More Speculation on the future of the World Bank

There are so many articles in the press nowadays, here is a selection:
International Herald Tribune:
http://www.iht.com/articles/2007/05/22/business/bank.php
another viewpoint:
http://www.iht.com/articles/2007/05/21/business/sxpesek22.php
American Enterprise Institute: (or the voice of Neo-Cons )
http://www.aei.org/publications/filter.all,pubID.26225/pub_detail.asp
Who is the favorite candidate:
http://www.bloomberg.com/apps/news?pid=20601087&sid=ar453SJDxPfA&refer=home
The Indian Express:
http://www.indianexpress.com/story/31511.html
And From Pakistan:
http://www.thenews.com.pk/print1.asp?id=56954

Blair and Presidency of the World Bank

This report is interesting:
http://www.thisislondon.co.uk/news/article-23396863-details/Blair+tipped+to+be+World+Bank+president+as+disgraced+Wolfowitz+resigns/article.do
See Telegraph as well:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/18/bcnblair18.xml
and Guardian:
http://business.guardian.co.uk/story/0,,2083048,00.html

Wolfowitz Quits

After weeks of struggle Paul Wolfowitz offers his resignation. This has been the greatest example of good governance (of course I am rather optimistic writing this, since there are so much to be desired). When it was revealed that he helped to arrange a better deal for an individual to whom he has personal attachment, there were bodies, monitoring bodies, to report the incident. There was a committee to determine whether he has broken any rule or not. The fact that such system works and can function even in a complex set up such as that of the World Bank empowers the argument for good governance. Well Done.
Financial Times Article is interesting:
http://www.ft.com/cms/s/023bffd4-03cb-11dc-a931-000b5df10621.html

Resign!

European Union Parliament called for his resignation:

http://www.alertnet.org/thenews/newsdesk/L25557567.htm

even The Economist is asking for his resignation:

http://www.economist.com/opinion/displaystory.cfm?story_id=E1_JDQDNTR

Also 40 former executives from the World Bank:

http://news.yahoo.com/s/afp/20070423/bs_afp/worldbankwolfowitzletter_070423053656

And I love The Economist KAL's Cartoon.

Milton Friedman's Comments on The World Bank & IMF

I recently read one of Milton Friedman’s s speeches. “Why Government is the Problem” adopted from his 1991 Wriston Lecture published by Hoover Institution in 1993. In highlighting the differences between public endeavors and private enterprises and why government is actually the problem he mentioned IMF and the World Bank as examples. I quote:

“The general rule is that government undertakes an activity that seems desirable at the time. Once the activity begins, where it proves desirable or not, people in both government and the private sector acquires a vested interest in it. If the initial reason for undertaking for undertaking the activity disappears, they have a strong incentive to find another justification for its continued existence.

A clear example in the international sphere is the International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates, whether that is a good system or a bad system beside the point. In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rate. The IMF’s function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities. At Bretton Woods, two agencies were established: one to administer a fixed exchange rate system and the other, the World Bank, to perform the function of promoting development. Now you have two agencies to promote development, both of them, in my opinion doing far more harm than good.[1]”

One wonders if the public sector’s love for its institutes is extended to the agents, whom it appointed to oversee them. Right now it seems public sector’s reason to appoint Dr. Wolfowitz as the president of the World Bank has vanished. However the question is if public sector has a “vested interest” in his person as the president of this organization. Financial Times recent story is interesting: Wolfowitz deputy urges him to quit.

[1] It is Friedman’s idea. Many would disagree.

Why Wolfowitz Should Go

Last week developing world as well as the developed one learned that the president of the most important development agency of the world has made arrangement for a companion of his to benefit from a rather large raise, suitable contract terms and guarantees that similar officers of her position could only dream of. This has enraged the World Bank Staff Association and media have reported that many might expect Dr. Wolfowitz to step down and some actually have already called for his resignation. Ironically Dr. Wolfowitz has begun his tenure as the president of the World Bank by adopting an anti-corruption stance that has cut the Bank loans to many developing countries.

While finance ministers of the world gather together to start the annual spring, the powerful board of the World Bank has expressed “great concern” about institution’s future. Meanwhile Dr. Wolfowitz has vowed to stay on the job because he believes in the mission of the World Bank and considers himself capable of carrying it out. However there is no doubt that Dr. Wolfowitz has exaggerated his capability and overestimated his credibility, which is declined significantly since last week revelations.

The writer does not have any doubt that Dr. Wolfowitz sincerely believes in the mission of the World Bank. However for the sake of the very same mission he should let someone else lead this most illustrious organization. Should he survives his presence will damage the World Bank reputation and its credibility in the developing countries.

One should not forget that the success of the World Bank plans and achieving its stated “Millennium Goals” depends on so many factors. More than anything it depends on their acceptance by millions who live in developing countries, most of whom are traditionally family oriented and truly conservative in their habits of life.

It would be extremely naïve to think that everyone in the developing countries welcomes the World Bank projects and plans. Any talk of privatization alarms those who are benefiting from subsidies and governments rents. Any talk of efficiency threatens the government officials who are on the jobs because of their political connections and not because of their efficiency. Any step toward diminishing male-female gaps in employment and income threatens those who believe in their traditional way of life. Thus there is always a battle between those who seek sustainable development and those who consider themselves righteous in preserving the status quo.

Although Dr. Wolfowitz believes in the mission of the World Bank his actions have strengthened the position of those who oppose the World Bank projects. Already too many consider the World Bank to be an agent of an imperialistic power. Many smart politicians use that negative image to cripple its efforts in combating poverty. Dr. Wolfowitz has added to this negative image these actions only justifiable by personal feelings of a nature that millions of people in developing countries do not consider justifiable. Thus he should go to save the mission and to respect those who make this mission a sacred one; the truest and the most noble of all crusades.

Recent Reports:
Washington Post
International Herald Tribune
American Chronicle
Reuters

The Anti-Corruption President of The World Bank

There are some interesting developments about President Wolfowitz at the World Bank. There also was an interesting article about him in New Yorker:

1. The New York Times April 13, 2007: Turmoil Grows for World Bank Chief
2. Time, April 13, 2007: A Rude Awakening for Wolfowitz
3. VOA: The Pressure Grows
4. CNNMONEY: World Bank Staff: Wolfowitz Should Quit
5. Washington Post, April 13, 2007: Wolfowitz Apologizes for “mistake”
6. Asia Times, April 13, 2007: The Wolf is at the Exit Door

Read this:
New Yorker: The Next Crusade Paul Wolfowitz at the World Bank.