Can a European dove tame this hawk?

Date: 07/04/05

Will Europe be rewarded for supporting the appointment of Paul Wolfowitz as head of the World Bank?

Reports suggest that the hawkish New Yorker could name a European as his number two at the Washington-based institution, in order to placate EU politicians fearful that he would use it as a vehicle for American foreign policy.

Wolfowitz is non-committal, though he stresses he is willing to take advice from Europeans, who control 30% of votes on the bank's executive board.

While occupying the vice-presidency post would give this continent considerable leverage with Wolfowitz, some development analysts believe it would be a retrograde step. It would be preferable, they say, to have a more democratic procedure, in which figures from developing countries could bid for the post. The current number two is China's Zhang Shengman, who worked in Beijing's finance ministry before joining the bank.

"The push for a European vice-president is a weak political compromise with the Americans," says Hetty Kovach from the European Network on Debt and Development, at the forefront of an anti-Wolfowitz campaign. "The Europeans wanted the best they could get because it would be too dramatic for them to reject Wolfowitz."

Jeff Powell from the Bretton Woods Project in London believes it would be a mistake to think that Europeans would be eager to persuade Wolfowitz to pursue policies that are in the better interests of poor countries than he otherwise would. "It would be a mistake to think that Europe can act as a balance on Wolfowitz," he argues. "When it comes to pushing for the privatisation of public services, sometimes Europe is just as aggressive as the US."

Although the outgoing president James Wolfensohn has balked at financing major infrastructure projects, the bank has faced heavy criticism for loans to major dams, which ecologists have regarded as damaging. Powell suggests that one area where Europe could have a positive role is in convincing Wolfowitz to adopt high environmental standards. "I fear that he sees them as getting in the way of business," he adds.

He contends too that Europe should resist any move by Wolfowitz to return the bank to its old practice of devising neo-liberal structural adjustment programmes for developing countries. As a key figure in the Pentagon, Wolfowitz has been instrumental in Iraq's market deregulation, much-derided for allegedly benefiting US firms more than the country's population.

Despite his unilateralist tendencies, Wolfowitz has spent much of the past few weeks trying to convince the bank's 184 members that he is committed to its multilateralist ethos. He has repeatedly described its mission of fighting poverty as noble. And he has tried to allay concerns that he will try to steer its focus more towards regions deemed of strategic importance to America - most notably the Middle East - and less towards the world's neediest. In an interview with Le Monde, for example, he signalled that sub-Saharan Africa would be his overriding priority.

Roger Bate, an Africa specialist at the American Enterprise Institute, says that Wolfowitz is more of a team-player and has better first-hand knowledge of poverty than his critics will allow. "You don't get to his position in the Defense Department without being a good politician, without being able to work with a wide variety of players," he says.

"I am in favour of Wolfowitz's appointment and one of the things that I would like to him to do is be courageous and take decisions that the bank is not going to fund undemocratic states but to focus on things that work. I fear, though, that he will be a consensus-driven leader. I'm not sure that the head of an organisation can turn it around unless he is really bold."

James Wolfensohn has often stated his commitment to relieving poor countries of their external debt burdens. His detractors complain that reality differs markedly from his rhetoric. Nine years ago the World Bank launched the Highly Indebted Poor Country initiative. This has resulted in debt cancellation worth €37 billion so far. Yet low-income countries still owe €400 billion to both their bilateral and multilateral creditors, including the Bank. That sum is ten times higher than the total volume of aid rich countries give to developing countries each year.

Jeffrey Winters, professor of political economy at Chicago's Northwestern University, suggests that Wolfowitz's track record on debt relief does not bode well. As Ronald Reagan's envoy to Indonesia during the 1980s, Wolfowitz actively supported a deregulation of the country's banking sector that was blamed by many commentators for a financial crisis in the 1990s. To cope with that crisis, the country's banks had to be bailed out, resulting in a sharp increase in Indonesia's debt.

Mandla Hadebe from the African Forum and Network on Debt and Development in Harare says Wolfowitz's military background does not tally "with our agenda for the total and immediate cancellation of Africa's debt".

"We are extremely concerned that Africa will be sidelined once Wolfowitz takes office, as will be our main issues of poverty reduction and debt cancellation. We feel his appointment will allow the superpowers to continue to impose their neo-liberal economic reforms, much to the detriment of any relief sought by Africa and the Third World in general," he said.

A World Bank insider says the mood within the institution is more sanguine: "Of course, there is a lot of talk about how Mr Wolfensohn is a Democrat and Mr Wolfowitz is a Republican and people are wondering what that shift will mean to the business of the bank. But the tone and tenor of Mr Wolfowitz's statements suggests the bank will be pretty much stable. There is no reason to be afraid."

Article reports on the controversial nomination of neo-conservative US American Paul Wolfowitz as head of the World Bank.