Loan wolf: Paul Wolfowitz at the World Bank

Andrew Balls – The Financial Times

Published: September 23 2005 Copyright The Financial Times
The speakers in the lobby of the World Bank’s headquarters in New Delhi play a plinky-plinky version of the theme tune from Chariots of Fire. It is 6pm on a Saturday evening in August and after a week of back-to-back meetings, receptions and dinners, Paul Wolfowitz has at last found a chance to escape.
The new president of the World Bank has decided he wants to visit a slum where the bank has been sponsoring a project providing computer kiosks to help children learn how to work and play online. He hasn’t told any of his security aides about the change in plan. (If you ask anyone about this kind of thing, he tells a colleague, you always get a “no”.) Wherever he has been on this trip, 20 or more vehicles have followed him – police vans, an ambulance and sometimes a fire engine. This time he wants a quieter visit. His Washington security chief understands, and after some fast and frank negotiations with the less understanding Indian police, two cars pull up to the door for Wolfowitz and his staff, followed by just three police jeeps. We speed off through Delhi’s busy streets in Wolfowitz’s car – a white Mercedes with dark bulletproof glass – our conversation punctuated by the constant honking of the horn.
Ten minutes later we are in a slum in the south of the city called Vivekananda Camp. Two television cameramen and a few photographers have been tipped off, and have beaten us here. Wolfowitz throws his jacket on to the back seat and strides off, security agents and police hurrying after him.
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Most of this trip has been taken up with meetings of government leaders and World Bank officials, but there is no doubt that part of it has been designed to soften the harsh image Wolfowitz earned in his last job of deputy defense secretary, where he was a leading advocate and architect of the Iraq war.
This has occasionally led to surprising sights: after a crowd of brightly painted dancers arrived to welcome Wolfowitz to their village in the southern Indian state of Andhra Pradesh one day earlier in the week, he suddenly jumped out of his car and started dancing with them in the street.
There is no dancing at Vivekananda Camp, where Wolfowitz is soon on a narrow path weaving through the modest houses. He puts his hands together, prayer-like at chest level, and bobs his head to people, offering them the traditional Indian greeting of “Namaste”, “I bow to you.” People cook outside on fires and sanitation is primitive – a stream of nasty-looking water runs along the path. But this is long way from being Delhi’s poorest neighbourhood. The houses are small and rickety, but, Wolfowitz points out, the roofs are well covered.
By the time he reaches the three computer terminals, built into a wall like ATM machines, he is surrounded by about 90 people, mostly children. Two of the bright yellow hatches on the computers turn out to be closed because of a power cut, a common problem here. The third one runs on batteries and Wolfowitz heads to it to inspect what it offers: games, in Hindi and English, and internet access. He tries to ask the kids what they use them for, but many can’t understand him. One teenaged boy, dressed all in white, turns out to have learned English at the nearby American School. Wolfowitz asks him to translate and turning to the crowd of children says, “Raise your hands if you do your homework.” All the hands shoot up, amid much laughter.
When the photographers ask him to pose for the camera, Wolfowitz picks up a sweet-looking little boy and hoists him up to get him in the shot. As he is saying goodbye, a camera is thrust in his face and a TV reporter, talking quickly, fires questions at him about Iraq. Wolfowitz says politely that he is here to visit the computer project, but now he has to go, and starts back down the path.
For a man who will be 62 in December, Paul Wolfowitz looks youthful. He is tall and pigeon-toed; his hair used to be dark but is now mostly grey, perhaps because of the stress of his last job. Although he has spent most of his career in government service he still has the demeanour of an academic. Ask him a question and he often pauses a long time before answering, sometimes for so long it becomes disconcerting.
In meetings, he is happy to sit and listen to others speak, but when he talks he makes incisive points and asks sharp questions. Senior bank staff who have spent time with him seem to be uniformly impressed by his intelligence. He relishes discussion and debate, and does not mind being told he is wrong – something that bank insiders say could not be said of his predecessor, James Wolfensohn. Wolfowitz is clearly very different to Wolfensohn; less charismatic but also less ego-driven.
My first visit to Wolfowitz’s office was revealing: when Wolfensohn was in it, the walls were covered with more than 100 photographs of him and world leaders. Now it is almost bare, just a couple of photographs of Wolfowitz’s son and two daughters on the window ledge. The new president says he does not plan to adorn the walls, adding with a smile that given some of the leaders he has come across in the past, you never know when you might have to take the photographs down again.
It is an open secret that President Bush gave Wolfowitz the choice of the World Bank presidency nomination or the US ambassadorship to the United Nations. For a long-time admirer of the bank with much less time for the UN, the decision was an easy one – even though his background is in security policy, not development. (The UN post, of course, went to John Bolton.)
Born in New York, Wolfowitz is the son of a Polish immigrant father, Jacob, who moved to the US as a child and became an academic mathematician. Wolfowitz seemed set to follow a similar course, majoring in mathematics and chemistry at Cornell University – where his father was a professor – before disappointing his family by heading off to do a PhD in political science, rather than mathematics, at the University of Chicago.
Wolfowitz taught briefly at Yale University, before holding a series of jobs in the Defense and State departments. He is proud of his record, as assistant secretary of state for East Asian and Pacific affairs in the 1980s, of pushing for democracy in the Philippines during the Marcos regime and, as he put it in an interview, “helping to see Marcos out of Manila”.
Later in the 1980s, as US ambassador to Indonesia, he addressed, in very diplomatic language, the problem of the Suharto regime’s corruption.
Behind the scenes he pushed the World Bank to address the issue more directly, bank staff from the time remember. During the Clinton years he returned to academia as dean of the School of Advanced International Studies at Johns Hopkins University in Washington.
The promotion of democracy has been one of the most consistent themes of his career. As a leading neoconservative, he believes in the use of US might to advance democracy abroad. Because of this, and his role in the Iraq war and its troubled aftermath, it is no secret that a large chunk of the bank’s staff was appalled when he got the job last June. (There was a similar reaction in some European finance and development ministries, but national leaders gave their backing and Wolfowitz was approved by unanimous vote at the bank’s board.)
There is an obvious comparison between Wolfowitz and Robert McNamara, the controversial Vietnam war defense secretary who resigned from the Pentagon to head the World Bank. But when I asked Wolfowitz about the comparison, he said: “I don’t know if it is fair to put that label on him – but I certainly was not running away from my old job. I would have stayed there very happily if this hadn’t come along as, you know, a more exciting opportunity.”
As for Iraq, he said: “I don’t want to get into an argument with all the people around here who might have a different view, but I still think that what the US, UK and others did for Iraq was the right thing and done for the right reasons. And hopefully it’s going to turn out the right way.” He added that wherever he had travelled recently, from Burkina Faso to Bosnia, Iraq had hardly come up at all.
And inside the World Bank, people are far more interested in what their new leader plans to do with the world’s leading development organisation. Wolfowitz has been so busy since he started at the bank that he has had relatively little time for informal discussions with senior staff. Of those he has spoken to, several said he had been so cautious that they had little idea what his plans were.
He brought two lieutenants with him: Robin Cleveland, former associate director of the Office of Management and Budget, who helped to secure funding for the war in Iraq, and Kevin Kellems, a former adviser to Wolfowitz at the Pentagon who was also a spokesman for vice-president Dick Cheney. Both are new to the bank and have little expertise in development, which has ruffled some feathers. Staff are happier with Wolfowitz’s choice of the head of his office, Letitia Obeng, a Ghanaian national with broad experience at the bank who has worked in Africa, Asia and Latin America.
It is hardly surprising that Wolfowitz should have brought in some old and trusted advisers. The World Bank group is a huge, sprawling bureaucracy, with 184 member countries, more than 10,000 employees, five separate agencies and 26 vice-presidents of one sort or another.
It is well known that Wolfowitz has not been impressed by all the vice-presidents he has met. He has spent relatively little time at the bank’s Washington headquarters, so this impression may change, but insiders expect a shake-up of the top management team.
Since Wolfowitz was appointed he has spoken regularly to Shaukat Aziz, Pakistan’s technocratic prime minister, whom Wolfowitz knew from his academic days. When he visited Aziz in Pakistan last month there was a rumour Wolfowitz wanted to appoint Aziz to a top position at the bank. Wolfowitz has dismissed such speculation, saying Aziz was too valuable in Pakistan to even consider trying to lure him away – but there are many at the bank in Washington who will not be surprised if Aziz joins at a later date.
Others who have influenced his thinking on development and the bank include Sir Nick Stern, the British academic and former World Bank chief economist who was policy director of Tony Blair’s Commission on Africa. More controversially, Wolfowitz has spoken a few times to Professor Allan Meltzer, chairman of the US Congressional Commission on reforming international financial institutions. The commission’s 2000 report criticised the bank for being overstaffed, inefficient and bureaucratic. It recommended that the bank should pull out of lending to middle-income nations (a view Wolfowitz has so far shown little sign of promoting) and focus on grants rather than loans for the poorest African countries.
Wolfowitz is modest about his knowledge of the bank, saying he has much to learn from its staff and from country visits. “For me this is an unusual opportunity to go back to graduate school,” he said at one meeting in Islamabad one night.
He is equally modest about making grand statements. Sitting in a deserted restaurant in Delhi last month, he was sceptical about the “vision thing” when I asked him what he was planning to say at this weekend’s annual World Bank meetings in Washington, an important gathering of finance and development ministers and the bank’s senior management.
”Everyone thinks it’s a time when I should lay out my vision,” he said, smiling. “I honestly find that a slightly pretentious description. But in the sense that I am a new leader, and that it is a very presidentially orientated organisation in many ways, I think it is important to lay out a common vision. A lot of it is going to be based on things I am hearing from other people. If it were my personal vision I don’t think it would take hold terribly well, so it will reflect both my sense of where we ought to go and something I think people are ready to support. Vision is a little grandiose. Setting priorities, as much as anything, I think is a big part of it.”
But what exactly are his priorities? After more than half a dozen conversations with Wolfowitz, and more with others close to him, it seems clear the new president will make sure that the bank’s main concern will remain Africa, the first continent he visited after his appointment.
Sub-Saharan Africa is unquestionably where the bank’s work is most needed. Numerically, there are more people living in abject poverty in China and India, but unlike Africa those countries have fast-growing economies, functioning states and a 20-year record on reducing poverty. Fears that the neocon hawk might try to reorientate the bank towards promoting democracy in the Middle East, and away from fighting poverty in Africa, are far-fetched.
Wolfowitz would like his legacy at the bank to be the moment when Africa shifted on to a sustainable development path, which is no small ambition. “I am not naive. It’s a huge challenge and the bank is only a small part of the answer, but if the world and the sub-continent can rise to that challenge, it would be wonderful to feel that we made a difference,” he says.
Wolfowitz sees an important role for aid, but is very sceptical of the idea that the only path to successful development is for rich countries to give poor ones enough money. Pointing to south-east Asia and China, which did not rely on financial aid, he says it is a “fallacy” to think spending money is all that is needed to reach targets such as the eight “Millennium Development Goals” that commit the international community to address a range of development challenges by 2015, from extreme poverty to access to education. Money, he says, “is a necessary but far from sufficient condition”.
As for what he calls “the development process”, he says “my feeling is that we understand about half of it, and about half of it is a mystery, almost”. He thinks it is affected by much more than strictly economic factors. “Leadership is a huge factor, both good and bad leadership, and one of the things that seems to be changing in Africa is that the ratio of good leaders to bad leaders seems to be going up significantly.”
One area in which Wolfowitz may differ from his predecessor is the central importance of economic growth in reducing poverty. James Wolfensohn was sometimes criticised for being too willing to please non-government organisations – and some within the bank – who opposed making growth the top priority. Wolfowitz has been clear from the start: “It’s just an inescapable fact you can’t make serious dents in poverty without sustained growth over a considerable period of time.”
The bank’s new action plan for Africa is laden with references to private sector-led growth in areas such as agriculture and regional trade. A recent report by the bank’s Operations Evaluation Department, an independent unit that analyses its loans and grants, said the organisation needed to refocus on promoting growth and investing in infrastructure. Spending more on health and education projects alone, for example, would not by itself reduce poverty. Wolfowitz appears to agree with the broad thrust of that report. During most of Wolfensohn’s time at the bank, there was a shift away from large-scale infrastructure projects, though at the demand of borrowing countries there had been a greater focus in the last couple of years. Wolfowitz aims to take this much further. He is committed to increasing the bank’s investment in hydropower, roads, water and telecommunications and while he says the bank must learn from mistakes of the past, he adds that it won’t cave in to protests from environmental and social activists.
Wolfowitz also wants to do more to measure the results of the bank’s loans and spending, so donor countries can see that the money it hands out is well-used. This goes hand-in-hand with his aim of building on James Wolfensohn’s efforts to decentralise bank decision-making. Sitting on a 10-seater private jet last month, as we set off from Islamabad to Lahore, Wolfowitz told me about a conversation he had with Pakistan’s prime minister Aziz, who used to be the head of Citibank for south-east Asia: “The point was he had virtually complete autonomy in deciding what loans to approve to his region. He did not take individual loans to his board or I think even to senior management. They reviewed his overall portfolio, his overall results. A corporation like that pays a lot of attention to how its managers are doing, but his point was they don’t get into individual details.”
The World Bank, he says, is a very different institution to a commercial bank, but he wants to explore ways to decentralise so that governments could get approval for loans and grants with its staff in their country, rather than having to deal with multiple layers of bureaucracy in Washington.
Wolfowitz is most passionate, and his views most distinctive, when talking about the politics of development. Speaking on the telephone earlier this month about how his thinking has developed since he started the job, he said: “I think I feel even more strongly than before that you can’t talk intelligently about development if you exclude anything that sounds political.”
One very political aspect of the job that Wolfowitz has thought about a lot is the importance of addressing corruption. He frequently talks of the good job Wolfensohn did in putting the issue on the bank’s agenda. Wolfowitz is very frank about corruption in his meetings with government leaders, and people present say that some African leaders he met during his trip were offended by this directness.
How will words be turned into actions? For a start, the bank under Wolfowitz will have zero tolerance for local officials skimming money off bank projects. His ambitions appear to go much further, however. While he has yet to reach firm conclusions, in countries where corruption and governance problems are judged to be big obstacles to development, he may insist that these issues are the centre of the bank’s country strategy.
But what would he do if the bank had a good project in a country with a lot of corruption at the local or central government level? In the past, the view has been that the bank should proceed with the project and try as far as possible to insulate it against corruption. More controversially, the bank could bypass government altogether and work through non-governmental organisations or private companies.
Wolfowitz said at a dinner with NGO leaders and academics in Pakistan that the bank’s mandate made it difficult to work this way, but he was looking for ways of doing it more often. “To try to change some fairly fundamental misbehaviour patterns, you’ve got to try to get people to understand that this is serious business and that it really is going to make a difference.”
Wolfowitz thinks the bank has shied away from confronting politically difficult challenges too much in the past. Driving through Delhi, I asked him how training as a political scientist affected his outlook at the bank and he said, after a long pause, “I think it’s in a general way an appreciation that economic policies take place in a political environment and against a political background, and that there is a difference between saying that the bank does not get involved in politics and saying the bank can afford to ignore politics.
”I sort of feel that at times – I think much less so now than in the past. There has been a feeling that staying out of politics means being politically tone-deaf, and that’s actually a way to get sucked into politics without knowing what is happening to you.”
Wolfowitz says that the World Bank “should not be in the business of withholding development assistance because of a political disagreement with a country”, but that it should address political matters when there are barriers to sustainable development. “Corruption, the role of women, governance and accountability, those are the things that are crucial to making sure that development dollars are well spent, that the development process is sustainable.
”It’s a fine line to walk. But I think if you set in front of yourself the question, what are the requirements of sustainable development? – as opposed to what are the things you may have some other issues about on political grounds? – and draw the line there, I think it can be found in practice.”
Wolfowitz openly makes a link between the need to fight corruption and his longstanding advocacy of democracy in those countries where it is lacking, arguing that corruption is a barrier to building democratic institutions. He often talks about the need for more representative government and a free press to help create the conditions for sustainable development, even though pressing such issues will not be popular with all the bank’s members.
”Listen to me, I am aware that I am no longer a US official but at the World Bank, a multinational institution,” he says. “But that does not mean we have to go to the lowest common denominator and only do things that every member agrees with. Of course we should not get into the business of having favourites in elections. But there is no way you can do development if you say that we are eunuchs when it comes to anything to do with politics.”
Some bank staffers who support such views nonetheless worry that he will run into controversy because of his history in the Bush administration. But he is unperturbed, making no secret of his belief that democracy promotes development, and that the two go hand-in-hand.
In Pakistan, for example, he says he sees the potential, over time, for a successful, democratic, modern Muslim state. “What the Muslim world needs, I believe, are examples of successful modern Muslim countries. And I use that term ‘modern Muslim’. I first heard that from a Jordanian who said to me, ‘I, as a modern Muslim… ‘ This was many years ago. And it’s an interesting and useful adjective, I think. It says more than just ‘moderate’. ‘Moderate’ implies a certain lack of conviction. Extremism is not a good thing so moderation in that respect is a good thing.”
An important part of this agenda is a focus on what the bank can do to help empower women in developing countries. Education and healthcare will remain priorities for the bank, but Wolfowitz is likely to focus its efforts on girls and women. “The role of women is something that has hit me very hard pretty much since my time in Indonesia, where you have a reasonably liberated female population in a predominantly Muslim country. And you can see that the country as a whole is the better off for it… It seems to me that it is an almost arithmetic equation that if half of the population is held back, then your development is going to be held back.”
Bank insiders say his thinking on this issue may have been influenced by Shaha Riza, a bank employee, Middle East expert and specialist on gender issues, with whom the divorced Wolfowitz has had a relationship for the past couple of years. “I have sympathy for someone who says that the Swedish model or the American model of relatively far-advanced feminism is not necessarily something that even women of other countries want,” he says. “But there is a point at which it is more than just a cultural thing and that is a fundamental violation of human rights and a fundamental denial of equality of opportunity, and when you do deny equal opportunity you are trying to run a race with one leg tied, sort of. And often your best leg.”
In Pakistan, last month, Wolfowitz heard a better analogy: at a meeting in the Punjabi village of Dhok Tabarak, a woman told him that development is like a cart: it has two wheels, and if one of the wheels is not turning you will not get very far. Wolfowitz was so taken with the metaphor that during the rest of his visit to Pakistan he quoted the woman on 20 or more occasions. After the first few times, he added a horse to the story, to represent economic growth. “If the cart does not have something strong to pull it – the horse is growth – then it does not matter how fast the wheels can turn.”
Of the three full days Wolfowitz spent in India, one day was spent talking to assorted groups of rural women about bank-sponsored development programmes. Women were also notably present at all his meetings in Pakistan and India and when I asked him if this was a deliberate policy that he intended to continue, he said that it was. “We can empower people simply by meeting with them; I think there’s a tendency to think that if the World Bank president meets with people then they must be important.”
Wolfowitz told me one day that someone had just described him as a feminist. He laughed, and said: “It is the first time in my life I’ve been called that, I certainly don’t think of myself in that way. Look, we are not talking about a particular cultural way of male-female roles, but you can tell when women are denied equal rights or equal opportunities and that is not only unfair to them, it is unhelpful to the whole society.”
Such sentiments from the former Pentagon hawk might sound odd to some in Washington, but they went down well in Hyderabad, where Wolfowitz one day spoke to a hall packed with 300 women from self-help groups across the state of Andhra Pradesh. The groups help women lobby together for health and education, and gain access to micro credit loans. “Who wants to tell me how the self-help group has changed their life?” Wolfowitz asked. All hands in the audience went up. Twenty women started to talk at once, each struggling to speak longest.
There was a lot of laughter and not much translation, but the cheerful mood was killed when the state’s chief minister rose to give a 20-minute speech about his administration’s achievements. The women listened in silence, but perked up when Wolfowitz began to speak again, clapping every time he paused for the translator. The loudest applause came at the end as he told them: “The thing that has impressed me is not just the money you earn but the way it helps you to make your children’s lives better. When I see how well the women are doing here, I think you have to teach the men to walk faster.”
Later, the chief minister asked Praful Patel, the bank’s vice-president for south Asia, why Wolfowitz had received so much more applause than him. Patel said he thought the chief minister had talked at the women, while Wolfowitz had talked to them and asked questions, and that had made a difference.
As the trip drew to a close, I told Wolfowitz he looked as if he had been enjoying himself. “It’s fun to have the chance to be a retail politician again,” he said. We talked of all the things he has done since June, and I said that it must already seem like a long time ago that he was the Bush administration’s deputy defense secretary at the Pentagon. “We’ve been busy,” he said. “I mean, I could slip right back into it, probably. But, yes, it does seem like a long time ago.”
Andrew Balls is chief US economics correspondent.


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