Financial Times Editorial comment: World Bank crisis becomes perilous

Editorial comment: World Bank crisis becomes perilous
Copyright The Financial Times Limited 2007
Published: May 10 2007 02:55 | Last updated: May 10 2007 02:55


At some point even a sole superpower must recognise reality. Hopes for an effective presidency of the World Bank by Paul Wolfowitz are over. He must either go or be the lame-duck president of a deeply damaged institution.

The special panel established to investigate Mr Wolfowitz’s behaviour towards the re-assignment of his girlfriend has concluded that he violated rules governing conflict of interest. Mr Wolfowitz’s lawyer demands sufficient time to prepare a rebuttal. This request should be granted to remove suggestions of a lack of due process. But if this concession is granted, the administration must accept the legitimacy of the outcome of that process.

What is to be avoided, if at all possible, is an open split within the board. Yet that is what is now threatened. Assume that the panel confirms its finding. Assume, too, that Mr Wolfowitz does not resign. The board would then have to vote. Not to do so would devastate its authority. If the Europeans were to win, President George W. Bush would be humiliated. Yet even if the US were to win, it would be a victory without substance: Mr Wolfowtiz would be a lame duck. Either way, the bank and the US national interest would be severely harmed.

Some of the Americans who want such a showdown see what is happening as a malevolent European plot to bring down their courageous warrior against corruption. But the notion that the US alone cares about corruption in development assistance is outrageous, as anybody with knowledge of the history of US aid would understand. Theirs is a fight without a cause.

They may also hope to force European governments to draw back. But the latter cannot do so if the credibility of the bank is to survive and its mission is to continue. It would be the clearest statement that fine words about governance are irrelevant when it matters.

The Europeans cannot draw back. They must make it clear that, in the last resort, they would be prepared to vote Mr Wolfowitz out. Moreover, they should add, contributions to replenishment of IDA, the bank’s soft-lending arm, would be politically impossible if Mr Wolfowitz stayed. The Europeans provide some 60 per cent of this funding. What chance is there of a Democratic Congress agreeing to make up the difference, to bail out a despised administration?

The Bush administration must then understand what would happen if it kept in place a man who cannot now hope to do the job. It should put the bank’s mission of poverty reduction above any misguided notions of personal loyalty.