Should the World Bank wither away?

By Jane Beresford
Radio 4's World Bank - A Crisis Too Far

It began as a bit of a joke. The word "girlfriend" and "Paul Wolfowitz" did not seem to go naturally together.

Paul Wolfowitz was unable to stave off the calls for him to quit

But when Mr Wolfowitz - a former deputy defence secretary and one of the masterminds behind the invasion of Iraq - became president of the World Bank, his girlfriend, a Bank employee called Shaha Riza, was given a better-paid and more senior job seconded to the US government.

Mr Wolfowitz was accused of favouring her.

Although he argued, with some justification, that the Bank itself had gone along with the arrangements, he was forced to resign.

But that is not the end of the turmoil at the World Bank. Mr Wolfowitz might be the proximate cause of its troubles, but the real problems at the Bank are much deeper - and in a sense, much more interesting.

Personally, I would privatise the World Bank John Bolton, former US ambassador to the UN

They are rooted in its past. The World Bank began life in order to reconstruct a devastated post-war Europe.

"The idea was that you could create a bank that would be self-financing," says Ngaire Woods of Oxford University, "it would raise money in capital markets by selling bonds and it would lend that money to poor countries."

An American was placed at the helm to reassure Wall Street, then the only capital market in the world.

To this day, the US government, the largest "stakeholder" in the Bank, guards its right to appoint the leader.

Controversial

There are now dynamic capital markets all around the world. Many say the time has come to cast the net wider, to have a non-American president - perhaps one from a developing country that has been a recipient of the Bank's money.

John Bolton, former US ambassador to the United Nations, is spoiling for that fight.

"Great," he says, "that would be fine with me - and you can find a substitute for our contributions as well. Personally, I would privatise the World Bank.

Poor countries want a bigger role in the Bank

"I don't think that when you have countries like India and China, that have ready access to international financial markets on commercial terms, that there's any need to have a World Bank anymore."

But countries come to the World Bank, not only for the money it lends, but also for the wealth of experience it brings.

Even so, some World Bank strategies - for instance, social restructuring and privatisation - have been highly controversial.

Critics point to centralisation of the World Bank's staff as one problem.

Although there have been some attempts to place more staff in recipient countries, some two-thirds of the Bank's permanent employees are still based at its vast Washington HQ, another hangover from the past.

And World Bank staff were key to the campaign to oust Mr Wolfowitz. When he became president, he made anti-corruption a key objective.

Alison Cave, outgoing head of the World Bank Staff Association, said that his personal behaviour became "unhelpful" to the work they were trying to undertake on the ground.

"Governments rightly came back and said, 'Well, who are you to say anything to us?'" she says.

'Vital role'

Critics say that it is to the governments of the world, not to the Staff Association, that the president should be answerable.

They point to this as a further example of the crisis of governance within the organisation, that the Bank has simply outlived its usefulness, that it is time to let it wither away.

Robert Zoellick says the World Bank is still important

The Bank's new President, Robert Zoellick, agrees that issues facing the World Bank are profound: "There are challenges here to transform the Bank's role and purpose in a fast-changing, globalised environment."

But Mr Zoellick, a former US trade representative who has dealt with Darfur and China, robustly defends the Bank against privatisation.

"Given my background in both the public and private sector," he says, "I'm very sympathetic to trying to draw private players into the system."

But he points out that as long as there are countries, such as many in Africa, that simply have no access to private Western capital, the World Bank continues to have a vital role in the 21st Century.

You can hear World Bank - A Crisis Too Far on BBC Radio 4 on 19 July at 2000 BST, or online for seven days at Radio 4's Listen again page.