Why They Fight

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Watching Paul
Wolfowitz, exposed in a sex and corruption scandal involving fellow
World Banker and private squeeze, Shaha Ali Riza, grappling for
several weeks now to save his super-cushy job at the World Bank
has brought to mind the infamous quote Ron Suskind teased from a
neocon senior aide to George W. Bush, "We’re an empire now,
and when we act, we create our own reality…and you, all of you,
will be left to just study what we do."

Regarding reality,
Wolfowitz, it seems, has had to call in re-write (and not for the
first time).

By requesting
his resignation, the Bank’s Board demonstrated to any clear-eyed
neocon that they were not studying the correct material. Wolfowitz,
instead of acting upon the Board’s decision as he previously indicated
he would, has hired lawyer-insider Robert Bennett to represent him
before that same Board.

Wolfowitz knows
the big script, history, clearly has him strategically placed at
the World Bank, in control of $25 billion in lending per annum and
holding a magic stick of "corruption charges" with which
to prod borrowers and trim staff, thereby riding out the Bush administration’s
departure, especially with a second, possibly even a third, five-year
appointment, thereby extending his own foreign policy impact well
into the future.

Going forward,
the job may prove only a fringe presence in the high-powered world
of Washington policymaking, but for Wolfowitz, losing it would be
a personal disaster. Bush’s political clout is in decline, leaving
little chance the president could deliver a comparable perch even
if persuaded to expend some of his dwindling power trying. The man
himself couldn’t survive a hearing for congressional approval which
the very best government jobs require, and he sure can’t get himself
elected. What to do? A sinecure at AEI? How very bleak.

Even were the
deluded Wolfowitz to beat the unjustly-enriching-girlfriend-with-other-peoples’-money
rap, his behavior in the breech insures he’ll never salvage his
job. (Today the ministers of the European Parliament have called
for his ouster.) If the Bank were the corpse it deserves to be,
its president’s current behavior would have it turning over in its

Clumsily, Wolfowitz
has attempted what he and his neocon pals managed to do to the Pentagon
and the CIA, but unlike those weenies, World Bank staff fought back,
proving the old saw, "The price of privilege is eternal vigilance."
In an uncharacteristically noisy string of special meetings, memos,
reports, internet message boards, chat rooms, public hissing displays
and press leaks, they refused to be intimidated while their institution
is made a shell and re-designed from within. No "Office of
Special Plans Under Construction" sign on their premises!

What Wolfowitz
wants — the re-politicization and militarization of the Bank on
behalf of a neocon-inspired global imperium centered in Washington
preferably no more than a short limo ride from his personal residence – is not what the 10,000 member World Bank staff want. Nor, it seems,
is it what the majority of the184 other member nations of the World
Bank want.

Just when the
entire global gang was coming to town for the Spring Meetings, the
damning details of Wolfowitz’s years of living large spilled out
in news reports along with his initial denials and, later, acceptance
of the reported facts after a botched cover-up. Handing out territory
and cash flows like a Mafia don, he saw to the girlfriend’s interests,
those of his favored defense department aides’, along with his own,
negotiating out-sized salaries, guarantees and privileges. In a
nice Trotskyite touch, he further made the appointment of a Republican
operative and White House pal as director of the Department of Institutional
Integrity where, staff says, said agent is to function as Wolfowitz’s
personal spy on all of them.

A funny turn
of events. Republican neocons pulled the congressional dogs off
the international institutions just when the Republican Senate’s
Cox Committee was establishing the abject failure of both the Bank
and the Fund in the Russian reform masquerade of the 1990s, which,
in turn, threatened both institutions’ future funding, possibly
even their existence. Neocons, sensing the Republican 2000 victory
for the White House, wanted both institutions along with the US
bilateral foreign aid infrastructure available for their own use
once they had control of the executive branch.

Lucky thing
that – just when Iraq started to go south, James Wolfensohn’s retirement
from the Bank offered an ideal hiding place from an increasingly
inquisitive congress and media. The candidate for the Bank’s presidency
did not require congressional approval, and traditionally the appointment
has always been the American executive’s. (How terrifying it must
be for Wolfowitz to contemplate the current humiliation of Alberto

Once installed,
Wolfowitz decided to focus on Africa, a public relations success.
Even now, it continues paying dividends as what support he has received
to stay on at the Bank has mostly come from Africa. But as the Bank’s
very first priority Wolfowitz chose to expand on his predecessor’s
anti-corruption initiative.

The centerpiece
of the policy worked out last September is a Voluntary Disclosure
Program (VDP) under which firms, NGOs or individuals who work as
contractors on Bank projects are to report their corrupt acts regarding
Bank projects for the last five years. In return, the penitents
receive confidentiality and the right to continue bidding on Bank
projects, all of which actually immunizes wrong-doers while allowing
the Bank to cover up its own negligence and/or political agenda.

Hmmm. Written
confessions on file. Another nice touch that.

speaking, the program is just dumb. Corruption is part of the organizing
structure in the developing world. If you are opening a prenatal
care center or a silver mine, doesn’t matter which, and the local
chief wants his palm greased to demonstrate to the tribe your desire
to be part of the community, you are not going to waste the daily
cost of labor, of maintaining site infrastructure, and of interest
on business loans, to march back to the capital and file a complaint.
You are going to darken that man’s palm, viewing it not as a bribe
but as a tax, and one with the advantage of being directly negotiated.
Under Wolfowitz’s plan, any rational expediency or opportunity cost
could be labeled as criminal conduct.

Wolfowitz has
cut off funds to Chad, delayed projects to Kenya, and ordered a
stoppage of funds to the Congo and Ecuador (which expelled their
in-country World Bank representative today) over various corruption
issues and charges, which have mostly served to create confusion
and resentment. Critics charge that his concerns regarding what
are inarguably high levels of corruption in World Bank projects
evaporated when considering lending for Iraq, Pakistan and Afghanistan.
Money further flowed to the countries Wolfowitz once recruited to
sign on to Washington’s counter-terrorism agenda. In the same vein,
he elevated nationals from Spain, from San Salvador, and from Jordan
— all nations that strongly backed the US invasion of Iraq — to
extremely sweet positions within the Bank hierarchy. In contrast,
when Uzbekistan denied landing rights to American military aircraft
he promptly suspended their Bank program.

By demonstrating
that good things and huge streams of cash flow to those countries
and individuals that sign on to U.S. aggressions, Wolfowitz is slowly
laying the basis for a new exploitation, i.e. the option of contributing
troops to US global adventures via an expanded Nato in return for
grants. (Grants are flexible, they can be loaded with extraneous
political conditions. Loans are precise, legal documents with troublesome
consequences if defaulted.)

It might seem
surprising but the bank has always had a problem with lending. It
was never much of a force in the reconstruction of European industry.
By the early ’50s there was little demand for its lending; it should
have been dismantled then.

Instead, to
solve its problem, the Bank cooked up a new agency funded through
the donations of wealthy nations that would subsidize credit at
zero percent interest on 50-year loans! Thus was born the International
Development Association (IDA) which is the funding that allowed
the Bank to plunge into the developing world, where it has been
disastrously wasting money and harming developing countries ever
since, not to mention taxpayers, who are compelled to bail out the
bankers cyclically.

The Bank is
completely unnecessary. In a world in which central banks are pumping
out money and global liquidity at tsunami levels, there certainly
is no need for preferential government-organized taxpayer-subsidized
loans. The poor would have been much better served over the decades
by arranging for loans on a commercial basis as the discipline required
to fulfill standard obligations would represent an economic and
political advance for a developing nation, the right of contract
being essential to prosperity.

Currently the
Bank is in an IDA donor drive, an every third year affair. Contributions
are way, way down.

The U.S.’s
16% ownership of the Bank puts it in the institution’s driver’s
seat. Wealthy countries are not eager to donate money for the as
yet unknown specifics of what is now viewed as an alarming US foreign
policy. Why should anyone sign on to possible future U.S. aggression
indirectly through World Bank lending?

agenda puts at risk a very cozy world based on the post–World
War II modus operandi in which dollar loans are extended to undeveloped
and impoverished nations in order to grab control over their resources
and governments. The main point is the loan, not the borrower’s
ability or commitment, but the lender’s claim on national collateral.
The corruption emerges from institutional action, action inherent
in and according to the World Bank’s design as a political lender
masquerading as a humanitarian enterprise, and nothing effective
can be done about it as long as the institution exists. Reform is
not an option, only elimination.

For the well-positioned
second-raters that people the Bank, there’s no advantage in trading
in a country club existence and perfumed reputation just to browbeat
and bludgeon troops out of poor nations in return for dollar grants.
It’s so much more agreeable to posture as a helping-hand, hiding
the nasty imperial bits in the loan covenants. True, the policies
the loans require often lead to public riots, and to resource, land
and territorial wars among their clients, but the mainstream media
never connects the loans to their bloody consequences. At worst,
details of the borrower’s thievery leak out.

What’s really
at stake for staff is the richest, absolute best government plantation
in the entire world. World Bankers, along with IMF, IFC and EBRD
employees, enjoy a mem-Sahib lifestyle; tax-free six-figure salaries,
foreign expeditions involving first-class travel, five-star hotels,
generous per diems, lavish banquets, and — if one is obliged to
"stay on" overseas for "mission" work — extensive
local staff and personal aides, language tutors, tuition support
for the children, numerous mandated vacations home per annum, residential
rent subsidies, full insurance packages, diplomatic mail for those
legally-dubious art acquisitions, the best address, and fancy invites.

If you are
a foreign national lucky enough to escape your native backwater
for an assignment in Washington, or London, or Paris, or Geneva
— all the best places! – there is no treachery you wouldn’t commit
to stay in place. (The very best institutional reform scheme ever
put forward was Christopher Fildes’s suggestion to move the Bank’s
headquarters to Bangladesh.)

If you are
a consultant, or an academic "adviser," you’ll keep your
honest opinions to yourself, and do the job, no matter how mad or
useless. There’s no way your university could, or your firm would,
roll out a red carpet like the World Bank does.

If you are
a Third World borrower and a government official and therefore advantageously-positioned
to skim the loans and use the principal for purposes more useful
to you and your continuing hold on power than to the nation, the
World Bank is your literal lifeline. Without scads of dollars to
hand out, an honest election or worse – open revolt – are always

If you are
a large, richly-endowed private corporation with an eye on the profit
possibilities in some foreign hellhole, you’ll play along, doing
your bit to legitimize, publicize and generally support the Bank.
After all, those giveaway loans may well be your critical leverage
indirectly. Tit for tat. Loan for license.

Clearly, there’s
a lot of mouths to be fed. Luckily for the class of useless hors
d’oeuvre eaters, there is China.

China is a
rare creature in the World Bank firmament in that it is a large
and paying customer, taking full advantage of the Bank’s subsidized
loans despite having an unprecedented $1.2 trillion in reserves.
The income China represents to the World Bank is critical; already
the Bank’s sister institution, the IMF, an agency China does not
patronize, is unable to make enough of a return on its international
loans to pay its costs and is currently floating the idea of selling
a portion of the Fund’s contributed gold horde for cash to pay for
their jobs and privileges.

The World Bank
does not wish to be similarly indisposed.

There really
wasn’t much heat in the Shaha Riza story. After all, a couple of
middle-aged parasites and public policy bores divvying up a big
bag of other peoples’ money while giving free reign to their shared
delusions of bayonet democracy and the Middle East is somehow depressingly

But in the
initial scandal data dump to the Washington Post on 12 April
("World Bank Chief’s Leadership Role Called Into Question"),
one sizzling fact leaked out apparently by mistake as it was never
mentioned again in future reports. The maverick leak was an e-mail
"noting that the bank had received a warning from China that
it might halt future borrowings if Wolfowitz refused to curb anti-corruption

is toast.

Alas, the Bank
is not. Not yet, anyway.

If we must
have a World Bank, and I am pained to write that it seems we must
apparently right up until the very instant of our coming national
insolvency, then let it be the redundant, inefficient, indulgent,
corrupt waste currently on offer.

A militant,
lean and mean neocon lending machine would be far worse.

28, 2007

Williamson [send her mail]
has been observing the international aid institutions since their
arrival in Russia after the 1991 collapse of the Soviet Union. Currently
she is expanding and revising her opus on the post-Cold War era,
Contagion: The Betrayal of Liberty; the United States and Russia
in the Post-Cold War World, to be published by Poor Richard’s
Press this coming autumn. She no longer lives in the United States.
This article was originally published by Sanders
Research Associates

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