likely, however, we will probably not see a significant shift in the Bank’s policies. Tempting as it may be to draw a contrast between the humanistic James Wolfensohn and the militaristic Paul Wolfowitz, the fact is that they are not, on economic issues, far apart. Wolfowitz has demonstrated a great affection for privatization, including in Indonesia, where Professor Jeffrey Winters says that the deregulation and privatization of the banking system he actively supported as Ambassador led to the problems that culminated in Indonesia’s succumbing to the East Asian financial crisis in 1997. In Iraq, Wolfowitz’s henchmen decreed the most radically privatized economy in the world – though thus far few have come forward to buy their piece of the pie.

The World Bank has been leading a major privatization campaign in many of its client counties, inspiring mass public opposition – particularly to water privatization – in South Africa, Tanzania, Ghana, Kenya, the Philippines, Bolivia, and elsewhere. Wolfowitz is likely to introduce, at most, an intensification of already-existing World Bank policies and tendencies. He will have the support of the Bank’s most powerful member, the U.S., at least until Bush’s term is over – something that has been very much lacking since Bush took office.

Indeed, U.S. policy toward the World Bank during Bush’s first term seemed to be geared to creating instability and uncertainty in the institution. Bush’s Treasury Department paid attention to World Bank policy only intermittently, and vacillated between neglect and irritating its European counterparts by encouraging a big increase in the use of grants rather than loans. Wolfensohn and the Bank were left to worry about whether the Administration would try to secure their usual Congressional funding, and in the end its support was at best lukewarm. With Wolfowitz in place, it is likely to be much more engaged with the World Bank, for better or worse.

Why would the 50 Years Is Enough Network even allow for the possibility of “better” when it comes to the thought of the Bush Administration working with the World Bank? As we maintained in an article in the January issue of Economic Justice News (available at http://www.50years.org/cms/ejn/story/251), the area of international development is possibly the only one where a Bush victory in the November elections might have been better news than a Kerry victory. The radical leanings of the Bush Administration and its instinctive suspicion of multilateral institutions allows it to see the magnitude of the failures at the IMF and World Bank, and it has not been shy with its criticism (though it has not been consistent in following it up). Democrats in the White House have been at least as guilty as Republicans of propping up structural adjustment and the power of the IFIs.

The natural question is: but can we really take any joy in the Bush Administration’s tendency to topple the existing status quo when it’s likely to make things worse rather than better?

It’s true, of course, that the Bush Administration, and certainly Paul Wolfowitz, is not motivated by the same principles we are. Where they want to make global capitalism work more smoothly, we want to transform it. But the changes they have indicated interest in making are for the most part positive. As the other page one article in this issue details, they are pushing the best proposal on debt cancellation yet brought to the G7. And they have been leading a charge for the World Bank to make more grants and fewer loans, something that obviously will prevent more debt build-up. We always have to be careful to look for hidden conditions or veiled methods of furthering corporate interests. So far those are not apparent. While remaining vigilant, the major U.S. proposals for change at the World Bank are very positive.

European governments and some civil society groups fear that the U.S. is simply interested in reducing the power of the World Bank in order to increase its own. We frankly don’t see signs that the Administration is going to take such an active interest in development economics that it will attempt to radically transform the whole field. If we’re right, we feel that the fears being expressed in Europe are exactly what we need to see – a reduction of power at the IFIs, and a real chance that some of that power will be restored to the governments and people of the Global South.

Curiouser and Curiouser: Wolfowitz and Debt Cancellation

This Administration agenda presumably would have been that of any Bush appointee to the Bank; we are certainly not arguing that Wolfowitz is somehow uniquely qualified to make these things happen. That said, it is true that Wolfowitz was a vocal proponent of canceling the debts Iraq owed to France, Germany, and Russia – a politically motivated list, to be sure, but the logic he used was precisely that which debt campaigners have been using for over a decade.

The debt in Iraq, like the debt in many other places, was accrued by an undemocratic regime that was working against the interests of its population. There is even a legal term for this – odious debt. The U.S. was the first country to invoke it, back in 1898, when it refused to pay debts Spain claimed of Puerto Rico and Cuba after the U.S. took them in the Spanish-American War. It has been used only two or three times since then, but Wolfowitz’s appointment to the Bank provides an unprecedented opening to insist that the World Bank adopt this logic as its own.

We are in for a very interesting five years at the World Bank. Wolfowitz’s notoriety guarantees that its activities, and our critiques, will get more public attention. We will be vigilant to detect how the new president tries to politicize the institution in ways that advance the U.S.’s agenda. We will also be encouraging further dissension among the most influential governments at the Bank, with the hope that out of it will come some of the significant transformations the global justice movement has been demanding for so long.