The Telegraph
Since 1st March, 1999
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- The forced resignation of Wolfowitz was a non-event

The international tittle-tattle, many will think, was uncalled for, or at least somewhat disproportionate. The World Bank may have one hundred odd sovereign countries as its members, it is still run very much like an American corporate entity: the chief executive is supreme, hiring and firing at all levels take place at his instance. This is equally true of the firm’s decision-making process; the final arbiter of the details of all policies and projects is the chief executive. Appointments, promotions and demotions take place according to his wishes. Sometimes an individual, occupying an important position flaunting an imposing-sounding nomenclature of office and drawing a fabulous salary, falls out of favour with the boss; he is immediately kicked out of his or her position and joins the ranks of ordinary foot soldiers of the corporate body. Perhaps his or her emoluments are not slashed; to do so could embroil the firm in legal complications. So while the salary might be protected, the power and glory would be gone. In a number of cases, such a person is offered a so-called golden handshake; he or she accepts it without demur and fades into the grey horizon. Unless, of course, he or she is lucky enough to be picked by another corporate entity.

In such a milieu, doing a good turn to one’s girlfriend ought to be taken as one of the normal prerogatives attached to the office of the chief executive. Since he is special, she too is special. After all, the expression ‘sweetheart deal’ entered the language because of transactions slightly out of the regular, slightly shady, taking place with the object of favouring a particular party who has a special relationship with the supreme boss of the company.

Paul Wolfowitz, when he was named to head the World Bank by the White House, had every right to assume he was walking into an institution which was just another American corporate body and he was getting the job, which was at the disposal of Mr President, as reward for planning so successfully the destruction and devastation of Iraq; he, Wolfowitz, had earned the right to enjoy the little pleasures of life. One such was to have the girlfriend around and ensure hefty lifts in her position and earnings.

He did precisely that. The subsequent hullabaloo, he can honestly bemoan, was unjust in the extreme. In other circumstances, he could have roughed out the little local difficulty he faced. Things however went awry precisely because of Iraq. He had rubbed in the wrong a number of west European countries on the eve of the Iraqi expedition. He had allegedly threatened the governments of these countries with unpleasant retributive measures when they appeared to persist with their openly expressed reluctance to join that great war of liberation in west Asia. How unreasonable, these governments did not forget that insult. Once the opportunity arrived, following the leak of information regarding the extraordinary generosity showered by Wolfowitz on his girlfriend and companion, they chose to jump on him. He had also alienated, by his abrasive manners, quite a few senior members of the World Bank staff, who ganged up with those representing the west European countries on its board of executive directors. Despite strong initial support from the White House, Wolfowitz realized the party was over and decided to quit.

This is where having or not having an Ivy League background makes a difference. Robert McNamara, despite the killings and mayhem he organized with such ferocious efficiency in Vietnam, could still preside over the World Bank for a full two terms. He had the Harvard finesse and could quote as much from Aristophanes as from T.S. Eliot. In contrast, Wolfowitz has a rough, uncouth Jewish background; he was given neither the time nor the opportunity to build an image of his own.

In the end, though, it hardly matters. Little hiccups like the Wolfowitz episode will not change the reality of the World Bank being an extension of the department of state of the United States of America. Way back in 1944, at Bretton Woods, the capitalist countries, planning how to maintain their hegemony in post-World War II international financial affairs, had agreed upon a format: while the International Monetary Fund was to look after short-term balance of payments, and difficulties of member-countries, and would be left to the care of a managing director from west Europe, the World Bank, charged with the responsibility for reconstruction and development of the member-countries, would always be an American fiefdom.

Once the west European nations were back on their feet, reconstruction receded from the agenda of the World Bank; development of the emerging countries of Asia, Africa and Latin America became its principal concern. Two considerations accordingly came to the fore: (a) the need to raise long-term capital, and (b) security of the capital thus raised and subsequently invested in the developing countries. The Bank, on account of the clout it enjoyed because of its symbiotic relationship with the US administration, came to fill both roles most effectively. It could float loans in Wall Street and raise enough capital for investment in the other parts of the world, something the European bourses were not yet in a position to do. Again, with the backing of the US, the Bank could arm-twist the governments of the countries where it lent money to counter-guarantee repayment by borrowing parties.

The development chant soon meshed with American foreign policy. The ploy was unabashedly on display: you are a poor country, and lack both capital resources and technology to develop on your own, come to our parlour, we will provide you with the funds, the technology and the expertise. Beginning with the Sixties, countries began entering the World Bank’s parlour in droves. The Bank would borrow in the American capital market at three to four per cent and charge the countries to which it lent twice as much, or even more.

The ruling oligarchies in the developing countries flourished because of the World Bank’s active involvement in their development process. The Bank flourished even more. The US, as the largest holder of the Bank’s equity, flourished equally. For many of the wobbly governments in west Asia, Africa and Latin America, the Bank, while arranging loan assistance, would also nominate their finance ministers — in some instances, even prime ministers or presidents — who would faithfully abide by the Bank’s diktat, which was often the surrogate of the American diktat. The president of the US, everybody knew, appointed the president of the World Bank; it therefore did not take much time for the World Bank to become an instrument of American neo-colonialism.

Over the sixty years of its existence, the colonial frame of mind apart, the Bank has developed another distinct culture. Loans are for the implementation of projects, projects are implemented by corporate entities with an adequate background of experience and expertise. Global tenders are floated for selecting such corporate bodies. It is invariably high noon for transnational corporations mostly based in the US. World Bank loans thereby have turned into an unending bonanza for the American corporate sector, revealing another facet of crony capitalism.

It is in a sense therefore a non-event, the forced resignation of Wolfowitz as World Bank president. He is being replaced by another state department nominee. The American corporate culture and the American political hegemony will remain undisturbed in the Bank. A Wolfowitz goes, a Zoellick enters. Tweedledum bows out; Tweedledee takes over.

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