Wolfowitz Unanimously Elected as World Bank President

Wolfowitz, 61, replaces James Wolfensohn, who will retire on May 31 after serving ten years as head of the World Bank, the largest financier of development projects. The nomination was approved today by the lender's 24-member executive board, according to a statement released by the World Bank.

It is humbling to be entrusted with the leadership of this critically important international institution,'' Wolfowitz said in the statement. U.S. President George W. Bush's nomination of Wolfowitz two weeks ago drew immediate criticism from European government officials, economists and activists. They cited Wolfowitz's record of advocating U.S. policies over the span of 20 years at the U.S. Defense and State departments, culminating with his role as an architect in the overthrow of Iraqi President Saddam Hussein. Bush will likely use Wolfowitz to scale back Wolfensohn's projects, said Allan Meltzer, who chaired a congressional panel on the bank in 2000. That may include overhauling the bank's $20 billion annual lending operation and changing how the lender's 10,000 employees in 109 nations are managed, he said. Wolfowitz said today that his new colleagues at the bank have recommended that he review the right balance between loans and grants; the bank's role as lender versus technical advisor; lending to middle income countries versus support for the poorest nations; and timely, high quality delivery of financial support versus the need for conditions, accountability and safeguards.''

`One-Horse Race'

Wolfowitz's nomination is the second time the U.S. turned to the Pentagon for a World Bank leader. Former Defense Secretary Robert McNamara headed the institution from 1968 to 1981.

The exceptional mission of the World Bank demands that it be led by an outstanding leader; someone with proven management skills, international diplomatic experience, real vision, and above all, a commitment and passion for development,'' U.S. Treasury Secretary John Snow said in a statement. Paul Wolfowitz is that leader.''

By tradition, the U.S. selects the nominee for World Bank and Europeans pick the head of the International Monetary Fund. Anti- poverty groups protested the closed nomination process by dressing two people in a horse costume and staging a one-horse race'' in front of the lender's headquarters in Washington. Other candidates for the World Bank position included former Hewlett-Packard Co. Chief Executive Officer Carly Fiorina and Bush administration AIDS policy chief Randall Tobias. Spreading Democracy In a March 18 interview, Wolfowitz, 61, said it's unlikely he would turn the bank into an organization for furthering democracy, preferring instead to keep a degree of separation'' between democracy building and the bank's core mission of economic development and poverty reduction.

Though Wolfowitz has repeatedly stressed in interviews that he will seek the counsel of all of the World Bank's 184 member countries, Fouad Ajami, a professor at Johns Hopkins School of Advanced International Studies, and former U.S. Central Intelligence Agency Director James Woolsey say that cracking down on autocratic governments may be one area where Wolfowitz won't compromise.

Economic development and democracy tend to go together,'' said Woolsey, who said he's known Wolfowitz for about 25 years. They also tend to make societies that are democratizing less likely to supply terrorists.''

`Tough Love'

One of Wolfowitz's main roles as president will be determining which projects and loan proposals go to the executive board for approval. Wolfensohn, 71, used that power to push through loans to Iran in violation of U.S. policy. Wolfowitz may increase aid to Iraq and reverse lending to Iran, colleagues said.

A high-ranking Bush administration official, who spoke on condition of anonymity, said Wolfowitz will put more pressure on poor-performing countries than his predecessor did and push for tough love.'' Still, Wolfowitz won't be given a free reign at the institution, said Francis Fukuyama, a professor at Johns Hopkins who first met Wolfowitz at Cornell University in the 1970s. People don't understand that the way the World Bank is governed, it is really difficult to move.''

Wolfowitz, the son of a mathematician who once taught Alan Greenspan, will first have to win over other member nations at the institution before he moves forward with Bush's plans to overhaul the World Bank.

Commitment to Development

In the March 18 interview, Wolfowitz affirmed his commitment to development and poverty reduction, citing his experience in the 1980s as ambassador to Indonesia and his role assisting in the Philippines's transition to democracy.

I wouldn't be taking on this huge responsibility if I didn't believe in the mission,'' he said. The more people I meet with, the more will understand.''

Michael Nacht, who is dean of the University of California at Berkeley's Goldman School of Public Policy and has known Wolfowitz for more than 30 years, said he has more development experience that most of his predecessors. Wolfensohn was an investment banker, and past presidents include former U.S. Representative Barber Conable of New York and banker Lewis Preston.

Paul Bremer, the former U.S. administrator in Iraq, said Wolfowitz's background provides an opportunity for the U.S. government to be more receptive to the needs of the World Bank.

Because he knows how the U.S. government works, he can in my view be a more effective spokesman toward the American government'' to get development issues addressed, Bremer said. Iraq One of the biggest hurdles Wolfowitz may face is proving to his skeptics at the bank that he has sound judgment, said Steve Radelet, who served as the U.S. Treasury's top official for Africa for Clinton and Bush. Wolfowitz missed the mark by promising that the Iraq war would be both quick and fully funded by oil revenue. It has cost the U.S. government more than $117 billion and U.S. troops are in their second year of occupation. It's a very surprising and, in many ways, inappropriate nomination, Jeffrey Sachs, a Columbia University professor in New York and a United Nations adviser, said after Wolfowitz's nomination on March 16. We need an individual with international experience in the fight against poverty and global trust. Mr. Wolfowitz does not fit those criteria.'' Nacht said Wolfowitz's appointment will test his ability to be a diplomat and negotiate. A lot will also depend, frankly, on what happens in Iraq as he takes on the position, Nacht said.

Once critics are assuaged, Wolfowitz can push the Bush administration's goals of increasing the use of grants to poor nations rather than loans and calling for democracy, a word that is still taboo in the World Bank lexicon, Radelet said.

Up until the end of the Cold War, it was impossible for the bank to talk about political reform and democracy,'' said Radelet, who is now at the Washington-based Center for Global Development. Though the focus on democracy has increased, the issue is still sidestepped by promoting programs that highlight a participatory approach'' and good governance, rather than regime change, Radelet said.

Career History

Bush named Wolfowitz as deputy to Defense Secretary Donald Rumsfeld in February 2001. Then dean of Johns Hopkins University School of Advanced International Studies, Wolfowitz was a veteran of both the State and Defense Departments.

He served as undersecretary of policy for Vice President Dick Cheney when Cheney headed the Pentagon during the administration of President George H.W. Bush, the current president's father.

From 1986 to 1989, Wolfowitz was the U.S. ambassador to Indonesia, and assistant secretary of state for East Asian and Pacific Affairs from 1982 to 1986. He worked on arms control and disarmament issues in federal agencies in the 1970s.

From 1995 to 2001, Wolfowitz was a director of toymaker Hasbro Inc. He received a master's degree in administration and a doctorate in political science and economics from the University of Chicago.

31 March 2005

To contact the reporter on this story:
Julie Ziegler in Washington at jziegler@bloomberg.net

To contact the editor responsible for this story:
Joe Winski in Washington at jwinski@Bloomberg.net