Global Policy Forum

By Walden Bello & Shalmali Guttal*

With all the hullabaloo generated by the designation of Paul Wolfowitz as his successor, outgoing World Bank President James Wolfensohn's record in leading the Bank has so far escaped serious scrutiny. Wolfensohn's was an ambitious presidency. Chosen by President Bill Clinton to head the world's largest multilateral lender in 1995, Australian-turned-American Wolfensohn promised to make the Bank more sensitive to the needs of developing countries. The institution was then identified with structural adjustment programs that had wrenched developing country economies without bringing about growth, and with controversial projects such as environmentally and socially destabilizing land resettlement schemes in the Amazons and Indonesia, and large dams, notable among which were the Arun III in Nepal and the Sardar Sarover in India.

The PR Offensive

At first, things appeared to go Wolfensohn's way. Assisted by a well-oiled public relations machine headed by ex-Economist writer Mark Malloch-Brown,(1) Wolfensohn tried to recast the Bank's image as an institution that was not only moving away from structural adjustment, but also making elimination of poverty its central mission, along with promoting "good governance" and environmentally sensitive lending. Channels to civil society were opened up, especially with the formation of the NGO Committee on the World Bank. However, many civil society organizations, such as the 50 Years is Enough network, complained that World Bank consultations with civil society were part of a divide-and-rule strategy that sought to separate "reasonable" NGOs from "unreasonable" ones. Indeed, not a few influential NGO's were seduced by Wolfensohn's promise to overhaul the Bank's approach and programs.

During the Asian financial crisis in 1997-98, Wolfensohn and his chief economist Joseph Stiglitz successfully managed to steer popular opprobrium away from the Bank to the IMF when Stiglitz and other Bank economists publicly questioned the wisdom of the capital account liberalization policies promoted by the Fund that had played such a key role in the crisis. The Bank also attempted to deflect criticisms about its own role in crisis management by attributing the foundation of the Asian crisis to "crony capitalism" in crisis struck countries, thus gathering steam in its calls for "good governance."

The Meltzer Report

Then in February 2000, like lightning out of the blue, came the report of the Commission on International Financial Institutions Advisory Commission appointed by the US Congress report. Headed up by conservative US academic Alan Meltzer, the Commission came up with a number of devastating findings based on the Bank's own data: 70 per cent of the Bank's non-grant lending was concentrated in eleven member countries, with 145 other members left to scramble for the remaining 30 per cent; 80 per cent of the Bank's resources were devoted not to the poorest countries but to the better-off ones that enjoyed positive credit ratings and could therefore raise their funds in international capital markets; the failure rate of Bank projects was 65-70 per cent in the poorest societies and 55-60 per cent in all developing countries. In short, the World Bank was irrelevant to the achievement of its avowed mission of alleviating global poverty.

Deprived of the public relations skills of Malloch-Brown who left the Bank to head up the United Nations Development Program, the Bank fumbled badly in its response. Much to the chagrin of Wolfensohn, few people came to the Bank's defense. Indeed, more interesting was that many critics from across the political spectrum-left, right, and center-agreed with the report's findings though not necessarily with its key recommendation of slimming down the Bank into a World Development Authority managing grant aid and devolving its loan programs to regional development banks. Among them was Wolfensohn's occasional ally, financial guru George Soros, who agreed with the conservative Meltzer that the Bank's "lending business is inefficient, no longer appropriate, and in some ways counterproductive...and need [ed] to be reformed to eliminate unintended adverse consequences."

The World Bank and Good Governance

Meanwhile, the political aftermath of the Asian financial crisis wrought havoc with the World Bank's stated aim of promoting "good governance." This loudly proclaimed goal was contradicted by sensational revelations regarding the Bank's relationship with the Suharto regime in Indonesia-an involvement that continued well into the Wolfensohn era. A "country of concentration" for the Bank, some $30 billion had been funneled to the dictatorship over 30 years. According to Jeffrey Winters and other Indonesia specialists, the Bank accepted false statistics, knew about and tolerated the fact that 30 cents of every dollar in aid it dispensed to the regime was siphoned off to corrupt uses, legitimized the dictatorship by passing it off as a model for other countries, and was complacent about the state of human rights and the Suharto clique's monopolistic control of the economy. Suharto's loss of power in the tumultuous events of 1998 and 1999 was paralleled by the erosion of the credibility of the World Bank's rhetoric about good governance.

The Bank took more hits as news of corruption and malpractice came to light in Bank supported infrastructure projects. Prominent among these were the Lesotho Highlands Water Project (LHWP) and the Bujagali Falls dam in Uganda. In 2001, the Lesotho High Court started investigating charges of bribery against several major international dam-building companies and public officials in connection with the LHWP. Instead of supporting a nationally accountable legal process, the Bank quietly conducted its own internal investigation of three of the companies charged with paying bribes and concluded that there was insufficient evidence to punish them for corruption. In 2002, the Lesotho High Court eventually succeeded in convicting four companies for paying bribes, among them Acres International, a long term ally and pet contractor of the World Bank and who the Bank had cleared in its internal investigation. It took the Bank well over a year to eventually announce that it would disbar Acres International from World Bank contracts for a period of three years.

The HIPC Fiasco

A major World Bank-led initiative launched under Wolfensohn's watch-the plan to reduce Third World debt-also ran into trouble. The Bank initiative was designed to offset increasing demands for total debt cancellation for developing countries that had been mired in massive debt since the debt crisis in the early 1980s. Calling debt cancellation unrealistic, the Bank called for debt reduction. Then it sharply reduced the number eligible for debt reduction to 42 out of 165 developing countries-thus the name "HIPC" or the Highly Indebted Poor Countries" initiative. Further, it stipulated that debt reduction of eligible countries would be granted by the big country creditors in exchange for "economic reforms" undertaken by the debtors.

Trumpeted at the G7 meeting in Cologne in July1999, the HIPC initiative was in trouble a few years later. As it turned out, it covered only 6.4 per cent of the total debt of the world's poorest countries, according to the calculations of the British charity Christian Aid. Moreover, as of 2002, only 20 of the eligible 42 counties were able to comply with the conditions policies imposed by the Bank and the IMF. Of these 20, it was revealed that, despite reductions in their debt stock under the program, four would actually have debt service payments in 2003-2005 that would be higher than their annual debt service paid in 1998-2000; five countries would be paying as much in debt service as before HIPC; and six countries would have their annual debt service reduced by a modest $15 million. Responding to criticism that that actual debt reduction from HIPC would be meager, the World Bank blamed lower prices for developing country exports but admitted that half the countries covered by HIPC would still have unsustainable debt loads at the end of the program.

The September 3, 2002 Bank report on the Status of Implementation of HIPC showed that the Bank's strategy for countries in the HIPC programme "exporting themselves out of debt" through exports of primary commodities did not work. Debt indicators particularly worsened for those countries dependant on the exports of cotton, cashew, fish and copper. However, with the exception of fiddling here and there on numbers, "sunset clauses" and "completion points," the HIPC strategy remained intact and the Bank made no effort to revise it based on evidence provided in its own internal reports.

Structural Adjustment by Another Name

Poverty Reduction Strategy Programs (PRSPs) were promoted by Wolfensohn as a replacement for the much-discredited structural adjustment programs that had been the Bank's and IMF's main approach to development since the 1980s. The rhetoric of change did not, however, match the reality of continuity, according to several studies conducted by civil society groups. As one exhaustive study conducted by the European Network on Debt and Development found, while PRSPs stress the importance of social safety nets and poverty reduction, the prescribed macroeconomic reforms to achieve them are "undiscussed" and are indistinguishable from the previous macroeconomic frameworks that focused on achieving rapid growth via liberalization and privatization. Moreover, the much-vaunted "participatory approach" of the PRSP amounted to "little more than consultations with a few prominent and liberal CSOs [civil society organizations] rather than substantive public dialogue about the causes of incidence of poverty."

Even more searing in its conclusion was a detailed investigation of PRSPs in Vietnam, the Lao PDR, and Cambodia by Focus on the Global South, which found the same one-size-fits-all formula of deregulation, liberalization, and commercialization of land and resource rights: "The PRSP is a comprehensive program for structural adjustment, in the name of the poor." (see http://www.focusweb.org/main/html/modules.php?op=modload&name=News&file=article&sid=252)

The World Bank and the Environment

Wolfensohn's effort to convince the world that the World Bank was becoming an environmentally sensitive agency was still born. In 1990, many environmentalists were dismayed that the Bank became the lead agency of the Global Environmental Facility, a multilateral channel for environment-related lending, since it was one the biggest lenders for environmentally destabilizing infrastructure projects. Wolfensohn's actions, as opposed to his rhetoric, merely confirmed their fears. Under Wolfensohn, the Bank was a staunch backer of the controversial Chad-Cameroon pipeline, which would seriously damage ecologically fragile areas such as Cameroon's Atlantic Littoral Forest. Furthermore, Bank management was caught violating its own rules on environment and resettlement when it tried to push through the China Western Poverty Reduction Project, which would have transformed an arid ecosystem supporting minority Tibetan and Mongolian sheepherders into agricultural land for people from other parts of China. Global pressure from civil society groups forced cancellation of some of the worst aspects of this program, but other environmentally threatening components were approved.

A look at the Bank's loan portfolio by the international environmental organization Friends of the Earth revealed the reality behind the rhetoric: loans for the environment as a percentage of total loans declined from 3.6 per cent in fiscal year 1994 to 1.02 per cent in 1998; funds allocated to environmental projects declined by 32.7 per cent between 1998 and 1999; and in 1998, more than half of all lending by the World Bank's private sector divisions went to environmentally destabilizing projects such as large dams, roads, and power plants. Not surprisingly, at the Global Environmental Facility Assembly in New Delhi in 1998, the Bank came in for harsh criticism for derailing GEF objectives from an international experts' panel. So marginalized was the Bank's environmental staff within the bureaucracy that Herman Daly, the distinguished ecological economist, left the Bank because he felt that he and other in-house environmentalists were having minimal impact on agency policy.

Managing Civil Society

Opposition to projects with negative economic, social and environmental impacts triggered Wolfensohn's efforts to manage his critics from civil society via "constructive engagements" and "multi-stakeholder dialogues." Most prominent among these were the Structural Adjustment Participatory Review (SAPRI), the World Commission on Dams (WCD) and the Extractive Industries Review (EIR). Although focused on different areas of Bank operations, all three initiatives sought to bring Bank critics around a negotiating table in a bid to prove that the Bank was willing to change, listen to its detractors and become more responsive to criticisms about its operations and polices. But the reality proved to be quite the opposite and in all three cases, the Bank showed itself to be unwilling to accept, let alone act, on the outcomes of these initiatives. A quick look at all three might be instructive for those who hold illusions that dialogue with the Bank will result in substantive change in its policies and operations.

Structural Adjustment Participatory Review Initiative

Wolfensohn's "feel good" approach was put to a test-and by all accounts failed-in the very first "constructive engagement" exercise he committed the Bank to through the SAPRI. Wolfensohn had arrived at the World Bank in 1995, just as the '50 Years is Enough' campaign was gathering steam. A merger of economic justice and environmental groups that targeted the Bank's disastrous record in SAPs and infrastructure and energy projects, the 50 Years Campaign and the media coverage it generated threatened Wolfensohn with a failed presidency before he had even begun his term. In an attempt to diffuse the attacks of external critics on the Bank and possibly to signal the dawn of a "new" World Bank, Wolfensohn accepted a civil-society challenge to conduct a joint Bank-civil society-government assessment of structural adjustment programs (SAPs) and agreed to enter into the SAPRI initiative, which was finally launched in 1997.

SAPRI was designed as a tripartite field-based exercise, and a civil society team worked with a Bank team appointed by Wolfensohn to develop a transparent and participatory global methodology for gathering and documenting evidence of the impacts of World Bank-IMF SAPs at local-national levels in seven countries. This included local workshops, national fora and field investigations. The process was also undertaken by civil society organizations in two additional countries where the Bank and governments refused to participate.

Despite agreement on the common rules of the exercise and the review methodology, the World Bank team played an obstructionist role throughout the SAPRI process. For example, at public fora, instead of trying to listen to and learn from the evidence presented by civil society representatives about the impacts of SAPs, Bank staff almost always argued points and in the end, claimed that the fora presentations (which were part of the agreed-upon qualitative input) constituted "anecdotal evidence." Similarly, while civil society at the national level tended to accept joint research findings despite reservations, the Bank almost always found extensive faults in the draft reports. In Bangladesh, the Bank had over 50 pages of objections to the joint report covering four or five topics. Civil society groups, however remained firm that the Bank adhere to the commitments it had made to the methodology and process, and pushed ahead with field investigations where an increasing amount of data started to emerge about the impacts of SAPs from farmers, workers, women's and indigenous peoples' organizations, and even governments. Many government departments participated in good faith in these investigations, although they remained nervous about the Bank's willingness to accept the findings.

As the Bank's ability to control country processes decreased, so also did its ability to control the output of the Review. Even before the final and concluding national fora were reached, field investigations already indicated major problems in all aspects of adjustment programs -- from trade and financial-sector liberalization to the privatization of utilities and labor-market reforms. Reluctant to go public with these findings, the Bank team backed off from an earlier (written) agreement to present all SAPRI findings in a large public forum in Washington DC, with Wolfensohn present. Instead, the Bank team insisted on a closed technical meeting and a small session in Washington DC scheduled when Wolfensohn was not in town. Most important, the Bank now insisted that it and civil society each write separate reports. The Bank report used the Bank's own commissioned research as the basis for its conclusions and barely referred to the five-year SAPRI process. In August 2001, the Bank pulled out of SAPRI and buried the entire exercise, and except to say that it had learned a lot from SAPRI, the Bank did not commit itself to reshaping its lending policies based on the SAPRI findings.

On 15 April 2002, the full SAPRI report (under the name of SAPRIN, to include findings from the two countries where civil society conducted investigations without Bank involvement) was released to the public and received immense media coverage. The Bank entered the fray again and Wolfensohn requested a meeting with SAPRIN members. He expressed regrets that he and his staff had not been in touch with SAPRI and promised to read the report and discuss it seriously in the near future. To date, however, neither the Bank, nor Wolfensohn have shown any commitment to review and make changes to their adjustment lending. On the contrary, structural adjustment policies continue to be the mainstay of Bank-Fund lending through PRSPs and the Poverty Reduction and Growth Facility (PRGF).

The World Commission on Dams

Like the SAPRI, the World Commission on Dams also proved to be a thorn in the Bank's side. Established in 1997 following a meeting convened in Gland, Switzerland by the World Bank and the World Conservation Union (IUCN), the WCD was the first body to conduct a comprehensive and independent global review of the development effectiveness of large dams and to propose internationally acceptable standards to improve the assessment, planning, building, operating and financing of large dam projects. Although co-sponsored by the World Bank, the origins of the WCD lie in the numerous anti-dam struggles waged by dam affected communities and NGOs around the world, in particular those targeting World Bank-funded projects from the mid-1980s onwards. Chaired by then South African Minister of Water Resources Kader Asmal, the WCD was comprised of twelve commissioners from eminent backgrounds, and included representatives from the dam building industry, anti-dam struggles, indigenous people's movements, civil society organizations, the public sector and academia. Over a period of two and half years, the WCD commissioned a massive volume of research and received nearly 1000 submissions from around the world on the environmental, social, economic, technical, institutional and performance dimensions of large dams. The work of the Commission was monitored by the WCD Forum, which consisted of representatives from research institutions, NGOs, donor governments, the private sector and multilateral institutions including the World Bank.

The WCD's final report "Dams and Development: A New Framework for Decision-Making", was launched by Nelson Mandela in London in November 2000. Despite deep differences in the backgrounds and political perspectives among all those involved in the WCD process, the WCD report was widely acclaimed as a non-partisan and progressive framework for decision making for future water and energy planning.

Although the WCD worked independently from the World Bank, the Bank played a more active role in the development of the WCD Report than any other institution. Bank representatives were active members of the WCD Forum, and the Bank was consulted at every stage of the WCD's work program. Bank President Wolfensohn even applauded the WCD process as a model for future multi-stakeholder dialogues. However, this rhetoric did not translate into commitments to learn from the evidence gathered by the WCD, or to apply the new guidelines proposed in the Commission's Report.

While the WCD Report was welcomed by bilateral donors, other multilateral banks (such as the Asian Development Bank and the African Development Bank) and even some industry associations (such as International Commission on Large Dams -- ICOLD), the World Bank's response displayed a stunning lack of commitment to effectively learn from past mistakes, and it even misrepresented the findings of the Report. At the Report's launch in November 2000, Wolfensohn said that the Bank would consult its shareholders on their opinions. The Bank's subsequent position on the WCD Report was based primarily on the responses of dam-building government agencies in the major dam-building countries, which rejected the Report's findings and guidelines, and deemed them inapplicable and even anti-development. In a March 27, 2001 statement, the Bank said that, "Consistent with the clarification provided by the WCD Chair, the World Bank will not 'comprehensively adopt the 26 WCD guidelines', but will use them as a reference point when considering investments in dams." And further that, "This was an unprecedented and highly productive dialogue between all parties. The World Bank believes that such dialogues are very important for the many controversial development issues, and will continue to engage in them in the future."

In 2001, the World Bank embarked on a review of its resettlement policy and a new Water Resources Sector Strategy (WRSS), but did not incorporate the recommendations of the WCD Report in any meaningful way in either document. On the contrary, both policies reflect a lowering of Bank standards for social, environmental and economic dimensions of Bank supported projects. In a letter to President Wolfensohn on12 JULY 2002, the twelve commissioners of the WCD said, "Given that a major thrust of the WRSS is to recommend that the Bank actively re-engage in financing large-scale dams (referred to in the WRSS as high-reward/high-riskhydraulic infrastructure), we think that it is unwise to dismiss without justification or explanation the recommendations of the first-ever global review of dams reached through consensus and developed through an extensive participatory process with support from the World Bank."

The Extractive Industries Review

The experience of the WCD was relived in yet another "dialogue between all parties" in the Extractive Industries Review (EIR). The EIR was announced in September 2000 during the World Bank-IMF annual meeting in Prague. Challenged in a public meeting by Friends of the Earth International Director Ricardo Navarro on the impacts of World Bank financed oil, mining and gas projects, Wolfensohn responded --to the surprise of his staff - that the Bank would undertake a global review to examine whether Bank involvement in extractive industries was consistent with its stated aim of poverty reduction. Led by Indonesia's former environment minister Emil Salim-himself a controversial figure in the eyes of peoples' environmental movements-- the EIR process was less thorough, less independent and less participatory than the WCD process. Perhaps reflecting some learning from the WCD process, the World Bank attempted to keep a much tighter hold on the EIR research and consultations and, despite protests from peoples' movements and NGOs involved in the EIR, Bank staff remained active in scrutinizing inputs into the process. Peoples' movements and NGOs fought hard to ensure that factual information about the impacts of extractive industries on different constituencies were fed into the EIR.

The EIR Report was published in Lisbon on 11 December 2003 and, despite Bank interference, turned out to be a surprisingly strong document. Although the Report did not respond to all the concerns and demands of peoples' movements and NGOs, it contained strong language and recommended that the Bank and its private sector arm, the International Finance Corporation (IFC), phase out their involvement in oil, mining and natural gas within five years and shift their financing to renewable energy. The Report caused an outcry among private financiers (such as Citibank, ABN Amro, WestLB and Barclays) for whom Bank involvement in the oil, mining and gas industries is essential before they are able to extend financing to such projects.

As with the WCD Report, the World Bank ignored many of the EIR Report's important recommendations. Following the release of the EIR Report, a leaked copy of the World Bank management's response (prepared on behalf of President Wolfensohn) flatly rejected the ambitious proposal that the Bank phase out of extractive industry by 2008. The management report stated that, "Adopting this policy would not be consistent with the World Bank Group mission of helping to fight poverty and improve the living standards of people in the developing world" and that ending the financing of oil projects "would unfairly penalise small and poor countries that need the revenues from their oil resources to stimulate economic growth and alleviate poverty." As an example, the report cited Chad and Cameroon, where the Bank has financed an oil pipeline despite vociferous opposition by local communities and environmental groups, and which has been plagued by controversies about violations of human rights and environmental standards. Strangely enough, the Bank argued that it should remain directly involved in extractive industries because it can ensure compliance with social and environmental standards, notwithstanding all evidence to the contrary.

Quizzed about the Bank management response to the EIR Report at an awards ceremony in Georgetown University in Washington DC on 25 February 2004, Wolfensohn responded that he had not seen the management response before it was leaked. He also claimed that the he had learned that the Report was not a consensual report and that the Bank had an obligation to respond to those in the process who were not part of the represented consensus as well. Here, too, was a repeat of the post WCD scenario as Wolfensohn hid behind the "Southern countries" rhetoric, the argument being that because Southern governments did not accept the EIR recommendations, the World Bank could not make firm commitments to implement many of these recommendations such as respecting human rights and ensuring that oil, gas or mining projects do not go ahead without the free, prior and informed consent from local indigenous peoples.

On 9 February 2004 in Melbourne, Wolfensohn was presented with a letter from five Nobel laureates--Archbishop Desmond Tutu, Jody Williams, Sir Joseph Rotblat, Betty Williams and Mairead Maguire-- urging him to adopt the recommendations of the EIR. In the letter the five laureates said ''We urge you in the strongest possible terms to embrace the spirit of the report and accept the recommendations in their entirety when devising a strategy for moving forward.'' And further, "War, poverty, climate change, greed, corruption, and ongoing violations of human rights - all of these scourges are all too often linked to the oil and mining industries. Your efforts to create a world without poverty need not exacerbate these problems. The Review provides you an extraordinary opportunity to direct the resources of the World Bank Group in a way that is truly oriented towards a better future for all humanity."

Though the Bank was an initiator and sponsor of both the WCD and EIR, it refused to adopt their findings even in principle, hiding behind the opposition of its larger developing country clients such as China and India. In late 2004, the World Bank announced that it would pursue a new framework for addressing the social and environmental impacts of the projects it finances. Its "country systems" approach would rely mainly on borrower governments' social and environmental standards and systems (for example, a country's relevant national, sub-national, or sectoral implementing institutions, and applicable laws, regulations, rules, procedures, and track records) rather than the Bank's own safeguard policies for project implementation. Although the Bank is in any case expected to comply with national policies, its existing safeguard policies (although rarely complied with even by Bank staff themselves) provides at least a minimum set of standards by which the Bank's commitment to environmental and social sustainability can be assessed. The new "country systems" approach will likely let the Bank off the hook from such assessments since it can now conveniently claim that it is driven by the wishes and needs of its borrowers rather than its own centralized policies.

The Limits of Reform

Questions have been raised by the press and many NGOs about the amount of autonomy that Wolfensohn had in reshaping Bank policies based on the results of the SAPRI, WCD and the EIR. Was Wolfensohn truly well intentioned in these efforts, but thwarted from meeting his commitments by intense political pressures from the IMF, US Treasury and other G7 countries? Or was Wolfensohn all talk and no action, more concerned with his own image than the outcomes of these initiatives, and unwilling to use his political capital if it compromised his position with the higher powers that control the global economy?

Reflecting on the SAPRI experience, Doug Hellinger from the Washington DC-based NGO Development Gap, said that Wolfensohn "would go no further in following up on the damning findings that emerged than his staff and Board would allow. While he had told his management team that he had left his investment banking days behind him to launch a direct assault on world poverty, throughout his presidency he would repeatedly refuse to risk the loss of his political capital, much less his job or future standing, on this venture whenever he ran up against the powerful interests behind adjustment programs. Let civil society or perhaps his chief economist, do the heavy lifting, but, in the end, Wolfensohn, like his less flamboyant predecessors, has faithfully performed his job of protecting these special economic and financial interests."

The increasingly conflictive relationship between civil society and Wolfensohn came to the boil during the tumultuous World Bank-IMF annual meeting held in Prague in September 2000, which had to be cut short owing to massive demonstrations. Confronted with a list of thoroughly documented charges at the famous Prague Castle debate, Wolfensohn lost his cool, exclaiming, "I and my colleagues feel good about going to work everyday." It was an answer that was matched only by IMF Managing Director Horst Koehler's equally famous line at the same debate: "I also have a heart, but I have to use my head in making decisions."

The Years in the Wilderness

By 2001, with the advent of a right-wing administration at the White House, the liberal Wolfensohn's future turned uncertain. Partisans of his nemesis Meltzer had become his bosses. He spent his last four years in office steadily acquiescing to the Bush administration's "bilateralization" of the World Bank program to support its wars of aggression in Afghanistan and Iraq. In Afghanistan, aside from pledging $570 million and fronting the US effort to raise billions of dollars for reconstruction, Wolfensohn expressed interest in the Bank's participation in financing a fuel pipeline to channel massive gas reserves through Afghanistan from landlocked Turkmenistan to India or Pakistan, a project greatly desired by US energy corporations backed by US Vice President Richard Cheney.

In Iraq, Wolfensohn, prodded by Washington, committed $3-5 billion for reconstruction and agreed to manage the Iraq Trust Fund to channel money to development projects undertaken by the occupying regime, especially those aimed at "capacity building" in the private sector, a priority aim of the Bush administration.

But Wolfensohn could not prevent the erosion of his authority and prestige. Distrusted by the White House as a Clinton holdover, he was also regarded by developing country governments as a lame duck whose reformist rhetoric no longer conformed to the unilateralist thrust of US government policy. Then came a kind of redemption in the form of Paul Wolfowitz and his scandalous appointment as Wolfensohn's successor. In a very real sense, James Wolfensohn's reputation was salvaged by George Bush: so rampant is the fear of Wolfowitz that the departing Wolfensohn, now being viewed through rose tinted glasses, is being canonized as a patron of development.

What can we learn from the Wolfensohn era in the World Bank? At several moments during his presidency, Wolfensohn had in his hands opportunities to at least slow down the Bank's destructive trajectory, even if not turn it around. He had the (albeit cautious) commitment of the Bank's fiercest critics to objectively review Bank policies, programmes and projects in a bid to halt its worst excesses. But Wolfensohn converted what could have been a potential victory for the Bank into unmitigated defeat. The Bank now stands discredited not only for not meeting its own stated goal of "creating a world free of poverty," but also for its inability and unwillingness to keep its word and meet the commitments it made publicly through its various "multi-stakeholder dialogues." Now, more than ever, the World Bank is associated with double-speak, dithering and duplicity.

Arguably, the most important lesson to be learned from the Wolfensohn decade is that the World Bank is too large, too political, and too central to the structure of US-led global capitalism to be changed by a single individual, even one as charismatic and shrewd as James Wolfensohn. In the last instance, the Bank serves as an extension of US corporate and strategic interests. Wolfensohn could only modify its performance at the margins. Now even that slight room for maneuver to initiate cosmetic reform is being eliminated as Paul Wolfowitz, whose name is synonymous with unilateralism, steps in as Bank president.

(1) Malloch-Brown's career has experienced a meteoric rise in the UN system: he was recently appointed to a newly created post in the office of the UN Secretary General, and is now responsible for US-UN relations.

About the Authors: Walden Bello and Shalmali Guttal are members of the staff of the Bangkok-based research, analysis, and advocacy organization Focus on the Global South. Much of this report is drawn from Bello's latest book Dilemmas of Domination: the Unmaking of the American Empire (New York: Henry Holt and Company, 2005). The authors would like to acknowledge the contributions of Janneke Bruil (Friends of the Earth International), Doug Hellinger (the Development Gap), L.C. Jain (planner and economist), Peter Bosshard (International Rivers Network), Patrick McCully (International Rivers Network) and Soren Ambrose, 50 Years is Enough.

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