As of this writing, President Bush has announced his plans to submit a single name to the Board of the World Bank and seek its approval to have Robert Zoellick, U.S. diplomat and trade negotiator, replace Paul Wolfowitz as President of the Bank at the end of this month.  The announcement seeks to perpetuate the 60 year old cozy handshake deal – not required under any law, national or international -- under which the United States selects the President of the Bank while Europe selects the head of the IMF.  If past is prologue, the Board will accept Bush’s choice, despite recent suggestions that, at the very least, the White House should have submitted a list of names to afford the Board some discretion.  If Zoellick is approved, the Bank will get a new President without even confirmation by the U.S. Senate and only after cursory (if any) prior consultations with many other shareholders of the Bank.  While some Europeans and finance ministers might have been consulted prior to the White House announcement of its hand-picked successor, according to press reports the Zoellick announcement came as something of a surprise to most Bank Board members.  It came only days after finance ministers in Australia, Brazil and South Africa jointly declared that the next Bank president “should be appointed using an open, transparent selection process with candidates not restricted by nationality.” (See http://www.washingtonpost.com/wp-dyn/content/article/2007/05/29/AR2007052900760.html?hpid=topnews ).

The Zoellick announcement, and predicted approval by an institution dominated by the West, resembles the noblesse oblige one royal house accords another.  Absent an unlikely World Bank Board revolt, most of the governments that are actually subject to the World Bank’s (or the IMF’s) policies as borrowers will, yet again, play no role in selecting who directs either of these institutions.  This troublesome fact, symptomatic of ever more evident “democratic deficit” concerns surrounding the UN and Bretton Woods institutions, has tended to be overlooked in the media glare of Wolfowitz’s messy resignation-cum-firing.

ASIL members have not been shy about weighing in on all sides of the Wolfowitz scandal.  For Peggy McGuinness and Makau Mutua, for example, the evidence suggests that Wolfowitz violated the Bank’s internal conflict of interest rules when he arranged for the transfer, promotion, and pay hike for Ms. Riza Ali Shaha, his girlfriend (for McGuinness, see http://opiniojuris.org/posts/1179499674.shtml, for Mutua see http://allafrica.com/stories/200705210652.html).  For Ruth Wedgwood, on the other hand, Wolfowitz was the victim of a “manufactured scandal” by an institution that “had no protocol for figuring out how to accommodate the career of a professional woman when her spouse or partner came to work in the same chain of command.” (See http://www.latimes.com/news/opinion/la-oe-wedgwood17apr17,0,7950703.story?coll=la-opinion-center ).  Wedgwood and other ASIL members, such as Julian Ku, point to a paper trail suggesting that the Bank’s own ethics committee had previously approved of the arrangements under which Riza was entitled to compensation and a promotion for being forced out of the Bank upon Wolfowitz’s appointment as the Bank’s President in 2005. (See http://opiniojuris.org/posts/1176731064.shtml ).  Wolfowitz’s defenders and critics also differ in terms of whether Wolfowitz’s forced departure will help or hurt the Bank’s prominent anti-corruption efforts in borrowing states, particularly in Africa.  Defenders contend that his resignation will be a victory for opponents of Wolfowitz’s strenuous efforts to withhold funds from corrupt projects or governments[2] while opponents like Mutua contend that Wolfowitz’s own blindness to nepotism exposed him as a “pathetic hypocrite devoid of any morality to lead the Bank” – much less his much touted anti-corruption campaign.  African governments, as well as African observers, who are most likely to be affected, appear divided. (See http://www.reuters.com/article/topNews/idUSL1829611320070518 ).

As is suggested by the commentary by ASIL members, the Wolfowitz matter raises, with renewed force, serious questions about the accountability, transparency and governance structures of our institutions for global governance.  For Mutua, Wolfowitz’s fall “signifies the obsolescence of the global institutions established under Pax Americana in the aftermath of World War II” and the need to end the “obsolete hegemony of the West of all Bretton Woods institutions.”    For Wolfowitz defenders, the fault lies with the Bank’s own inconsistent or non-existent internal procedures.  Wedgwood also acknowledges that “[t]he public may rightly be dismayed to learn that Riza and other World Bank “lead” professionals can earn from $132,000 to $232,000,” amounts that, given their tax-free status, are substantial indeed and more than that earned by U.S. Cabinet secretaries.

At the heart of these complaints is the reality that the World Bank is more than just a bank for the world.   It is now at least as much a player in making international law as are the more powerful governments of the world.

There should be no question that the world continues to need the Bank and that it needs to operate primarily as a bank.  Poor countries continue to have needs that will not be met by private capital markets and all of us continue to need a global financier that pays attention to the supply of global public goods.  Someone needs to finance public infrastructure projects that, for example, respond responsibly to the threat of global climate change.  And it makes economic sense to run the world’s Bank in a way that avoids moral hazard with respect to the use of financial resources.  The weighted voting that accords greater power to those wealthier governments that provide the Bank’s funds is probably a necessary structural feature to this end.  It is not likely that the capitalist West, which supplies most of the Bank’s funds and does not do so on the premise that the enterprise is principally a philanthropic one, will willingly surrender its hold on the Bank’s purse-strings.  At the same time, running the Bank efficiently and in a commercially responsible manner does not require that the United States – which owns 16% of the Bank’s shares – should be able to choose, year after year, the Bank’s most powerful official – at least not without the considerable international vetting seen in most other global post-WWII institutions.  The tradition that gives the United States sole discretion to pick the Bank’s President belongs to some age, but it is not the age of enlightenment.

Moreover, the World Bank is not only a bank.  It is, like the IMF, a supplier of laws along with funds.  Like the IMF, the Bank has an extensive and profound legal impact on borrowing countries through the conditions it imposes on those who seek its funds.  As is well known, both institutions adhere to policy-based lending that accords them wide discretion in imposing legal changes on borrowing states as a pre-condition to approvals for projects or in connection with releasing tranches of funds. Although the Bank is politically circumspect both in terms of how it forces borrowing states to change their domestic laws or institutions in accordance with its mandates[3] as well as how it “enforces” conditionality, [4] its caution about how it engages in law-making suggests just how deeply intrusive its legal impact is.  While the Bank, like the IMF, is enjoined under its charter from “interfering” in the political affairs of any state, its license to consider only “economic considerations” is broadly interpreted – as is suggested by the Bank’s extensive engagement on matters relating to “governance and corruption.”

As the Bank proudly proclaims on its website, many of its projects seek to reform state institutions, including the regulation of the borrowing state’s civil service, and increase the participation and oversight by civil society and the media of a government’s performance -- on the premise that the legitimacy and efficacy of such institutions directly affect economic growth since a corrupt civil service or one subject to patronage and nepotism, including theft of state assets, strangle the private sector and increase inequality.[5]  Since the time of Wolfowitz’s predecessor, the Bank has committed itself to ensuring that its own projects adhere to the highest standards since its own credibility in advising and supporting countries’ governance and corruption efforts obviously depend on the Bank itself serving as exemplar.

According to the Bank, an increasing portion of its activity is devoted to promoting public sector governance in borrowing states.[6]  Its efforts to instill good governance and solid counter-corruption principles in others have included such legalistic endeavors as assisting the IMF in promoting international “codes of conduct” with respect to fiscal transparency, data dissemination, and monetary and financial policies, along with myriad projects much farther afield – such as collaborations with the IMF and others on standards for corporate governance and combatting money laundering or the financing of terrorism.[7]  The Bank also assists in the monitoring and enforcement of the OECD Anti-Bribery Convention as well as the United Nations Convention against Corruption.[8]  (Indeed, the Bank helped to draft the latter treaty and is now engaged in drafting a technical guide to its implementation.)  Ironically (at least for those who see the Wolfowitz debacle as a case study in nepotism), that treaty requires parties to, among other things, establish merit systems for their civil servants.

The Bank’s law-making efforts embrace many other topics and its legal impact results not only from the conditions that it attaches to its loans.  As Benedict Kingsbury and others have suggested, the Bank’s Guidelines, although intended primarily for the use of Bank officials in the course of their work, constitute “internal” administrative law that casts external normative ripples on numerous topics within international law, including environmental law and the rights of indigenous peoples.[9]  When the Bank, in accordance with its Guidelines, refuses to finance a project involving shipments in violation of the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, for example, it has an impact on the status of that treaty and its interpretation that probably exceeds that of any single state.

In light of the Bank’s impact as both banker for the world and law-maker, concerns over who runs it are understandable.  They should not be regarded as another form of anti-Americanism stemming from hostility to our post 9/11 policies, including the invasion of Iraq.  Those of us who live in the United States or Europe should understand why the Wolfowitz scandal resonated across the world and why the rest of the world – much more subject to the Bank’s legal mandates than any of us – is keenly interested in who succeeds him.  Surely children of the French and American revolutions do not need reminding that in the modern age law-makers are increasingly expected to be accountable to those whom they purport to affect.  Indeed, this principle lies at the heart of the Bank’s own governance and anti-corruption efforts.  As Mark Malloch Brown, former UN Deputy Secretary-General, has opined, an institution that itself seeks to modernize states’ civil service systems should not itself follow “old-style patronage appointments made behind closed doors;” a Bank that tries to enhance states’ competitiveness by instilling merit-based civil service principles itself needs to be run by a President chosen on the basis of competitive selection and not by backroom politics. (See http://www.latimes.com/news/opinion/la-oe-brown18may18,0,73622.story?coll=la-opinion-rightrail ).

Changing the way the Bank chooses its President and making sure that that President is above reproach are good ideas as matters of principle.  They also make sense practically – if the Bank is to overcome the perception in borrowing countries that the Bank’s rule-of-law projects are the least effective of its efforts.[10] 

Whether or not one agrees with Mutua when he suggests that the present Bank’s governance reflects an “imperial” project, it is hard to disagree with him that having President Bush determine who runs the world’s Bank is a relic of a bygone, and decidedly undemocratic, age.

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