Debate Rises On World Bank Succession
Some World Leaders Oppose Traditional Prerogative of U.S.

By Peter S. Goodman and Mary Jordan
Washington Post Staff Writers
Saturday, May 19, 2007

The departure of Paul D. Wolfowitz as World Bank president is prompting calls around the world to revoke the traditional right of the United States to select the institution's leader.

As the White House asserted its claim on picking Wolfowitz's successor, aid groups and former bank officials demanded that the next president be selected not in deference to the Bush administration, but on professional merits.

Advocacy groups and development experts took aim at an unwritten rule that has for six decades governed the financial institutions created in the aftermath of World War II: The U.S. president picks the World Bank chief, and Europe selects the head of its affiliate institution, the International Monetary Fund.

"Paul Wolfowitz's problems at the World Bank stem in part from a widespread perception that he disproportionately represents U.S. interests rather than objectives that command a global consensus," said a letter signed this week by more than 200 people, including heads of aid organizations, and sent to the executive boards of the World Bank and the IMF. The letter called for the traditional arrangement to be "abandoned and replaced with selection procedures that reflect two key principles: transparency of process, and competence of prospective leadership without regard to national origin."

Wolfowitz, forced out after weeks of ethical controversy, yesterday assured the bank's executive board he would have little to do with the institution from now to June 30, when his resignation takes effect.

In a letter, Wolfowitz said he would "leave the day-to-day work of board meetings to the bank's managing directors," while deferring to them on policy issues. Wolfowitz said he "may make a farewell trip to Africa at the request of a number of leaders," but promised to consult the board on travel plans.

Wolfowitz's letter was meant to resolve an argument surrounding the interim period. The Bush administration has opposed the appointment of an acting president, fearing such a move might weaken its prerogative to name Wolfowitz's successor. Senior bank officials who spoke on condition that they not be named, citing political sensitivities, said the letter mollified the Bush administration while giving bank officials assurances that Wolfowitz is effectively gone.

The struggle over the bank's future is taking place even as its relevance in the world is under attack.

The World Bank is not a bank in the conventional sense. It is a vast, global development program financed by wealthier countries that pumps billions of dollars into the economies of poor countries every year, either as low-interest loans or grants. Bank money finances programs ranging from schools to hospitals to mosquito nets that guard against malaria, and it has historically been a lifeline in some of the world's poorest places.

Some critics argue, however, that in a world flush with capital, the bank's lending to attack poverty is no longer as vital as it once was. Venezuela is sprinkling Latin America with aid, China is distributing loans across Africa, and private money is coursing around the globe, allowing governments to borrow liberally.

Still, the bank remains a last resort in many places, lending urgency to the leadership question, analysts said.

"Private capital does not flow to poor, hungry, disease-ridden areas with unreliable electricity," said Jeffrey D. Sachs, director of the U.N. Millennium Project, which oversees an action plan to attack extreme poverty. "One needs this official financing to address the misery of places that are ignored by the global markets."

The White House said yesterday that it would move quickly name a new World Bank president, affirming its traditional prerogative.

"Traditionally, the American nominee has become the World Bank president," White House spokesman Tony Fratto said at a news conference. "The president is going to try to select the individual he thinks is the best person for the job."

There were signs the Bush administration had absorbed lessons from seeing Wolfowitz driven out by a groundswell of international opposition. Treasury Secretary Henry M. Paulson Jr. said he would sound out counterparts before giving the White House a list of potential replacements. "I will consult my colleagues around the world," Paulson said in a statement.

When President Bush appointed Wolfowitz two years ago, he overrode the objections of many world leaders. Wolfowitz had been a primary architect of the Iraq war, and some people overseas, especially in Europe, saw him as a symbol of American arrogance.

There was evidence yesterday that world leaders would not immediately challenge U.S. claims on the bank presidency. European governments are intent on continuing the arrangement, thus safeguarding their claim on choosing the IMF leader.

"I don't think we should change this," Germany's finance minister, Peer Steinbrueck, told reporters near Potsdam, where he was chairing a meeting of counterparts from industrial nations.

Japan's finance minister, Koji Omi, added: "It's important that the U.S. maintains its leadership of the World Bank for the sake of the overall global economy."

That rationale underpins the arrangement. The United States and Europe contribute the largest amounts to both the IMF and the World Bank, which annually distributes about $22 billion in loans and grants. Having them in charge helps maintain their willingness to contribute.

While a merit-based system might sound appealing, it would be a morass, said Jeffrey C. Hooke, a former officer at the International Finance Corp., the private-sector lending arm of the World Bank Group, and author of a book about the bank, "The Dinosaur Among Us." "It would be too much of a radical shift for the United States to enter into a multi-country process," he said. "That would be total chaos."

Sentiments have been building for years that the World Bank cannot hold itself out as an international organization unless more countries have a say in how it is run. Earlier this month, Hilary Benn, international development minister in the British cabinet under outgoing Prime Minister Tony Blair, told Parliament that the American and European claims on the bank and the fund should be scrapped.

Gordon Brown, the finance minister who is set to succeed Blair as prime minister next month, is particularly interested in opening up the process to select the leaders of both institutions, according to several people familiar with his thinking on the issue.

Colin I. Bradford, former chief economist at the U.S. Agency for International Development and now a fellow at the Brookings Institution, said the arrangement would endure for now. He suggested the Wolfowitz debacle would force the Bush administration to find a more internationally palatable replacement. "They need a reconciliation candidate," he said.

Alex Singleton, president of Globalisation Institute, a London think tank, said given that the United States is the biggest investor in the bank, it is appropriate that the White House pick the president. He said, however, that much rests on who is picked to replace Wolfowitz. "If the choice is a right-wing conservative hawk, there will be a lot of trouble," he said. "This debate will go on and on."

Early speculation centers on Robert M. Kimmitt, a deputy Treasury secretary; Stanley Fischer, the Bank of Israel governor; and Paul A. Volcker, a former chairman of the Federal Reserve.

The reformers argue that the rationale for American and European control no longer holds: Many governments would be willing to raise their contributions in exchange for greater influence.

"This is about power, it isn't about money," said Kenneth Rogoff, a former IMF chief economist. "The World Bank just isn't going to continue to be effective if no one thinks its governance structure is fair."

Jordan reported from London. Special correspondents Karla Adam in London and Shannon Smiley in Berlin contributed to this report.