THE WORLD'S BANKER
A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations
By Sebastian Mallaby. Penguin Press. 462 pp. $29.95
We often refer to Robert Louis Stevenson's Dr. Jekyll and Mr. Hyde when we want to suggest that someone has a dual personality, part of it charming, part of it monstrous. But we tend not to distinguish very clearly between people who cannot help swinging back and forth between the two and those who can alternate at will, and often do so in a quite calculated way.
I wonder if Sebastian Mallaby had Stevenson in the back of his mind when he was writing this book, for the World Bank President James Wolfensohn he portrays here appears to be almost exactly 50 percent Jekyll and 50 percent Hyde. Wolfensohn/Jekyll is the irresistible charmer seen at his vacation home in Jackson Hole, Wyo., who can turn bitter foes into best friends (or at least "frenemies") with a single shot of his charisma. Wolfensohn/Hyde is the intolerable monster seen on Wall Street and in Washington, whose egocentric tantrums have just the opposite effect. The moral of Mallaby's story is that Wolfensohn's presidency of the World Bank would have been more successful had Dr. Jekyll been in sole charge. But that may underestimate the usefulness of Mr. Hyde.
Wolfensohn's career is an astonishing story in its own right, and Mallaby, an accomplished British journalist who is now a Washington Post editorial writer, tells it well. Born and raised in Sydney, the son of an unsuccessful Jewish businessman who had quit England for Australia during the Great Depression, Wolfensohn was an underachiever in high school but a renaissance man in college. He learned to fly. He learned to fence, captaining the Australian Olympic team. And then, at Harvard Business School, he learned to schmooze. Throughout the 1960s and '70s, he clawed his way up the greasy pole of global finance, working in New York for both Schroders and Salomon Brothers and accumulating not only a substantial fortune but also one of the world's classiest Rolodexes. One of the wizards of the age of relationship banking, Wolfensohn brought to finance many of the skills that his friend Bill Clinton brought to politics -- in particular, an ability to make every contact in a vast network feel loved.
Yet mere wealth was never enough for him. Wolfensohn also found time to nurture and then to display his musical gifts. At age 40 he was encouraged by his ailing friend Jacqueline du Pre to take up the cello. Ten years after his first lesson, he was sufficiently accomplished to perform in concert at Carnegie Hall. It did not hurt that he was then chairman of the Carnegie Hall board.
In Wolfensohn's philanthropy, too, he hankered after public performances -- and when it comes to doing good, the stages don't come much bigger than the World Bank. Getting there took him slightly longer than getting to Carnegie Hall. Wolfensohn was first considered for the job as early as 1980, but it was another 15 years before he got it.
As he pitched it to the key players in the Clinton administration, Wolfensohn plus the World Bank would be a marriage made in heaven: His charisma and boundless energy would be wedded to its resources and global aegis. But despite being called a bank, the institution he yearned to run was in many ways much more like the financial division of the United Nations. Its cosmopolitan civil service culture was a thousand miles removed from the yelling, table-thumping style of the investment banks of New York and London. It was this cultural gap, Mallaby argues, that kept turning Jekyll into Hyde.
Outsiders only saw Jekyll. Confronted by the bank's increasingly vociferous critics among nongovernmental organizations (NGOs), Wolfensohn listened, nodded, affected contrition, pledged repentance. Confronted by the bank's senior staff, he morphed into Hyde -- bullying, swearing, slamming doors, threatening resignation.
Mallaby is full of praise for Wolfensohn in his Jekyll guise. We see Wolfensohn wooing the NGOs, recoiling from the corruption of the Ivory Coast, smelling a rat in Suharto's Indonesia, spotting a success story in Uganda and brilliantly seizing an opportunity in Bosnia, ensuring that the World Bank played a decisive role in stabilizing that shattered country after the 1995 Dayton peace accords.
Perhaps most impressive of all is Mallaby's account of how Wolfensohn outwitted his critics in the Bush administration. With some sensationally deft footwork, he managed to weave around Treasury Secretary Paul O'Neill (who allegedly wanted his scalp) and to reverse the president's stance on foreign aid (who else could have got Bush and Bono, the Irish rock star turned development activist, onto the same stage?). By 2003 he felt sufficiently secure to refuse requests for World Bank assistance with the reconstruction of U.S.-occupied Iraq.
But when he turns to the internal politics of the bank, Mallaby reveals Mr. Hyde. It is not a pretty sight. When Wolfensohn arrived at Jakarta's airport in February 1998, he greeted the bank's director for Indonesia by telling him, "You've really [expletive] this country up" -- no doubt a relatively affable salutation at Salomon Brothers in the roaring 1980s but not normal World Bank parlance. His staff came to dread such storms of profanity. To avoid them, they learned never to voice criticism when the boss unveiled one of his Big Ideas -- of the Bank as a "knowledge bank," of a new "Strategic Compact" with poor countries, of a "New Development Framework." The correct response to such grandiose visions was always: "Yes, Jim, absolutely, Jim."
As Mallaby tells it, Wolfensohn was not always wholly in control of his mood swings. I am not so sure. My guess is he was modeling his outbursts on those of the great financial maestro Siegmund Warburg, who had been Wolfensohn's mentor in the 1960s. After detonating himself in mid-meeting and storming back to his hotel, Warburg would coolly ask colleagues: "How did I do?" One can imagine Wolfensohn asking the same question after some of the suspiciously theatrical rages Mallaby describes.
Wolfensohn may have felt he needed such blasts to rouse the troubled institution he inherited. The Bank was under fire. Its "structural adjustment programs" -- which involved tightening the fiscal and monetary policies in borrower countries -- had earned it the enmity of many NGOs, which saw it and the International Monetary Fund as the two ugly sisters of globalization. There was disquiet on the other side of the political spectrum too. The Bank's role was to lend capital at affordable rates to help poor countries develop their economies, and since its foundation in 1944, it had made a great many such loans. Yet in many of the recipient countries, especially in sub-Saharan Africa, growth had been feeble or nonexistent. If critics on the left saw the Bank as too tough, critics on the right suspected it was much too soft, handing out money to corrupt Third World politicians who simply siphoned it into their Swiss bank accounts.
Assailed on all sides, the Bank's bureaucrats -- thousands of economics PhDs from all around the world -- hunkered down and got on with what they did best: generating an awesome quantity of reports and statistics. Nothing illustrates more strikingly what a rut the Bank was in than its snail-like slowness to grasp the magnitude of the HIV-AIDS epidemic. In short, the institution needed a shakeup, and Wolfensohn's job was to administer it. This was not something Dr. Jekyll could do. It called for Mr. Hyde.
One episode in particular illustrates what Wolfensohn was up against. It occurred at a 1997 meeting of the bank's board, which represents the rich countries that are its shareholders. Wolfensohn went along expecting to give an ornamental clock and utter a few valedictory banalities to Marc-Antoine Autheman, the outgoing French representative. Instead, he was the recipient of an earful of Gallic invective. Having denounced Wolfensohn's "obsessive reference to the exclusive and irrelevant model of the American private sector," Autheman proceeded to recite a bizarre allegorical poem:
Narcissus, you complain and praise your image
Which the mainstream mirrors
Only Echo Echo responds
But who . . . would follow you but Echo
If your motto remains
Follow me, Support me, and Repeat after me.
No one had any doubt who "Narcissus" was meant to be. But the image of Wolfensohn gazing fondly at his own reflection in the "pool" of the World Bank could be turned around. For if the Bank was a pool when Wolfensohn took it over, it was a distinctly stagnant one. And far from merely admiring his own reflection in it, Wolfensohn had made it his business to stir the pool up.
"I say yes, Jim," Autheman continued, "when you care for Africa; listen to the civil society; ask for a new, unprecedented debt relief. . . . But, I say no when you respond to dissent by the threats to resign [and] criticize staff to the point where they feel humiliated."
To which the only possible response must surely be: poppycock. If one of its senior directors could come out with drivel like this, the World Bank definitely needed as much Hyde as Jekyll from Jim Wolfensohn -- and maybe more. *
Niall Ferguson is a professor of history at Harvard University and a senior fellow at the Hoover Institution. His latest book is "Colossus: The Price of America's Empire."