www.wolfowitzresign.com May 21, 2007

"Mission (Actually) Accomplished!" We are retiring. Good luck with the search for a successor.

Friday, May 11, 2007

News Round Up, May 11, 2007

The New York Times, Europeans Push U.S. to Force Wolfowitz From World Bank
Time Magazine
, The World Bank's Real Problem. It's not just the Wolfowitz mess.
The Los Angeles Times, Wolfowitz seen as a world apart at bank
The Washington Post, The Real World Bank Problem, by George F. Will
See comment for full stories


wolfowitzmustresign said...

The New York Times
Europeans Push U.S. to Force Wolfowitz From World Bank

11 May 2007

WASHINGTON, May 10 -- European leaders have told the Bush administration that Paul D. Wolfowitz must resign as president of the World Bank in order to avoid a vote next week by the bank's board declaring that he no longer has its confidence to function as the bank's leader, European officials said Thursday.
The officials said the board was drafting a resolution reflecting its view that the relationship between Mr. Wolfowitz and the governing body of the bank had ''broken beyond repair.'' They noted that, if he remained in office, some European countries were planning to reduce contributions to the World Bank that would aid poor countries and instead would channel the money to European agencies and other groups for distribution.

''The administration has been told that its battle to save Wolfowitz cannot be won,'' said a European official, who like others who discussed the matter spoke on the condition of anonymity because the matter is confidential. ''His relationship with the board is not only damaged. It is broken.''

Bank officials say that the growing determination to oust Mr. Wolfowitz has led to a polling of the 24 members of the bank board and that a majority favor his ouster.

It was not clear why the board was not preparing simply to vote to oust Mr. Wolfowitz from his job. The bank's governing articles say that a president ceases to hold his job if the board so decides.

Instead, the board appeared to be searching for language to attract a majority vote and also to represent the strongest possible rebuke that would serve as the functional equivalent of an ouster by making his situation untenable and all but halting his ability to travel, meet with foreign leaders, negotiate on policy or make personnel decisions.

Disclosure of the board's plans came as Mr. Wolfowitz was preparing to make a last-ditch appeal to save his job, on the ground that the charges of misconduct and favoritism against him have been unfair and based on distortions.

Responding to the latest threat of a vote, Mr. Wolfowitz's lawyer, Robert S. Bennett, said: ''If this is true, it's disappointing and outrageous. What is the point of giving us time to make a submission if they have already made up their minds?''

Mr. Bennett said that Mr. Wolfowitz would be submitting ''a powerful presentation that shows without doubt that there is no bad faith on his part, no conflict of interest on his part'' and that a premature judgment raised doubts about the bank's credibility.

Bank officials say that Mr. Wolfowitz has already been given an opportunity to make his case in testimony before the bank's special committee investigating him and that the committee and board members have reviewed hundreds of pages of testimony and documents.

Bank officials familiar with the process of drafting the resolution to be adopted next week said the language was being revised in order to secure support that would be as broad as possible. At present, these officials said, support for the no-confidence resolution has come from Europe, most of Asia and Latin America.

Mr. Bennett has said that Mr. Wolfowitz would file a written statement by the end of this week countering the committee's conclusion that he violated conflict-of-interest rules and would appear before bank officials to defend himself next week. He has been invited to do so on Tuesday.

But with an acceleration of discussions about Mr. Wolfowitz throughout the bank and between finance and development ministries and their counterparts in Washington, it appeared that time was running out for him. The vote declaring him no longer able to function as president could come Wednesday, European and bank officials said.

There had been talk in recent weeks of an arrangement in which Mr. Wolfowitz would be offered the option of resigning in return for some kind of resolution saying he acted in good faith in the handling of a pay and promotion package for Shaha Ali Riza, his companion. But on Thursday it appeared too late for such language to be included in any resolution to be adopted next week.

European officials have encouraged the United States to go along with Mr. Wolfowitz's ouster in return for a promise that President Bush could continue the tradition of the United States picking the next president. But that possibility has not been seized by the administration in its talks with the bank.

There was no immediate response from the Bush administration on the possibility of a no-confidence vote, but officials said the dire situation for Mr. Wolfowitz had been discussed recently with Treasury Secretary Henry M. Paulson Jr. and Secretary of State Condoleezza Rice. Michele Davis, Mr. Paulson's spokeswoman, said Thursday that Mr. Paulson's talks had been confined to ensuring a fair process for Mr. Wolfowitz. Ms. Rice's spokesman said she was not involved in any talks about whether Mr. Wolfowitz should resign.

The bank board committee found last week that Mr. Wolfowitz violated bank rules and the terms of his contract barring conflicts of interest when he ordered a pay and promotion package for Ms. Riza upon becoming president in 2005.

Time Magazine
The World Bank's Real Problem.
Fox, Justin

It's not just the Wolfowitz mess. The bank also needs to figure out why it still exists.

The World Bank is undeniably in crisis. But not because its president, Paul Wolfowitz, got his girlfriend a raise.

It is the Wolfowitz saga that has been grabbing all the headlines, of course. The Iraq-war architect was plucked from the Defense Department and deposited by President George W. Bush at the World Bank in 2005 (by tradition, the U.S. President picks the bank's chief). At the time, Wolfowitz informed the bank's ethics committee that he was seeing Shaha Riza, a communications adviser at the bank, and the in-house ethicists told him she should be moved to another agency and given a raise for her troubles. But the size of the pay hike (from $133,000 to $180,000, tax free) and other details about Riza's transfer raised hackles among bank staff and sparked an investigation. The bank's board will decide any day now whether Wolfowitz stays or goes.

This dragged-out mess, though, is a distraction. The bigger issue is that the Washington-based bank and its sister organization, the International Monetary Fund (IMF), are struggling to justify their continued existence.

The situation is most pressing for the smaller IMF, which pays its bills with the profits it makes lending money to middle-income countries in financial trouble. With hardly any such countries in trouble these days, the organization is projecting a $224 million deficit for this fiscal year and asking its member nations if it can start selling off some of the gold they deposited with it after World War II (the answer so far: no).

The World Bank isn't that desperate, but it faces similar pressures. Both organizations were created in 1944 by the soon-to-be-victorious Allied powers. At the time, says Harvard professor and former IMF chief economist Kenneth Rogoff, "global financial markets barely existed, and domestic financial markets barely existed in Europe."

The World Bank's initial job was to finance reconstruction in Europe. The Marshall Plan rendered that task superfluous, so the bank--in the first of several reinventions--moved on to bankroll development in other countries. The idea was to lend to governments that were creditworthy but had no access to rich-country capital markets. "Now we live in a world where there are huge global capital markets, where, if anything, investors are too willing to invest in developing countries," says Adam Lerrick, a former investment banker who teaches economics at Carnegie Mellon University. The World Bank's net lending has plummeted over the past few years, even as it keeps shopping loans to the likes of Brazil, Turkey, Russia and China, sometimes on hugely generous terms.

This is the work of the biggest part of the World Bank, the International Bank for Reconstruction and Development. Member countries make deposits (the U.S. share is $2 billion down and $30 billion pledged); the bank sells bonds backed by those deposits and pledges, then lends the money out at a small profit. The other main arm of the World Bank, the International Development Association, gets regular infusions of cash from rich countries and lends funds on near giveaway terms to truly poor countries, mostly in Africa (the U.S. contribution is just under $1 billion a year, or 0.04% of federal spending).

Lerrick wants the World Bank to stop lending to middle-income countries and restructure its loans to the poorest nations as outright grants. Nancy Birdsall, a former World Banker who runs a Washington think tank called the Center for Global Development, argues that the bank could have more impact on poverty by making better use of its best assets: the expertise of its staff and its ability to coordinate global action. "Lending and grantmaking at the country level should not be the end-all and be-all," she says. "It should be the vehicle for advice and constant rebuilding of the bank's knowledge." Birdsall is a World Bank fan but agrees with critics like Lerrick that it must become smaller (it has a staff of 10,000) and less banklike to remain relevant.

Wolfowitz's allies say he is the victim of backlash from entrenched bank staff upset that he is turning up the heat on an anticorruption campaign begun by his predecessor, James Wolfensohn. That's probably overstating things. But the potential backlash against slashing the bank's staff and getting it out of lending would surely be epic. Which may explain why no World Bank president, Wolfowitz included, has attempted it.

The Los Angeles Times
The Nation; Wolfowitz seen as a world apart at bank
Nicole Gaouette
11 May 2007
In the tense days after World Bank President Paul D. Wolfowitz admitted his mistake in arranging a generous payment package for his girlfriend, angry employees launched an impromptu campaign. Blue ribbons started cropping up on lapels, taped to doors and as an image in e-mails -- a symbol of support for the bank's ideals of good governance and transparency.

The curls of fabric were seen by many of the more than 7,000 staffers in Washington as a silent but clear call for their leader to resign.

Then Wolfowitz himself was seen wearing one.

For employees chafing against his leadership, that blunder became a vivid example of Wolfowitz's isolation from the bank's employees -- a remoteness that has left him with few allies inside the international poverty-fighting institution as he battles to keep his job.

A political scientist and former Pentagon official known for his analytical skills and predilection for sweeping, visionary ideas, Wolfowitz also has a reputation for remaining aloof from day-to-day management decisions. At the World Bank, he brought in a tightknit cadre of aides -- all onetime GOP political operatives with no experience in development projects -- who limited the access of bank veterans to the new president.

These aides, according to more than a dozen World Bank employees who spoke on condition of anonymity because they feared for their jobs, showed little patience for bank practices, excluded veteran staff experts from negotiations over development plans for countries and went around managers to quiz staff about their work.

"When he arrived at the World Bank, he began by listening very carefully," said Sebastian Mallaby, author of a book on the World Bank. "But it emerged after six months or so that all of this would go in one ear and out the other. When it really came time to do something, he appeared to fall back on the advice of three people he had brought with him from the outside. The internal experts were feeling more and more out of the loop. That set Wolfowitz up."

Wolfowitz has apologized to his staff for the arrangements for his companion, a World Bank employee on loan to the State Department, saying: "I made a mistake for which I am sorry." And he has promised a management shake-up. One top aide has already resigned, and another was recently moved to an office farther away from Wolfowitz.

Through his lawyer, Wolfowitz declined to comment, but he has previously criticized bank staff for what he called "a conscious campaign to undermine my effectiveness as president and derail important programs."

Former Wolfowitz colleagues argue that bank staff were inclined from the start to dislike the former deputy secretary of Defense, regardless of whom he brought with him. Wolfowitz is seen as a principal architect of the war in Iraq, which much of the bank staff opposes.

"To understand his situation, one would first have to understand what he inherited -- the social dynamics," said retired Army Maj. Gen. John Batiste, referring to the staff hostility toward Wolfowitz. A former senior military assistant to Wolfowitz during his tenure at the Pentagon, Batiste said he was in constant contact with Wolfowitz for 15 months during the Iraq war.

"Paul Wolfowitz is a hardworking, brilliant man," Batiste said. "He was patient, decisive when he needed to be, thoughtful."

Fred C. Ikle, a friend and former undersecretary for Defense policy in the Reagan administration, is perplexed by the critique of Wolfowitz -- who took Ikle's job at the Pentagon. "He was very open to looking for outside advice; he reached out to different people," Ikle said.

But he acknowledged that Wolfowitz faced a much greater challenge at the World Bank, with its 185 member countries and more than $23 billion in grants and loans worldwide. "That was a different job. It requires a different style if you're the top guy," Ikle said.

At 63, Wolfowitz is familiar, comfortable even, in the role of an outsider working within the power structure.

In the early 1970s, he came to Washington after teaching at Yale University and joined a band of neoconservatives who advocated the use of unilateral, muscular U.S. power. They were a lonely crew in a city dominated by Secretary of State Henry A. Kissinger's pragmatic approach to foreign policy. Wolfowitz quickly learned to create his own networks and distrust conventional wisdom.

Under then-CIA Director George H.W. Bush, he worked on a team whose job it was to buck the status-quo thinking about military threats. In the late 1970s, as a Pentagon analyst, he went against the grain, pegging Iraq as a threat to surrounding states more than a decade before the first Persian Gulf War.

Wolfowitz's reputation as a visionary who argued that America should use its power to make the world a better place appealed to the staff at the bank. He "has compassion for poor people and thus believes in the mission of the bank," said a recently retired employee.

When he arrived almost two years ago, Wolfowitz vigorously embraced a campaign to eliminate corruption in World Bank projects, a mission started by the previous president. But some on the staff began to take issue with how Wolfowitz ran the effort. Staff and aid groups criticized Wolfowitz, saying he ignored the advice of longtime experts and pursued a political agenda -- targeting some countries for corruption, but overlooking U.S. allies in the war on terrorism.

"India was corrupt, but Pakistan could do no wrong," said the retired employee.

Bank staff interviewed for this article had little praise for Wolfowitz's management style. They described him as a remote and indecisive leader with a hard edge.

One staffer, who waited 18 months for Wolfowitz to weigh in on a high-priority matter, said employees were put off by "how opaquely Wolfowitz's office made a decision" and the lack of response to their overtures. "I must have sent papers up with options ... 10 times, but heard nothing," the staffer said.

This staffer said Wolfowitz came across as self-deprecating, but also said "there were signs that that was not the core of him." The staffer recalled an early meeting at which "he barked at someone because he didn't like the way they were rattling the coffee cups."

Bank critics also said the president seemed disinclined to delve into most policy details. One senior employee recounted a meeting about improving national diversity among the staff, a priority request from the board. The group worked for 18 months and presented Wolfowitz with two options. But at the meeting, the employee said Wolfowitz told the group he had not read their briefing book or their one-page summary, and he seemed unable to make a choice. "We saw dithering, speculating, as if he was at a graduate seminar," said the employee.

When the group prepared its final report, Wolfowitz's aides directed them to leave out the section on national diversity. "It was a phenomenally inept assessment of the board's needs -- totally tone-deaf," said the senior employee.

A three-decade bank veteran said that same quality was evident in Wolfowitz's personal interactions. At one event to celebrate employees marking long-term anniversaries at the bank, spouses were invited to meet the president. Wolfowitz gave a quick speech, then returned to his office.

"This is an opportunity to win friends; he's been there a year and a half, and this is how he runs the event," the veteran said, adding that Wolfowitz had "zero emotional intelligence."

Some employees said that Wolfowitz favored his handpicked aides so much that he would blame their mistakes on the professional staff.

One staffer recounted Wolfowitz shouting at colleagues for failing to provide information on the bank's Middle East strategy. The group had given it to his staff days earlier, but his staff had failed to pass it along.

"Rather than say, 'I'm very sorry,' he continued to berate us as if we were children, not competent adults. Every time we said, 'You're misinformed,' he would come at it from a different angle, never, ever admitting he or his staff might be at fault," the staffer said.

Some of the employees interviewed for this article said their anger was rooted in concern that Wolfowitz was damaging the bank's credibility and its mission. But some also spoke of a certain inevitability to the situation -- not based on the initial reception when Wolfowitz came to the bank, but on the way he dealt with it after that.

"You could see him as a guy who knows he's walked into a hostile organization that hasn't embraced his nomination. I can understand that in the beginning," said the recently retired employee. "But people came to him and said, 'We're international civil servants, not politicians; let's make things work.' That hand was extended, and it was not extended back."

The Washington Post
The Real World Bank Problem
George F. Will
10 May 2007

The kerfuffle over whether Paul Wolfowitz, the World Bank's president, behaved badly regarding the contract for his companion to facilitate her departure from the bank involves no large issue. The bank's existence does. The bank's rationale, never strong, has evaporated.
Born in 1944, at the apogee of confidence in governments and international governmental organizations, the bank has a mission is "to fight poverty with passion and professionalism." The great prerequisite for curing poverty is, however, economic growth, and the world has learned, during a 63-year retreat from statism, that the prerequisite for growth is free markets allocating private capital to efficient uses.

Much of what recipient countries save by receiving the bank's subsidized loans they pay in the costs of "technical assistance ," the euphemism for being required to adopt the social agendas of the rich nations' governments that fund the bank. Those agendas focus on intrusive government actions on behalf of fashionable causes -- the empowerment of women, labor, environmentalism, indigenous peoples, etc.

The bank argues, incoherently, that its clients value the "technical assistance" but that the clients would not adopt it unless bribed -- unless it were a condition of receiving subsidized loans. So the bank subsidizes projects that the client countries do not deem worth financing with money borrowed at market interest rates. As Allan Meltzer of Carnegie Mellon University says , money is fungible: Projects with the highest social or economic return are often dangled in front of the bank to get its loans -- but these projects would have been funded anyway. So, in effect, the bank's loans support marginal projects that would not have been funded without the loans.

It is difficult to demonstrate that World Bank loans have produced growth, let alone as much growth as private capital would have produced. Furthermore, when the bank provides debt relief, it creates what economists call moral hazard, an incentive for perverse behavior -- particularly, improvident borrowing. The bank's transactions with nongovernmental organizations are, strictly speaking, irresponsible: To what, or whom, are NGOs, or for that matter the bank, truly accountable?

In the past five years, according to Adam Lerrick of the American Enterprise Institute, 90 percent of the bank's loans went to 27 middle-income countries, which Lerrick says "closely parallels" private-sector lending decisions. The bank's loans represented less than 1 percent of the money provided by private capital markets to those 27. Ten of the 27 accounted for 75 percent of the bank's loans. Wolfowitz has said :

"We are facing . . . competition [from the capital markets]. I think it's important that we effectively compete. Increasingly . . . if the fight against poverty is successful, more and more countries will be in this middle-income category, and if this institution is going to remain relevant to the world, it obviously needs to be relevant to the middle-income countries."

Wolfowitz's words are those of a man who has been in government much too long. He says private capital markets have become competitive with the bank's functions. But when those markets are not "competitive," that means only that they question the value added by loans the World Bank has wanted to make. That is the meaning of the capital markets' supposed bias against developing countries. If those markets are now eager to compete with the World Bank for clients, it is time for the bank to get out of the way.

The World Bank's problem, as Wolfowitz seems to see it, is humanity's blessing: Middle-income countries are proliferating. This means that the bank is losing its battle to retain whatever relevance it once had. The bank's real mission statement is the non sequitur that makes government undertakings immortal: We were created for a reason, therefore there must forever be a reason for us to exist.

When the bank was born, a war-shattered world was haunted by memories of the collapse of global trade in the 1930s. Capital markets in the late 1940s were small and risk-averse. Today, the problems the bank was created to address are long gone. The world is awash in capital available at low rates. For example, China's central bank has $1.2 trillion in foreign reserves and more than $60 billion arrives annually in direct investment by investment bankers flush with cash.

It is said that the Wolfowitz matter might damage the bank's reputation. But its reputation that matters concerns the waste and corruption that inevitably attend the political yet unaccountable distribution of many billions of dollars.

It is said that unless Wolfowitz goes, some donor governments might withhold funds . For the bank, the right thing, even done for a silly reason, would be an improvement.

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