A. W. (Tom) Clausen decided he had had enough, and was tired of "swinging in the wind." As the World Bank boss who had been selected by former president Carter -- albeit with the acquiesence of then-candidate Ronald Reagan -- Clausen had never enjoyed the full confidence of the Reagan administration.
For nearly a year now, the gossip in Washington -- well supported by the facts -- was that the White House wanted to get rid of him in favor of a more dynamic leader when his term was up in mid-1986.
As Clausen set up shop here for the annual IMF/World Bank meeting, there was still no word from the White House. The signal Clausen was waiting for -- one way or the other -- never came.
On Monday, he made up his mind: Scheduled to make his annual address the next day, he called Treasury Secretary James A. Baker III, and told him that at the conclusion of his speech, he would announce he would not seek a second term.
It was Baker's turn to be surprised. As one observer said: "They wanted to get rid of Clausen, but they didn't expect him to do what he did -- when he did it. Now, the ball is in their court: the administration is talking about a stronger World Bank, which all of a sudden has a lame-duck president. That's not the way they had planned it.
Clausen somewhat bitterly told a banker friend here that for four years, the Reagan administration had held back the kind of expansion of bank activities that he had favored, and now that the White House has done an about-face under Baker, he won't be around to benefit from it.
And so, an unhappy Clausen stewardship of the World Bank is coming to an end. It is a strange saga, in that Clausen, a California Republican who spent more than 30 years close to the dominant business establishment there, never was able to build political bridges to the Reagan administration once he got to Washington. He also had the misfortune to succeed Robert S. McNamara, who was controversial but a dynamic leader, and he took over at a time when a world-wide recession had hit, complicating the bank's mission. Clausen came in touted as an efficient manager. But he lacked inspirational charisma and political know-how. He never was able to sell himself and his bank to Congress. Like a colossus with its 6,000 employes, the bank under Clausen seemed immobilized by the enormity of its task. Clausen could be articulate, even brilliant, in analyzing the problems of debt and development, but the follow-through action wasn't there.
In an interview with this reporter on March 27, 1985, Clausen said: "There's a need for enlarged flows of aid to the Third World , particularly in light of stagnation. Official development assistance is needed , in the light of the reluctance of the international marketplace private banks to come forward. Therefore, the role of the bank ought to be enhanced, strengthened and encouraged."
That is precisely what Baker, with much fanfare, suggested here this week. It is more or less what a special congressional committee headed by Rep. Stan Lundine (D-N.Y.) has recommended.
But Clausen wasn't able to translate his words into action. In fact, the bank's lending for the first time in history actually slipped below the total of the prior year, an embarrassing $2 billion below target.
If the first early strike against Clausen was the fact that he wasn't a tried and true Reaganaut (as proved by the Carter designation) and the second strike was the unflattering comparison with McNamara, the third strike was his over-cautious response to the Third World debt crisis in 1982, when Mexico's problems surfaced in full crescendo at the IMF/Bank annual meeting in Toronto.
The IMF's Jacques de Larosiere emerged as the leader at that time -- which was quite natural. In effect, there was a fire to be put out, and the IMF had the tools, through short-term emergency balance-of-payments loans, to douse the blaze.
But Clausen (and the United States government) was slow to see that the problems faced by Mexico and the other debtors needed longer-term assistance as well.
"Clausen held back," says a bank insider. "He's the kind of man who wants to make sure that he's taking the right action -- and he never wants to have it said that he made the wrong decision."
There was another problem for Clausen: the Donald T. Regan Treasury with Beryl Sprinkel as undersecretary for monetary affairs in the first Reagan term. Sprinkel feared that the bank, dealing on a government-to-government basis, was crowding out the private sector. He worried, also, that the bank paid too little attention to American geo-political interests.
(Much of this highly-critical evaluation of the bank has disappeared with the advent of the Baker administration at Treasury -- but not all. In an interview here after Clausen made his decision, Assistant Secretary David Mulford said that one of the main complaints against the Clausen bank is that it has failed "to use its resources effectively."
(One of the "most outrageous" things the bank has done, Mulford said, was to invest $300 million in an Occidental Petroleum company project in Colombia. That project, Mulford said, could have been financed privately.)
But there was even more devastating back-biting that soured the Clausen-U.S. relationship. Although the former BankAmerica chairman had never been to Africa before, his first trips to that continent as bank president left him appalled at the depth of the poverty. He became passionately converted to the need for the most generous help to these and the other "poorest of the poor" countries through the International Development Association, the bank's concessional-aid affiliate.
Thus began a battle with the Treasury, opening wounds that still haven't closed. The bank lobbied hard for a minimum of $12 billion for a three-year IDA program that began last year, of which the U.S. contribution would be $3 billion -- already a slight reduction from the prior Carter years.
But Don Regan insisted that $9 billion was big enough for IDA, which would cut the American contribution to $750 million a year. Clausen was incensed and arranged through Vice President Moeen Qureshi to have British Prime Minister Margaret Thatcher and other European heads of State write directly to President Reagan urging a restoration of funds.
It didn't work, but Don Regan was offended. Regan, said an insider, "didn't like being seen as Scrooge." He never forgave Clausen for that. And when Qureshi was proposed to be the new executive head of the International Finance Corp., Regan vetoed Clausen's nomination, and proposed instead that the job go to a Latino. Now miffed himself, Clausen rejected Regan's plan, and settled on Sir William Ryrie, a British Treasury official.
With the advent of the Baker crowd, some of the chill disappeared, but the new team, including Undersecretary Richard Darman, soon concluded that many congressional and academic critics of the bank had correctly diagnosed the bank's ills under Clausen -- it was not moving swiftly enough to support the IMF in unravelling the debt crisis, especially by boosting the quick-disbursing "structural adjustment" loans.
Putting aside some of the more petty bickering of the prior Treasury administration, the new Treasury team concluded some months ago that Clausen was not an effective manager of the bank; that it had become an unwieldy bureaucracy incapable of effective cooperation with the IMF, and that in the Treasury's new vision in which the bank would take a more active lending role, it ought to have a new president.
The Treasury took initial soundings among other principal shareholders. Those soundings confirmed that Clausen, while admired as "a straight arrow" and an exceedingly decent man, commanded no great support from either the rich industrial nations or the bulk of the poor.
Ultimately, Treasury insiders know, the bank will need a general capital increase to support greater lending activity -- just as Clausen has been saying for almost two years now. But with Clausen at the helm, the Treasury concluded that there would be little political support in Congress for an increase.
It is entirely likely that Clausen's prospective departure from the bank will galvanize both the bank and the Reagan administration into precisely the more active role for the bank that Clausen himself had wanted. With the resignation, a new era of United States-World Bank cooperation may be at hand.
But whether the new president of the bank -- whoever he or she turns out to be -- can manage the bloated bank bureaucracy any more efficiently is another story, and the answers there remain to be seen.