The World Bank: Worse than Wolfowitz

By Ken Silverstein

Paul Wolfowitz's conduct at the World Bank is outrageous and he deserves to be fired—although, let's face it, any woman who would sleep with him does deserve a raise—but let's not be romantic about his Bank opponents. To hear it from them, once Wolfie is out the door, the Bank will get back to its core mission. If by core mission they mean rewarding corrupt, Third World elites and making the poor poorer, I think they'd be correct.

There are few organizations that have done more harm to the people of the planet than the World Bank. During the 1960s and 1970s, it played a huge role in creating the global debt crisis that decimated the Third World by approving huge loans that shored up tinpot dictators like Mobuto Sese Seko in Zaire and the generals that ruled most of Latin America. The loans were unpayable, so the countries inevitably had to take out fresh loans to pay off old ones, leading to a never-ending spiral of debt. Beyond that, World Bank funds were frequently used to pay for white elephant projects—like dams that never generated a kilowatt of electricity and highways that destroyed rain forests—and much of the money found its way into the pockets of crooked government officials and the balance sheets of First World banks.

Then came the 1980s and 1990s, when the Bank became a big booster of neoliberal policies. That meant deregulation, reduced social spending (in order to save money that could be used to pay off old loans), and privatization of the same state-owned companies whose creation the Bank had previously encouraged. All of this failed just as abysmally as the Bank's prior policies. “Despite an intensified campaign against poverty, World Bank programs have failed to lift incomes in many poor countries over the past decade, leaving tens of millions of people suffering stagnating or declining living standards,” the Washington Post reported last year, summarizing a report by the Bank's own autonomous assessment arm. Indeed, the few countries that in recent years have succeeded in reducing poverty—China, to take the most prominent example—have done so by aggressively rejecting the Bank's advice.

Wolfowitz is often lauded for allegedly attacking corruption at the World Bank, but his record on that matter is spotty at best. He cut off loans to Uzbekistan, which had blocked the Bush Administration's access to military facilities, but has kept lending money to numerous regimes that are friendly to the United States. And an unnoted irony in the current controversy is that Wolfowitz's main supporters in his fight to keep his job are African leaders, most of them hardly models of civic virtue.

But what of Wolfie's Bank critics? Many World Bank employees are well-intentioned and they seem sincere in their outrage. Because of the Iraq war, Wolfowitz was unpopular when he came to the Bank. He infuriated employees by bringing in Robin Cleveland and Kevin Kellems, overpaid, arrogant Bush Administration hacks, and then further alienated senior staff by cutting them out of the decision-making loop.

However, hating Wolfowitz doesn't make you a saint. Some of those Bank senior vice presidents and managing directors complaining about the hefty pay raises Wolfowitz arranged for Shaha Riza don't have much credibility given that their salaries, according to the Bank's annual report, are hovering in the range of $300,000 annually—and that's tax free and doesn't include generous perquisites.

One person with whom I spoke who knows the Bank well said that many of Wolfowitz's critics have been unenthusiastic about any effort to root out corruption. “Some of them believe,” said this person, “that corruption is inevitable and it's not the Bank's job to fight it. Others say he's been selective about the issue, as with the case of Uzbekistan. And others come from countries where they know people who have done very well from corruption and so their attitude is, ‘What's wrong with a little bribery?’ They're using the uproar about his girlfriend's salary as a pretext to get rid of him, but there are no white hats on either side.”

This is no defense of Wolfowitz and I'll be the first to celebrate if he gets the boot. But I wouldn't expect that outcome will actually mean much for the world's poor.