Editorial (Unpublished): June 1, 2005

The New President's Challenges ' Who's Going to Reform the World Bank?
This Wednesday Paul Wolfowitz will walk into an imposing glass and steel building on 18th Street in Washington, D.C. and start his first day in what could be the most challenging job he has ever held. As the 10th President in the 60-year history of the World Bank, Mr. Wolfowitz will have an unprecedented opportunity to help steer the direction of development as we rapidly move towards the Millennium Development Goal targets. 

His new position could allow him to help to truly bring opportunity, choice and prosperity to the poorest areas of the globe. But to do so he will have to confound his critics, defy skeptics and dramatically change both his approach to the international community and more importantly the attitude and engagement of the institution he now heads.

The World Bank currently lends and grants almost $20 billion dollars a year to over 100 countries, but its reach extends far beyond these figures. It is also highly influential over development programs around the world through its prolific publishing, data collection might, as well as through the conditions and directions it attaches to its grants and loans.

Over the past ten years, the way the World Bank works has come under increasing criticism by civil society groups and by internal and external evaluations. For example, last year an internal review found that the Bank's approach to oil and mining causes more harm then it alleviates. Critics have raised fundamental concerns about the hypocrisy of an organization attempting to portray itself as judge and jury of good governance for poor country governments, while it refuses to address the fundamentally undemocratic nature of its own decision-making. Perhaps most significantly, in the coming years the Bank will have to come to terms with the role it plays in undermining democracy and participation when it forces governments to implement policies, taxes and projects that fly against public opinion in their own countries.

Mr. Wolfowitz brings his own set of challenges, as he will have to clearly and unequivocally distance himself from his previous controversial role in the war on Iraq and from U.S. global strategic directions. He must do this not only to secure a measure of goodwill, but also to attempt to prevent G7 governments from hiding behind their citizen's distaste for the Bush administration as an excuse for not engaging in the hard work, and hard decisions that must be taken to implement the long-overdue fundamental reforms needed at the World Bank.

Mr. Wolfowitz's first and best chance to confound his critics will be presented to him next week at the June 10th and 11th G7 Finance Ministers meeting. At this meeting, the world's most powerful financial managers will be cutting a deal on poor country debts. This will be unveiled a month later by Paul Martin, Tony Blair, George Bush and the rest of the G8 when they meet in Gleneagles, Scotland in early July. As it stands, the deal on the table looks to be a time-bound, half-measure that will do very little to remove the debt noose that is killing off opportunities and peoples in the poorest countries of the world.

Mr. Wolfowitz seems to understand that half-measures on debt will not allow poor countries the space and opportunity to pursue the steps they need to get out of their crushing poverty. He also seems to understand that it is morally repugnant for rich countries to continue to extract payments for debts that were contracted by undemocratic and corrupt leaders and that have done virtually nothing to improve the lives of poor people. Mr. Wolfowitz made essentially this argument last year when he secured a deal for 80% cancellation of the debts of Iraq.

Mr. Wolfowitz and Minister Goodale should not walk out of the G7 meeting next weekend without a debt deal that offers a permanent exit for the most impoverished countries from their crushing debts. Wolfowitz could establish his credentials as a poverty fighter by using his close ties with the White House to persuade President Bush and Treasury Secretary Snow to back 100% cancellation of all multilateral debts owed by impoverished low-income countries. Whereas his predecessor, James Wofenshon, seemed preoccupied with defending the power of the World Bank at all costs, Wolfowitz could at once ingratiate himself with critics from both the left and the right by indicating his willingness to allow some of the Bank's loan loss reserves and retained earnings to be used for debt cancellation. Real progress needs to be made this year on poverty eradication if there is to be any hope of achieving the Millennium Development Goals and of once and for all stopping the debt crisis facing the poorest countries.

In his new job, working with governments from rich and poor countries there may be hope. But without fundamental reforms and a resolve to take brave and decisive actions, hope will quickly fade. It is up to Mr. Wolfowitz himself, and people like Minister Goodale, to prove wrong those who reacted with horror to Mr. Wolfowitz's nomination and combat the growing sense that the World Bank is unable to change or learn from its own mistakes.