Journamalism from Sebastian Mallaby on Paul Wolfowitz

Noted Journamalist Sebastian Mallaby, Director of the Maurice R. Greenberg Center for Geoeconomic Studies, Deputy Director of Studies, and Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations can't quite screw his courage up to the sticking place enough to call for World Bank president Paul Wolfowitz's to resign or be fired:

Sebastian Mallaby - The World Bank, Stuck In the Mud - washingtonpost.com: The scandal centers on the pay of people around Paul Wolfowitz, the World Bank president. Kevin Kellems, an unremarkable press-officer-cum-aide who had previously worked for Wolfowitz at the Pentagon, pulls down $240,000 tax-free -- the low end of the salary scale for World Bank vice presidents, who typically have PhDs and 25 years of development experience. Robin Cleveland, who also parachuted in with Wolfowitz, gets $250,000 and a free pass from the IRS, far more than her rank justifies. Kellems and Cleveland have contracts that don't expire when Wolfowitz's term is up. They have been granted quasi-tenure.

Then there is the matter of Shaha Riza, a long-standing bank official who is Wolfowitz's romantic partner. She went on paid leave (seconded to the State Department) after Wolfowitz arrived; her salary has since jumped from $133,000 to $194,000. When questions were first asked about Riza's rewards, a spokesman declared that the matter had been handled by the bank's board and general counsel, implying that the bank president himself had not been responsible. But the truth was that Wolfowitz had been closely involved, as a contrite Wolfowitz admitted yesterday.

Treating an anti-poverty institution this way would look bad under any circumstances. But the scandal is especially damaging to Wolfowitz... [who] has alienated the staff by concentrating too much power in the hands of Kellems and the abrasive Cleveland; he has alienated shareholders by presenting half-baked strategy ideas; he has alienated borrowers by blocking loans, sometimes capriciously. Moreover, Wolfowitz has made the battle against corruption his signature issue....

[F]ive years [9/11], the United States is walling off its southern border and the aid boom is over. And where is the current World Bank president? Fending off calls for resignation.

And Sebastian Mallaby can't quite screw his own courage up to the sticking place for him himself to say a peep about his own past, as a booster of Paul Wolfowitz and a big mocker of Wolfowitz's critics:

February 20, 2006:

Wolfowitz's Corruption Agenda: Nine months into his tenure as president of the World Bank, Paul Wolfowitz has made headlines mainly by provoking a staff backlash. Neoconservative commissars are seizing control! (Actually, Wolfowitz has a grand total of four Republicans in his entourage.) The World Bank's agenda is being hijacked by a Bush man! (Actually, Wolfowitz has resisted the Bush administration's bad policies on debt relief and climate change.)...

[T]he staff backlash is obscuring something interesting. In the past few months, there have been hints of fresh thinking on corruption. Now the evidence has reached critical mass: The change appears to be genuine.... [Previous World Bank president] Wolfensohn denounced the "cancer of corruption" in 1996.... Speeches are one thing, action quite another.... [T]he anti-corruption unit was understaffed and ineffectual.... Excuses were found....

In a series of tough decisions, some of which have been widely reported and some of which have not, Wolfowitz has challenged this culture.... Wolfowitz's World Bank presidency, which had seemed to lack an organizing theme, has acquired one. The new boss is going to be tough on corruption, and he's going to push this campaign beyond the confines of the World Bank; on Saturday he persuaded the heads of several regional development banks to join his anti-corruption effort. It's amusing to see the Wolfensohn-Stiglitz left-liberal critique of narrowly economic development policy being championed by this neoconservative icon...

May 30, 2005:

Paul Wolfowitz... takes over this development powerhouse on June 1, believing that he is leaving behind a big job at the Pentagon and taking on an even bigger one.... Taking over this multilateral institution is a bit like showing up at elementary school halfway through third grade. Everyone already has a gang of friends and a newcomer is often dissed -- even if the newcomer is the principal....

Probably 90 percent of the bank's staff opposes the Iraq war, and a similar proportion regard President Bush as a dumb cowboy. Two of the three aides whom Wolfowitz is bringing to the bank share his association with Iraq, which does not impress the banksters. One is Robin Cleveland, an assertive official who put together Bush's Iraq spending bills; she has summoned bank vice presidents over to her office for meetings, but some veeps have refused to make the journey....

Wolfowitz... mostly he has charmed his way past all these prickles. He's disarmed people by eating lunch in the staff cafeteria (the bank has a separate dining room for managers, and yet a third one for the president); he has given out his personal e-address in get-to-know-you staff meetings and stressed his respect for the World Bank's professionalism. To allay fears that he's hung up on democratizing the Middle East, he's planned an early trip to Africa. In meetings he's spent more time listening than talking -- a contrast with the messianic style of the outgoing Wolfensohn...

March 31, 2005:

Why Oh Why Can't We Have a Better Press Corps? (Shut Up or We'll Kill Your Development Bank! Department): THE WORLD Bank's board will meet today and will almost certainly confirm the nomination of Deputy Defense Secretary Paul D. Wolfowitz as its new president. The initial expressions of shock from Europe have proved unserious and, in some cases, even hypocritical.... Imposing a particular deputy on Mr. Wolfowitz is not going to help. It will push the World Bank toward the nationality-driven hiring that is the bane of United Nations agencies.... Mr. Wolfowitz's critics, domestic as well as international, should now get beyond their dislike of his role in the Iraq war.... [T]he institution will have a hard time facing down the inevitable attacks on its decision if it is simultaneously having to defend itself against critics who dislike its new president.

Most people agree that the World Bank is necessary.... The World Bank brings big financial and intellectual resources... it provides around $20 billion a year to developing countries and houses the largest concentration of development thinkers anywhere. People who care about this institution and its mission--as many of Mr. Wolfowitz's detractors do--should think carefully before they damage it by attacking its new boss...

March 28, 2005:

washingtonpost.com: World Bank Pragmatism: Wolfowitz's strength is that he'll make the bank a tool of U.S. policy. And if you're going to have an ideology, Wolfowitz has the right one. The World Bank is an effective institution partly because it's based in Washington, dominated by U.S.-trained economists and run by a U.S. appointee.... [T]he bank's advice on how to become a successful society is generally sensible.... Thanks to its connections to successive American administrations, the World Bank has played a bigger role than it otherwise would have....

The problem with the Bush administration has not been that it bent the World Bank to its foreign policy. It's been that it often failed to do so. The planning for postwar Iraq might have been smarter if the administration had consulted the bank's experts.... If Bush had handed the World Bank presidency to some CEO campaign contributor, this malign neglect might have continued. Now that he's installing a valued lieutenant, cooperation should improve....

Wolfowitz['s] passion is the advance of democracy.... Wolfowitz appears pragmatic on economics as well. His main exposure to development comes from his time as ambassador in Indonesia, which combined miraculous poverty reduction with state intervention; he surely does not believe in privatizing everything in sight.... So there are some troubling ideologies that Wolfowitz does not share. That leaves the reasonable question: Is a passionate democratizer right for the World Bank?... Now a new consensus... holds that the chief challenge in poor countries is political. It's to fight the corruption that deters private investment and to create the rule of law.

For this new challenge, democratic virtues such as accountability and transparency are essential, and appointing a passionate democratizer as World Bank president seems less outlandish....

Wolfowitz should be cautious about pushing this agenda.... It's fair to ask whether, given his naive forecasts about the easy success of Iraqi reconstruction, he can be trusted to be cautious. But if he can avoid hubris, and if he can fight through the thicket of negative perceptions, he may prove a worthy leader for the World Bank.

March 19, 2005:

The permanent establishment of World Bank critics - who had been diverted to protesting [about] the Iraq war - can now do both at once. It's like Christmas for them...

March 5, 2005:

washingtonpost.com: Clueless On the World Bank: Wolfowitz has most of what it takes to lead the World Bank. He is a persuasive communicator; he has experience in public-sector management; and he knows something about developing countries, having served as ambassador to Indonesia. But his association with the Iraq war makes him, unfairly... anathema to most World Bank shareholders...

One cannot help but be struck by the transformation of Robin Cleveland: in May 2005 she was a mere "assertive official" from the Bush administration, one of "only four Republicans" whom Wolfowitz brought into the World Bank; today she is the apparatchick "parachuted in with Wolfowitz [when he was appointed, who] gets $250,000 and a free pass from the IRS, far more than her rank justifies.... [and] granted quasi-tenure..." that she is today.

Comments

[John Emerson]

The Wolfowitz corruption story is over a year old.

http://villagevoice.com/blogs/bushbeat/archive/2006/01/morning_report_263.php"

[Jeffrey Winters]

Mallaby's work on the World Bank is shoddy and embarrassing. From his puff book about the Bank under Wolfensohn (The World's Banker) to his blatant promotion of Wolfowitz, Mallaby has consistently been awed by power and has happily repaid the access the powerful give him. The result is pure apologetics and not a good reflection on the CFR.

Jeffrey Winters
Northwestern University
[Co-editor with Jonathan Pincus of "Reinventing the World Bank"]

[save_the_rustbelt]

Wolfowitz should be in Iraq carrying a rifle, since he thought it was a swell idea.

He never should have been appointed to the Bank, so the aftermath is secondary to the biggest mistake.

[Rob]

Wolfowitz: trying to make the IOC look clean!

[Kate G.]

Do these morons never learn? Giving out your (unread) email address and lunching in the workers lunchroom is not a substitute for actually doing what you are supposed to be doing. Your "agressive" minions can agress all they want if no one bothers to cometo their meetings. I particularly like the comment that there are "hints" of new thinking rather late in the game. I've got a "hint" for you. Corruption is one of the most obvious things in the world. IF you are anti corruption then just put into practice the laws already on the books. You don't need no stinkin' new thinkin' for that. But I guess Wolfowitz and his enablers were too busy being confused about the propriety of moving his "romantic partner" aka his "mistress" around like a well paid pawn.

But hey, he'll survive anything but a live boy or a dead girl. Or has that old truism been overturned since Scarborough's scandal and the New Jersey Governor?

Kate G.

[Emily]

What's the deal with the tax-free income for Kellems and Cleveland?

[AG]

Of course, you should also remember that Cleveland got the job in he first place because she'd already become an embarrassment to the administration; in the midst of negotiations for the tanker purchase that turned into their own scandal, Cleveland sent an email (later released by McCain) with her brother's resume (Peter Cleveland)asking Air Force Secretary Roche "I would appreciate anything you can do to help with NG [Northrop Grumman]". Roche passed it along:"STEVE -- I know this guy. He is good. His sister (Robin)is in charge of defense and intell at OMB. . . . If Peter Cleveland looks good to you, PLS add my endorsement. Be well. "

So Cleveland couldn't stay at OMB - there was documented evidence against her. So they parked her at the World Bank. For $250,000.

[RKimble]

Emily:

Let me explain the tax deal for Americans in the WB, which is not unique to the two people you named. WB staff are paid net of tax because the WB agreement with the US makes WB salaries free of US income tax for those who are NOT Americans. So if you are, say, British or Brazilian and doing a certain job in the WB that pays US$100,000/year, that is US$100,000 without any tax. If you are an American and doing the same job as the Brit or the Brazilian and have the same qualifications, experience, etc, then you get the same US$100,000 net of tax, BUT with a complication. The complication is that the American MUST pay federal and state income taxes. So the WB estimates what those taxes will be (based on the staff member's deductions and other income), divides by 4, and gives the resulting amount to the American staff member each quarter. The American then files an estimated income tax statement (Form 1040-ES) with the fed govt and with the state where he/she lives (say, Virginia). The American has to certify to the Bank that he/she has actually used the quarterly payment to pay his/her taxes. If the staff members cheat, and are caught, then they are fired; this does happen from time to time.

So the salaries are technically not tax free because the Americans have to file and they have to pay. But to make WB salaries for Americans comparable to those of non-Americans doing the same job, the WB gives the American staff member the estimated taxes, so in the end it is very similar to being tax free. BTW, if the American has non-WB income (say, her spouse works outside the WB) then the usual fed and state income tax procedures apply to that income and the WB doesn't help you with that.

I fear this wont make you any happier, but this is the deal.

[bcg]

This news makes Wolfowitz' anti-corruption campaign just another case of the Republican pot calling everyone else's kettle black. Clearly, the man doesn't know how to practice what he preaches; so, why doesn't he step down already? Barring that, what's necessary to get him dismissed?

[c.l. ball]

I agree with Winters that Mallaby's _The World's Banker_ is more hagiography than history of the present -- much can be said of Traub's _The Best Intentions_, although less so when it comes to Annan's management failures in the latter chapters. (And the Winters and Pincus volume is an excellent book).

But I don't get the overall attack on Mallaby here. Wolfowitz pursued a valid anti-corruption agenda and democratization -related variables correlate with good governance according to WB research (Kaufmann, et al). That's why Mallaby liked W. and why he said WB supporters should support his presidential fait accompli. He had only 4 close aides from prior jobs (is that unusual or not?) and Mallaby notes that the "assertive" Cleveland has *alienated* other WB execs, that's hardly praise. Whenever Holbrooke was described as 'assertive' no one took it as a compliment.

I don't get the hang-up over Mallaby. Is it "journamalism" that the Village Voice failed to report on the Cleveland pay package? After all, Bush-beat was focusing on Cleveland.

[Emily]

R Kimble:

Thanks for the explanation.

[andres]

John Emerson: you are right--there seems to be a significant time lag between the moment when a scandal is reported on by a dissident news source such as The Nation or The Village Voice, and the moment it is picked up by the mainstream news media.

It could be just a function of Journamalism, but more likely it's that mainstream editors and producers won't touch a particular story until the volume from the dissident media and blogs becomes too loud to ignore. Just another argument for reforming the power structure and ownership of the mainstream media.

[Ralph]

James D Wolfensohn also launched an anti-corruption campaign when he took the helm of the WB in 1995 so there is nothing very remarkable about Wolfowitz's signature issue as far as I am concerned. I don't know how successful Wolfensohn's campaign was but unlike Wolfowitz I believe he was more diplomatic about pursuing cases of corruption within the ranks of the WB itself.

[xxx@xxx.com]

The truth is that Mr. Mallaby has good writing skills, as expected from a Economist alumni, but his understanding of economics and of the IFIs is laughable. I gave up on reading him a long time ago.

(I guess that is the burden of actually studying hard, getting a Ph.D. and keeping the ears open through life --- I cannot read newspapers anymore... The stupidity hurts and burns!)

[xxx@xxx.com]

But on Wolfowitz:

Is there anything this guy can do right?

Can he tie his own shoes or is he at risk of falling down flat on his face?

[don't trust the WSJ editorial page]

OK, the WSJ editorial page has what seems to be a pretty reasonable defense of wolfowitz. they say (roughly):

1. wolfowitz told the board his girlfriend worked at the world bank
2. the board decided it was a conflict of interest, so she would have to go
3. she was up for (or close to, or something like that) a promotion, so they decided they should give it (or something like it) to her beefore giving the boot, since the conflict of interest wasn't her fault.
4. they asked wolfowitz to direct the head of HR to do what they had decided he should do.
5. wolfowitz is getting screwed by euro-trash for doing what he was told to do.
6. wolfowitz is just like the duke lacrosse team [in which case he should be fired for having a party with underage drinking and strippers -me]

normally, i would say that it now seems wolfowitz really got screwed by people jumping to conclusions. but, i'm not really inclined to believe the *editorial page* of the WSJ, so ... can anyone shed some more light on this?

[xxx@xxx.com]

There is no such a thng as a $50,000 promotion raise in the IFIs. From one notch to hte next, the raises are generally not greater than 5 percent.

As usual, the WSJ editorial page is lying -- that is what they are paid for, anyway!

[RKimble]

Dear Dont Trust:

#1 is true
#2 is true. The Board was simply informing PW of a well known rule, one that has been applied to several other cases in the WB (people have been demoted and I think even fired for breaking it);
#3 opinions vary. She had apparently been refused twice for this promotion (but that does not mean that she wasn't close in 2005). But it ought not to have been the role of the Board to do anything other than make some sympathetic noises about her situation and ask HR & MENA (the Region where she worked) to look again at her situation as far as the promotion while saying nothing about the salary increases and any future promotions;
#4-#6 if these are true, then why did PW admit a mistake and apologize ? Certainly the Board did not tell PW to tell HR to give her the extraordinary raises and to put her on a promotion track that no one gets in the manner that she was demanding.

There are two recent revelations about these people that are relevant if true. The woman reportedly received compensation for work outside the Bank before 2005 while a staff member (2003 ?) (this is very strictly against the rules; if you want to do something like serve unpaid on, say, the board of some little foundation, you have to get written permission) and PW's lawyer reportedly bargained for him to be allowed to give paid speeches while serving as President. If the first is true, she should have been fired point blank. The latter is really mysterious. Here is the President of the WB, who can invite himself to make an unpaid speech just about anywhere in the world (maybe a Senate confirmation hearing would not be such a hot idea), and he wants to get paid for it ? The WB has top technical people in national offices all over the world who may get paid oh maybe $25/k a year (Bank contracts in national offices are aligned to the local market not to the DC labor market) and what are they supposed to think about PW's ethics after they hear this ?

The WSJ should not have to be reminded that there are two issues here, but here goes: (i) it is the perception of the conflict of interest, less than the existence of a conflict, that is the problem; and (ii) the hypocrisy of PW's behavior is toxic for our relations with client countries. I am sure Idris Deby and Denis Sassou Nguessou are smiling about all this as speak.

Best.

[anon]

"what's necessary to get him dismissed?"

Europeans with balls? Pretty much everyone else needs the cash, so there's nobody else to do it. But these are the same Europeans who let his nomination go through first time round, so don't expect much.

It's just like everything else this Administration's done: discredit anything resembling state, regulatory or interventionist activity by miring it in corruption and greed. But letting this incompetent lying clown's appointment go through in the first place did the job: he's managed to bring the Bush philosophy of "help yourself" to the leading intergovernmental development agency. Thanks a lot, Europe. Americans, don't look east to have this mess sorted out.

[Anon]

That's right, blame Europe for America's decadence. We have very little choice but to vote in the best of a band buch, seeing as the "Land of the Free and the Home of the Brave" insists on retaining control (and robbing blind) one of the world's biggest charities, as well as refusing to nominate an honest candidate. What do you want us Europeans to do? Perhaps the USA should admit that its citizens are simply incapable of doing a good, honest and selfless deed and refrain from ruling the World Bank (and attempting to do so to the rest of the world). To quote; "America is the only nation in the world to pass from barbarism to decadence without an intermission of civilisation". I honestly can't believe you blame Europe for America's thievery, but thats just typical ain't it, its never America's fault, always someone else's. Your empire is on its knees, and its going to fall very soon.