Austin Bay Blog

Paul Wolfowitz has made economic reform and anti-corruption pillars of his stint at the World Bank. Good for him, because corruption saps the economic and political vitality of far too many developing nations.

Often corruption in the Third World amounts to doing favors for family members (hello Kofi Annan), clan, and tribe.

Wolfowitz has made World Bank loans contingent on reducing corruption and encouraging accountability.

However…but…get a load of this.

And talk about self defeat.

Wolfowitz got involved in a promotion and pay issue with his girlfriend. HIs girlfriend works at the World Bank. And apparently on his staff.

What a nobrainer. Blatant nepotism in a public institution. Credit Wolfowitz with appropriate contrition, if after the fact. Wolfowitz also says he informed the board of this relationship when he joined the bank. That was the right move — but he should have recused himself from promotion and pay issues.

The lede:

World Bank President Paul Wolfowitz admitted on Thursday he made a mistake and apologized for his handling of the promotion and pay increase of his girlfriend and staffer Shaha Riza.

“I proposed to the board that they establish some mechanism to judge whether the agreement reached was a reasonable outcome,” Wolfowitz said in a statement he read at a news conference before upcoming meetings of finance ministers in Washington this weekend.

“I will accept any remedies they propose,” he added.

Overweaning arrogance and lack of self reflection are weaknesses of the Wolfowitz-Hadley-Libby-Feith crew. As a group they were well-suited for Beltway political wars — the kind of Beltway congressional and executive agency infighting that Rumsfeld (and Cheney, Libby’s boss) thought they would face in their battle for Pentagon reform and reorganization. 9/11 changed the mission. Instead of a figurative battle in the Beltway’s arena, the civilized world faced a long war with barbarism, a long, bloody war that placed a preimum on strategic clarity, personal courage and perseverance, not the contacts on your Rolodex. After 9/11 the entire lot should have been eased out in favor of experienced, genuine war fighters — real war fighters instead of Beltway Clerks.

World Bank employees believe Wolfowitz has compromised the institution’s integrity. They certainly have a case:

But the World Bank’s employee representative group called for Wolfowitz to resign during a staff meeting at the bank.

“The president must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff’s trust in his leadership,” according to written remarks presented at the meeting by staff association chair Alison Cave and obtained by Reuters.

Note critics want to use this scandal as a reason to end US leadership at the World Bank. The Bush Administration must fight for US leadership. But what a steep hill to climb. WOlfowitz’ personal behavior has undermined the legitimacy of his public anti-corruption policy.

And read the entire Reuters report.

UPDATE: The Washington Post weighs in.

More data on the pay issue:

His acknowledgment, though cryptic, was a major new development in an unfolding scandal at the global lending institution, which seeks to help the world’s poorest countries. With annual meetings of the the bank and the International Monetary Fund convening in Washington this week, the World Bank’s executive board is discussing Wolfowitz’s future.

Wolfowitz has been assailed in recent days by a barrage of questions about two large salary increases that were given to his girlfriend and colleague, Riza. Visibly agitated during a news conference today, he tacitly acknowledged playing a role in those increases.

Let’s add this paragraph, because it suggests that real favoritism was involved (I know, I called it nepotism in my original post– and I think that is the more appropriate term here):

Wolfowitz, President Bush’s choice to head the World Bank, took over in 2005. Riza was transferred to the State Department shortly afterward, in accordance with conflict-of-interest rules. She is still paid by the bank and she has received raises that increased her pay to $193,590 from $132,660, according to the bank’s employee association, which has said the raises violated bank rules that limit the size of pay increases.

UPDATE 2: The Economist sees the same corrosive hypocrisy I described, vis a vis Wolfowitz’ anti-corruption policies. Those policies are critical. Shades of Clinton — the personal undermining the political.

The lede:

UNDER the demanding but not always inspiring leadership of Paul Wolfowitz, the World Bank has toiled hard for the past year, hammering out a strategy to fight corruption until every last detail was in place. In its finally approved form, that well-honed document has much to say about the vital role of a “vibrant civil society” and “competitive media” in holding officials’ feet to the fire.

But as he prepares to welcome ministers to the bank’s spring meetings in Washington, DC, on April 14th and 15th, Mr Wolfowitz’s own toes (so memorably exposed when he doffed his shoes during a visit to a Turkish mosque) may feel a bit toasty. For that, he can thank the Government Accountability Project (GAP), a vibrant participant in America’s civil society—and the document it has fed to competitive media still far more fascinated by the man than by the organisation that he has run for almost two years.

The document in question is the salary history of Mr Wolfowitz’s girlfriend, Shaha Riza, who was working at the bank at the time of his arrival. Three months later, Ms Riza was posted to America’s State Department at the insistence of the bank’s ethics committee, which was not happy for one sweetheart to supervise another. What has raised eyebrows and greened complexions in Washington in recent weeks is the deal’s super-generous financial terms: before she left the bank, Ms Riza was earning $132,660. Two big pay hikes later, she takes home $193,590, much more than the secretary of state herself.

The effect of the revelations on the anti-corruption program:

According to the bank’s anti-corruption strategy, the public disclosure of income and assets “can help to enhance the credibility of decision-makers”. But when Mr Wolfowitz’s incredulous underlings read about these handsome sums in the Washington Post on March 28th, they flooded their staff association with expressions of “concern, dismay and outrage”; the association duly agreed that Ms Riza’s terms were “grossly out of line” with staff rules and “extraordinarily discouraging” to bank minions whose entire annual pay was less than Ms Riza’s rise.

Here’s the Economist’s version of my observation about Beltway Clerks not being fit to fight long wars:

Now, the fear is not an excess of ambition, but a lack of traction; not that Mr Wolfowitz will overreach, but that he fails to follow through.

They can talk the academic side. They can’t wage it in the field — and wagining it in the field in the case of the World Bank meant setting an example of ethical behavior in both letter and spirit.