The Great Game

It wasn't just the jet-lag that seemed to have winded the former Australian Olympian, multi-millionaire financier and concert cellist. On CNN, Wolfensohn was watching President George W Bush lob a hand grenade that is still reverberating around the world.

When the US president nominated Paul Wolfowitz as his replacement to head up the bank last Wednesday, Wolfensohn, 71, was stranded 3,000 miles away from the action. He clearly had no prior warning.

The man dubbed the Elvis of Economics by campaigning rock star Bono was in London to chair an extractive industries conference. As Bush spoke all hell broke loose. Wolfensohn retreated to his suite and cancelled breakfast meetings with journalists and television interviews. Miraculously, an interview with The Observer survived the maelstrom.

Wolfowitz, the hawkish neo-conservative US deputy defence secretary, was only two weeks ago dismissed by Wolfensohn as not having the passion or credentials to take up the world's most important post from which to fight global poverty.

'I submitted the name of my son and I think they got it mixed it up,' he playfully told US reporters. Now the joke appears to be on Wolfensohn. History may judge his incident-packed reign as a partly successful attempt to rescue an institution that 10 years ago was labelled blindly dogmatic, paranoid, aloof and ripe for abolition.

But Wolfensohn's last years have seen raging battles over the extent of the bank's involvement in reconstructing Iraq. Rows over his management style abound. The tortuous act of satisfying the demands of NGOs (non-governmental organisations), poor countries that receive loans totalling $20bn each year, and the bank's shareholders - the governments of the richest nations in the world form a majority - has taken its toll. Privately members of Wolfensohn's inner circle suspect that the timing of the Wolfowitz announcement, while the outgoing president was on the other side of the Atlantic, was no coincidence.

Unable to marshall the forces of opposition, an anodyne press statement went out under Wolfensohn's name praising Bush's nominee as 'a person of high intellect, integrity and broad experience in both the public and private sectors'.

But alone with his speech writer and a PR minder, the frustration was palpable. Asked if Wolfowitz, the architect of the war on Iraq, who argued that the war could be fought cheaply and paid for by the country's oil revenues - was a suitable candidate to head up a development bank, he said: 'I look forward to reading your newspaper to find out what the charges are. The recommendation comes from the American government. It will be voted on by the board. I know Wolfowitz. I think he's a very intelligent guy. And I think he's got many of the qualities that are needed but I think he could do with expressing his policies on development and I'm sure in the coming days he will do that.'

Hardly a ringing endorsement. But while the bank's 10,000-strong staff - dotted around the world thanks to Wolfensohn's diktat that they break out of their pampered Washington base - are mostly fretting and outraged, senior bank officials are uncertain whether European governments will veto Wolfowitz's appointment.

Since Bush's visit to Brussels last February, European leaders appeared to have moved on from the bitter disagreements over Iraq that caused the international community to fracture. There is, however, a chance that the rift could re-emerge over Wolfowitz.

James Wolfensohn grew up in the Sydney suburbs, the son of a highly intelligent but failed businessman. Wolfensohn inherited from his father the restless ambition that saw him represent Australia at fencing in the Olympics, perform cello recitals at Carnegie Hall (having been taught to play by the late Jaqueline du Pre) make tens of millions of pounds as a banker for Schroders and Salomon and run a wildly successful consulting firm advising a legion of top executives.

His most famous deal before becoming World Bank chief was the maddeningly complex refinancing of the debt-ridden Chrysler car company in the early 1980s. Wolfensohn was the toast of New York society. He ran Carnegie Hall and the JF Kennedy Center in Washington and had a Roladex to die for.

Chutzpah and friends in high places helped win him the job he had craved for 15 years - running the World Bank.

Looking back at his achievements, which include writing off $42bn of poor country debt, albeit painfully slowly (there is still at least another $100bn outstanding), he said: '[The bank] developed into an institution that was preoccupied with economics and procedures and tended to be more a professorial policeman than a partner. It is now regarded as a service organisation that is in partnership with the government of a country and more broadly with civil society. My colleagues felt able to let out their inner feelings and their human feelings which obviously they had sublimated to the professional approach of economics.'

Getting economists to show their feminine side may not seem that important but prior to Wolfensohn the World Bank was utterly hated. Its 'structural adjustment' programmes forced harsh strictures on the fragile countries in its debt and worsened poverty in many cases. Wolfensohn broadened out the bank's terms of reference, engaged with NGOs and replaced the much criticised structural adjustment with poverty reduction strategy papers.

The name change wasn't just a PR stunt. The whole tone of the bank has changed. Conditions on loans are not so prescriptive and the new buzzwords are 'country ownership' of economic policy.

But one of the biggest criticisms of Wolfensohn's leadership is that the bank's response to the Aids crisis was inadequate. When asked if he believes his reaction was too slow, Wolfensohn is silent for a while. 'Probably, but it was a lot faster than anyone else ...I don't just blame the bank. The governments of the countries didn't want to deal with it. Terrible denial. And they wouldn't borrow money for it and we didn't have a big grant-making capacity,' he explains.

Wolfensohn now identifies global warming as a huge security and poverty issue. He said its effects were being felt by farmers in the Andes and the Himalayas, where glaciers are drying up. 'We see its effects on some of the poorest countries. In Bangladesh or the Maldives or some of the low-lying Caribbean states, it's terrible.'

But after a World Bank Extractive Industries Review to assess whether the bank should phase out investing in fossil fuel projects, the management came out in favour of the mining industry. While Wolfensohn backs renewable energy, he remains pragmatic. Renew ables account for under 2 per cent of energy consumption, he points out. What the bank is 'really interested in' is technology for the clean use of fossil fuels.

His real fears are that new world trade agreements scheduled for this December, to grant poor countries access to highly protected European and American markets, will fail to materialise. 'People really need to take some risk and some pain. This is another example of the predominant issue in development today, which is domestic issues and budgets overriding international issues.'

He also fears Chancellor Gordon Brown's plan to inject an extra $50bn of aid by front-loading international governmental aid budgets is 'not getting much support from other countries'. The fact that the US is the principal withholder of support remains unsaid.

With the G8 meeting coming up in Gleneagles in July and a key United Nations conference due in September, Wolfensohn says, 'The challenges are to get through these meetings, not again with a series of analyses and statements of principle, but with an action plan.'

He believes that a priority for the new World Bank chief must be to crack down on the '$18bn of bilateral aid that goes on "technical assistance", which is consulting, some of which is incredibly valuable but we do need to look at that'. Many believe Wolfensohn wanted another term at the bank and it certainly seems that he would have liked to have taken it through the vital meetings ahead. But he says: 'There's some merit in getting out after 10 years when people think you're alright - until they discover that you're not alright.

'Having seen the recent commercial experiences of leaders of institutions who get out too late, with every one of those that I read about I feel happier and I count the days to make sure I get out before there's a scandal.'

Say no more James, say no more. (Link)

# posted by Jacob @ 3/20/2005 07:54:00 p.m.