After Wolfowitz, Who Will Lead the World Bank?

The resignation of Paul Wolfowitz from the World Bank has prompted the question of who is on the short list to replace him as the organization's president. Michele Norris talks with Sebastian Mallaby, director of the Maurice R. Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations. Mallaby is the author of The World's Banker.

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ANDREA SEABROOK, Host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Andrea Seabrook.

MICHELE NORRIS, Host:

And I'm Michele Norris.

One day after an embattled Paul Wolfowitz resigned as president of the World Bank, the attention turns now to the questions of who will replace him and how or if the bank's mission might change? By tradition, as the bank's largest shareholder, the U.S. selects the head of the World Bank.

SEABROOK: A Story of Failed States, Financial Crises and the Wealth and Poverty of Nations." He's also the director of the Maurice R. Greenberg Center for Geoeconomic Studies and a fellow with the Council on Foreign Relations. He joins us now.

So good to have you with us.

SEBASTIAN MALLABY: Great to be with you.

NORRIS: Now, after a tumultuous period, what kind of leader might the president be looking for?

MALLABY: Well, there are normally three criteria to look at for a good leader of the World Bank. The first is somebody who actually understands the subject of development. Some of the people that were chosen in the past such as Barber Conable, who was picked in 1986, had been a congressman focused on domestic tax issues, didn't really know about international development and didn't particularly want to know about international development. So you do need somebody who understands the substance, otherwise they spend a year or something just learning the ropes before they can do anything.

The second thing is you need a great communicator because the World Bank is constantly under attack from left and from right. And the third thing is you need a manager because this is an institution with 10,000 people - a very complex institution, full of disputatious economics Ph.D.s. And so, you need to be able to lead these people in a coherent way and that's were Paul Wolfowitz clearly failed.

NORRIS: There are lots of names now in speculation. Would you mind ticking through some of those for us?

MALLABY: Well, the most obvious one and I think the front-runner is Bob Zoellick, who was the U.S. trade representative in the first Bush administration and then went on to be the number two at the State Department under Condoleezza Rice. And Bob Zoellick understands international economics very well, and he really wanted the job last time around. And only didn't get it I think because Condoleezza Rice really wanted him to come over to the State Department.

NORRIS: As we move down that list?

MALLABY: A name that I think is intriguing is Stan Fischer who is the governor of the Bank of Israel - the central bank of Israel. But who is a U.S. citizen and was formerly both chief economist at the World Bank and also the number two at the International Monetary Fund.

NORRIS: And before we leave the list, are there any other names that we should take note of?

MALLABY: You know, one name, Michele, who was in the mix in 2005 when the job came up last time was Colin Powell. People talked about it. It wasn't ever clear if he really wanted the job and that remains a question. But he was interested, he would fit the bill because he has experience, clearly of managing a big organization - the State Department, he did that pretty well.

And he does care about development and understands something about it. So, I think he would be a great candidate.

NORRIS: Bill Clinton?

MALLABY: Again, another intriguing name. You know, it would be a clever move on the part of the White House to offer him the job because it might slightly sort of tie him down and weaken Hillary as a candidate. Whether Bill would do it in light of his wife's ambitions, I'm not quite so sure.

NORRIS: Tony Blair has emerged as what some are calling a surprise contender. How realistic is that?

MALLABY: Well, I mean, I think in some ways he's a very attractive figure. I think he's greatly expanded Britain's overseas development budget so he has a track record of caring about development. He needs a job since he's about to step down as prime minister. He's got global stature, obviously. I think the drawbacks are twofold. First of all, he is associated with the Iraq war just like Paul Wolfowitz was. And secondly, it's not clear he wants it.

NORRIS: Might European board members be emboldened by this? Is it a case where they might try to flex their muscle as they have done in the past?

MALLABY: Yes, they might be. But it's easier for the Europeans to be united against one person, as they were in this instance than to unite around an alternative person. Because, trying to get European consensus on any subject is very difficult. And to do so - when you're kind of up against a White House that would come out with one name and that would be it. It would be totally united is pretty tough.

NORRIS: How soon are we likely to see a successor?

MALLABY: I think the White House does have to move fairly quickly in this instance. Last time around in 2005, as I recall there was a sort of two- or three-month period in which there was a lot of speculation and the difference this time is that, A, we're not coming out of an election and, you know, a transition in which the administration has lots of other personnel issues to fill.

And second of all, I think they realize that if they don't come up with an American name quickly, then there is a danger that the Europeans might carry a lesser alternative, non-American name. And then, this White House could go down in history as the first to lose the American prerogative over the head of the World Bank.

NORRIS: Sebastian Mallaby, thanks so much for speaking with us.

MALLABY: Nice to be with you.

NORRIS: Sebastian Mallaby is the author of "The World's Banker: A Story of Failed States, Financial Crises and the Wealth and Poverty of Nations."

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Q&A: The World Bank at a Crossroads

The World Bank was founded in 1944, charged with the monumental task of eradicating global poverty. It offers loans to countries that might not otherwise get them. Since its inception, the bank has lent or given $400 billion.

Yet critics say the World Bank is a bloated, corrupt organization that has outlived its usefulness. Those criticisms have gotten a boost from the scandal involving outgoing bank president Paul Wolfowitz. He will step down from his post June 30 following accusations that he arranged a sweetheart promotion and pay deal for his companion, bank employee Shaha Riza.

Sebastian Mallaby is a senior fellow at the Council on Foreign Relations and author of The World's Banker. He spoke with NPR about the challenges facing the World Bank.

If you were appointed World Bank president, what would be your first priority?

To rebuild a very bruised institution. If the World Bank were a private company right now, its stock price would be down about 25 percent because of a loss of confidence from the staff and from the borrowers — and also, a loss of confidence from the shareholders, the rich countries who give the bank money. Everybody is down on the institution now.

Are the bank's problems a direct result of the Wolfowitz scandal?

I think Wolfowitz's management style has a lot to answer for. Part of it is that he came in with a strike against him because of the Iraq war, and part of it is he made it worse by appearing not to listen to people. He was just a bad leader.

For a long time, the World Bank was criticized for funding large projects, such as dams, in developing countries—projects that these countries didn't necessarily want but were, in a way, foisted upon them. Is that still a fair criticism?

That criticism was probably accurate around 1980. That criticism had some truth to it, and the World Bank responded. By the early 1990s, the more responsible critics were saying that, actually, when it comes to the interaction of the environment and development, the World Bank was the most responsible institution in the world. And yet the criticism carried on. It was almost because people had scored such dramatic success pointing out the World Bank's problems a decade earlier that they didn't want to give up on that shtick.

Critics of the World Bank argue that it is a vestige from another era and it is no longer needed. Do you agree?

No. I think that's wrong. The reason you need a World Bank is twofold. First of all, there are poor countries that still don't have much access to private capital markets, and these countries benefit from the World Bank.

Secondly, there are projects that support global public goods. Take the concern over global warming. If China is building a coal plant, the whole world has an interest in making sure it is a clean coal plant. The Chinese could borrow money themselves and make a clean coal plant, but they are more likely to do that if they are offered subsidized lending from the World Bank. Otherwise, the borrowing countries will say 'Why should we pay extra for a cleaner coal plant?' The benefits are shared globally, so shouldn't the cost be shared globally? That's where the World Bank can help.

Another critique of the World Bank is that it encourages imprudent borrowing and feeds an addiction to cheap loans. Is that a real problem?

It seems to me that private capital markets can easily create an addiction to cheap capital, too. That's what you've seen ever since Mexico defaulted in 1982 because it borrowed too much from New York banks. Another argument for the World Bank is to be a counter-cyclical lender, to lend more in the wake of, for instance, the Asian financial crisis in 1997, when all of a sudden, Southeast Asia didn't have any private lenders.

What sort of person would make an ideal president of the World Bank at this time?

You need, first of all, someone who understands the institution and doesn't need to learn on the job. Typically the World Bank leaders spend the first six months figuring out what this complicated animal is. A couple of names come to mind. One is Stanley Fisher, who is now the governor of the Central Bank of Israel, although he's an American citizen. In the past, he was the chief economist at the World Bank. He's an insider with man-of the-world experience. He's not purely a creature of the bureaucracy.

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