Affordable Housing Institute : US

As usual, and except for its predictable headline (told you so!), the Economist (subscription required) has a useful take on Paul Wolfowitz’s nomination to head the World Bank:

 

The appointment of Mr. Wolfowitz at least shows that the Bush team takes the World Bank seriously. Mr. Wolfowitz may be controversial, but he is certainly no lightweight—and the administration has appointed plenty of those to top economic jobs (see article).  If Mr. Bush and his team disdained the organisation, they would not have chosen him.  Better questions are whether Mr. Wolfowitz has the right talents for the job and, even if he does, whether his close association with Mr. Bush dooms him to failure.

 

What qualifications are required?  The Economist offers some good ones:

 

Its leader needs to know about development, be able to articulate a workable vision and be a good manager. Mr. Wolfowitz scores passably on two counts.

 

The job is complex:

 

There is also a risk in coming to the World Bank with a vision that is both grand and idiosyncratic—witness Robert McNamara, another Bank president fresh from the Pentagon with a mind to change the world.  Haunted by Vietnam, Mr. McNamara had big ideas for eliminating poverty and oversaw a huge expansion of the Bank.  The result was bad lending and a weakened institution.  Jim Wolfensohn, whom Mr. Wolfowitz will [note the presumption, that the nomination will go through — it is coming — Ed.] replace, was likewise drawn to the grandiose.  The Bank needs a realist more than a visionary.

 

Whatever one may think of Mr. Wolfowitz’s choice of targets (he is excoriated in some circles for his role in the Iraq war), there is little doubt he has a business mind, the kind that can make the World Bank move.  But in which direction, and to what purpose? 

 

“I have the right talents and a strategic agenda.”

 

Is Mr. Wolfowitz, in Isaiah Berlin’s apt metaphor, a fox or a hedgehog?  One who knows many things but not the big ones, or one big thing to the exclusion of all else?  

 

Affordable housing is a microcosm for the larger problem of poverty alleviation: it is interdependently tied into economic growth, rule of law/ property rights, and democracy/ transparency/ entrepreneurialism.  Many are the ways to be wrong, and good intentions are no substitute for failure: you have to do what works, and avoid what doesn’t.

 

At the same time, there is a place for acknowledging complexity.  Strategy design is multivariate and high-complexity; decisions are binary: Yes or No?   Does Mr. Wolfowitz see the big picture?

 

Wolfowitz has been scoring points by harking back to his experience in Indonesia. As ambassador in the late 1980s, he said in a statement issued last week, “I saw first-hand what the World Bank could accomplish” in helping to raise Indonesians’ living standards.  But as a close observer in the late 1990s, when the economy collapsed amid rot in the banking system and cronyism in the presidential palace, “I also saw first-hand the harm that corruption and weak institutions can inflict to defeat development and poverty reduction.”

  

Mr. Wolfowitz is on a charm offensive:

 

He has telephoned Bono, the Irish rock star who champions the cause of Africa’s poor.

 

“But I still haven’t found/ what I’m looking for”

 

He has granted interviews to French newspapers, planned visits to European officials and praised his prospective staffers.

 

“Would you trust me?  I know I would!”

 

Has he merely been putting on sheep’s clothing?

 

Jessica Einhorn, who succeeded Wolfowitz as dean at Johns Hopkins-SAIS and was a top World Bank official before that, said: “If there is one guy who understands how important strong institutions are, and would have first-hand appreciation for how difficult it is to get them in place, that’s Paul Wolfowitz.”

 

With Wolfowitz at the bank’s helm, “it could be that there will be a healthy new emphasis on the centrality of political institutions to the development process,” agreed Nancy Birdsall, president of the Center for Global Development. “That is where the field is, where the new consensus is, without question.”

 

Should one support his nomination?  The Economist wimps out:

 

Worse than this, however, is Mr. Wolfowitz’s closeness to Mr. Bush. His appointment tells the world that Mr. Bush wants to capture the World Bank and make it an arm of American foreign policy.  If that is his intention, it is a mistake.  As the biggest shareholder, America rightfully has outsize influence in the Bank.  That does not mean the Bank should become Washington’s tool. If Mr. Wolfowitz is to be a credible and effective head of the Bank, his first task must be to dispel the suspicion that he is Mr. Bush’s lackey.  His goal when he comes to make his first speech should be to disappoint his former boss.

 

Truth be told, I think the Economist got it wrong.  The question about Mr. Wolfowitz is not whether he pleases the President — but does he get it? 

 

Social investing combines the charity and the bank: the mission heart and the business mind.  The issue is not either-or, it is both-and.  Either alone fails.  Both fox and hedgehog.  Is Mr. Wolfowitz truly both?

 

“That’s for me to know and you to find out.”

 

UPDATE: He appears to be in:

 

In a bid to head off serious opposition to his candidacy, Wolfowitz has emphasized in public statements and interviews that he is deeply committed to the bank’s mission of eradicating poverty, that he recognizes he will be accountable to all the member nations, and that he admires much of the legacy of outgoing president James D. Wolfensohn.  Reiterating and elaborating on those positions yesterday, Wolfowitz “was at his best — very charming, humble, saying for every question, ‘If I’m chosen president’ . . . ‘If the board approves my candidacy,’ ” a European source said. The source spoke on condition of anonymity because of the highly charged nature of the matter.

 

The chances for a European challenge virtually evaporated on Monday when German Chancellor Gerhard Schroeder said that his government would not block the nomination and that Wolfowitz might prove to be a pleasant surprise as bank chief.  That still left open the possibility of a revolt by developing countries, who have long complained about the control rich nations exercise over the World Bank and IMF.  But that prospect appeared to vanish yesterday after a meeting Wolfowitz had with the G-11, a group of directors representing developing countries.  A statement issued by the group after the meeting was noncommittal, describing Wolfowitz’s responses to their questions and saying that the directors “are briefing their governments and consulting with them on this nomination.”

 

But an official from a developing country said there is unified agreement among G-11 member nations that they will not try to put up a candidate against Wolfowitz, as they did last year when a new IMF head was named. One reason, the official said, was that the developing countries are aware of the European desire to get the deputy’s job, and a Third World challenge to Wolfowitz would only give the Europeans extra leverage.  “It would have meant an even higher imbalance” between the growing economic importance of developing countries and their lack of clout at the World Bank and IMF, he said.

 

 

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