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Last Updated: Friday, 18 March 2005, 08:25 GMT
World Bank: Wolf at the door?
By Mary Hennock
BBC News business reporter

Paul Wolfowitz
Paul Wolfowitz has served as US ambassador to Indonesia
The US president's choice of his hawkish Deputy Defence Secretary Paul Wolfowitz to head the World Bank has sparked outrage from aid agencies.

Oxfam wants a "open and transparent" selection process, while Greenpeace is "very disturbed" by the nomination.

And the frostiness of some European governments speaks volumes in the polite, hushed world of diplomacy.

"The enthusiasm in old Europe is not exactly overwhelming," was how Germany's development minister put it.

Mr Wolfowitz has tried to calm things down. "I believe deeply in the mission of development," he told the Financial Times newspaper. "Before I have my own vision, I need to do a lot of listening."

Very true, say his critics, pointing to his lack of any obvious qualifications for the job of directing the world's biggest development agency.

Defenders of Mr Wolfowitz say he has strong management skills and a passionate interest in battling corruption in poor countries, and promoting democracy.

Africa in focus

But what are the challenges facing the World Bank? What debates surround its future direction, and where might Mr Wolfowitz steer it?

The Bank works in more than 100 countries and spends about $20bn a year.

The Bush Administration comes...with a particular focus on governance, and even more narrowly on democracy, that is going to stir things up
Stephen Sestanovich, Council on Foreign Relations in the New York Times

Whoever becomes its president - and Mr Wolfowitz has yet to clinch the job - will be arriving at a busy and ambitious time when the broader development agenda is focused firmly on Africa.

The Bank is pledged to Millenium Development Goals to reduce key indicators of poverty by 2015.

These global targets were drawn up in 2002-03 with United Nations backing, alongside talks on a new Marshall Plan for Africa, a name picked to suggest something on the same scale as the rebuilding of Europe after 1945.

Last week came the Commission on Africa, led by UK Prime Minister Tony Blair. It called on wealthy nations to double aid over 10 years in return for less corruption and more democracy.

Sidelined or centre-stage?

Liberal critics of Mr Wolfowitz's nomination for the top job have two fears.

Some worry that the World Bank will be sidelined, whilst others dread it being driven by a new, muscular agenda scripted in the White House and favouring tough, political conditions on aid.

Bono: "There are 10 or 12 Afghanistans out there"

They spot an aggressive US move to put hardliners into the world's more dovish, mediating bodies.

They think Mr Wolfowitz will huff and puff neo-conservative rhetoric and blow the house down.

Sir Richard Jolly, ex-deputy executive director of UN childrens' agency Unicef, says: "I would be fearful lest they think a go-it-alone American superpower did not need strong international institutions."

Some European officials at the United Nations are already muttering that it might become necessary to sidestep the Bank and expand the role of the European Commission, according to another development economist who asked not to be named.

Bombs and ballot boxes

So is there a Wolfowitz agenda?

Stephen Stestanovic is a senior fellow at the Council for Foreign Relations, and a former aide to Mr Wolfowitz. He dished out some hints in an interview with the New York Times.

"What has bothered people about the Bank," he said, "is the concern that it has just fed the preoccupations, and prejudices, and bank accounts of corrupt elites in backward countries".

The Bush Administration is going to "stir things up" with a "particular focus on governance, and even more narrowly on democracy", he explained.

Many third world activists and development specialists favour more transparency, while the Bank itself claims to be a leading promoter of anti-corruption programmes.

It is Mr Wolfowitz's muscular advocacy of the Iraq war as a route to unleash democracy and elimate corruption in the Middle East that makes them nervous. What would such views mean for the Bank? Could it become a pawn in any future White House thinking on bombing other nations to the ballot box?

In many ways, there has been a convergence between liberals and conservatives on the importance of anti-poverty work in the war on terror.

2.7 billion people on less than $2 a day
24% of people malnourished in poor nations
1 billion people lack safe water
10 million child deaths a year in developing nations
1 in 16 women in Sub-Saharan Africa die of pregnancy and childbirth
Source: World Bank Development Indicators

Pop singer Bono is hardly a neo-conservative hawk, yet he recently urged the World Economic Forum to help Africa because, if it is neglected, "there are 10 or 12 Afghanistans out there".

The UN secretary general's 2004 panel report on "Threats, Challenges and Change" made similar points.

There is also convergence on the need for greater transparency and accountability to stop development loans being siphoned off by corrupt regimes and wasted.

Open ear

But aid agencies want the Bank to be a listening bank. They doubt whether an ideologue like Mr Wolfowitz likes to listen as much as he is now saying, and fear the bank could become a rigid policy instrument.

Putting too many political conditions on loans lowers lending and limits development, says Professor Stephany Griffith-Jones of the Institute of Development Studies at Sussex University.

There is a left-right divide in the development world over how useful loans are for tackling inequality. The row is about whether they plug vital economic gaps and give a leg-up to the poorest, or simply encourage corruption and unwieldy projects which cannot survive competitive pressures.

Few would go as far as Marian Tupy of the free-market Cato Institute, who says the World Bank "should close shop" as "loans have a history of supressing development".

"We may see more lending to African countries precisely because he wants to use the Bank for foreign policy goals", he says.

Liberals fear the White House wants the Bank scaled down as suggested by the Meltzer report published in 2000, which proposed it withdraw from all but the poorest countries, leaving much of Asia and Latin America alone.

It is perfectly possible that Mr Wolfowitz just wants to end third world poverty. But he will have his work cut out to persuade his critics that he is really looking for a new job, rather than a new desk from which to do the old one.

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