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 grave.

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 Gonzales!)

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.

Practically 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?

Wolfowitz’s 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 possibilities.

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 familiar.

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 investigations."

Wolfowitz 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.

April 28, 2007