By Richard Adams (THE GUARDIAN, 14/04/07):
When George Bush picked Paul Wolfowitz as head of the World Bank, the biggest fear was that the architect of the US invasion of Iraq would turn the world's most important aid agency into a neocon arm of the White House. The reality has been far worse: in two years Wolfowitz has turned the bank into a rudderless, divided institution that is seeing its credibility drain away.The most obvious villains of this particular drama are Wolfowitz and his small coterie of advisors. But in reality the sound haunting the bank's executive board and their government masters is that of chickens coming home to roost.
Back in 2005, when the Wolfowitz appointment was announced, there was a brief flutter of mutiny on the part of the European nations that hold a substantial number of the bank's purse strings. Yet they eventually waved through the appointment with barely a flicker - being more concerned with protecting the cosy agreement that allows Europe to pick the head of the International Monetary Fund, while the US gets its choice in the World Bank.
This is a shabby arrangement - and the appointment of Wolfowitz would have been the ideal catalyst for the Europeans to end it. But they shied away from the fight and now are suffering the consequences: a lame duck president in the World Bank, appointed by a lame duck president in the White House.
In spite of its gleaming headquarters and heavyweight staff - boasting enough PhDs to stock several reputable economics departments - the bank is a fragile organisation. It is only as powerful as the rich developed governments that fund it allow it to be. That's why the controversy that has engulfed Wolfowitz this week hurts the bank more than it does the hammer of Iraq.
The affair involves preferential treatment afforded to Wolfowitz's girlfriend, Shaha Riza, who worked at the bank long before her lover received his sinecure from a grateful president. Bank rules forbid those romantically involved to work together - a dubious rule, especially as the bank has 10,000 staff, but a rule none the less. What happened next is murky, with conflicting accounts from Wolfowitz and his advisors set against those of other bank staff. But we now know - thanks to a smoking gun memo - that Wolfowitz intervened to secure salary increases of 46% for his girlfriend, dictating in precise detail the terms to be offered to Riza on her secondment.
That Riza then went to work for Liz Cheney, the daughter of vice-president Dick Cheney, only adds further piquancy. Concerning as it does sex and money - a rare combination at the World Bank - the controversy has transfixed Washington, and the calls for Wolfowitz's resignation have come thudding in from sources as diverse as the bank's own staff and the Financial Times.
Yet it could not have come at a worse time for the bank. It is in the middle of its triennial funding round, where wealthy donor nations replenish the bank's pot of resources for the world's poorest countries. Wolfowitz's ability to go cap in hand for funds is surely impaired when he is simultaneously trying to save his job. The real losers, in that case, will be the world's poor.
The case against Wolfowitz does not rest solely on his generosity towards his lover. Two other "Bush administration retreads" - to use Wolfowitz's phrase - have received even more generous salaries, compared with their thin experience in an institution where degrees are weighed rather than displayed. Kevin Kellems - nicknamed "keeper of the comb" by bank staff for his role in passing a comb to Wolfowitz in Fahrenheit 9/11 - receives $250,000 for his loyalty. The irony is that Wolfowitz's signature policy since arriving at the World Bank has been a drive against corruption - a controversial policy in the eyes of reputable aid agencies, as tangential to the bank's real task of fighting poverty.
But even then, Wolfowitz has been accused of using its policies as a veil for US-inspired actions, such as the rapid turnaround in treatment of Uzbekistan by the bank, shortly after the former Soviet republic expelled US troops from bases there. Even more disturbing evidence emerged this week, of a bank director removing all references to family planning policies from a draft strategy document. The evidence revealed by the Government Accountability Project - a watchdog group that also uncovered the pay increases awarded to Riza - contradicts a statement by Wolfowitz that there had been no changes in the bank's policies on promoting family planning.
After all this, will the European governments finally pluck up the courage to rid themselves of Wolfowitz? They have already bottled this decision once. They now have a opportunity to make amends - and should seize it or risk letting the bank drift into irrelevance.