WOLFOWITZ SCANDAL SPOTLIGHTS U.S. REIGN AT BANK

by Emad Mekay

(IPS) WASHINGTON -- Recent White House backing for the beleaguered World Bank President Paul Wolfowitz, despite the findings of an internal report that said he had violated the Bank's ethics rules, is bringing the role of the United States in running the Bank in "undemocratic" ways under scrutiny, with rising calls for Washington to loosen its grip on the institution.

On Tuesday, the anonymous World Bank whistleblower who initially helped leak documents about the hefty pay and promotion package Wolfowitz engineered for his girlfriend and fellow Bank official, Shaha Riza, spoke out in a letter published on the Internet and called for more a democratic process to select the World Bank president.

"Today, we do not know the final outcome of the Paul Wolfowitz scandal here at the Bank. We do know that we are well past the point when the Bank president could resign with any semblance of good grace," the letter says.

"At the World Bank many of us believe that this unseemly episode clearly illustrates the need for rapid reform of the governance framework, in general, and the presidential selection process in particular," said the letter, posted on the website of the Government Accountability Project (GAP), a Washington-based whistleblower protection agency.

The letter describes a sense of disappointment among Bank's 10,000-strong staff that the U.S. government, despite its rhetoric about democracy around the world, appears unabashed in its continued backing for Wolfowitz despite the findings of the Bank panel and the sentiment of Bank staff who have made it clear they want to see Wolfowitz's departure.

"As Bank staff, we watched incredulously with the rest of the world as this man demonstrated that he was accountable solely to the leader of a single country, a country which owns only 16 percent of the Bank's shares and whose policies show that it remains unaffected by views of its global neighbors," said the letter referring to the U.S. unilateral style at the Bank.

"The shareholders of the World Bank will have learned nothing from the damage done to the institution by Paul Wolfowitz if they again allow a minority shareholder to install a president of its choosing and to claim a defining and proprietary influence."

The statement came amid signals from the Bush administration, which essentially appointed Wolfowitz in June 2005 to the Bank's presidency, that it does not find Wolfowitz's behavior worthy of a dismissal.

The Bank's special panel investigating the matter found on Monday that the 63-year-old Wolfowitz violated Bank standards and the ethical obligations of his contract.

Wolfowitz immediately disputed the findings as "unbalanced and flawed." The Bank's 24-member Board of Directors is expected to issue a final decision on his fate later this week.

White House Spokesman Tony Snow reiterated support for Wolfowitz Tuesday while U.S. Secretary of State Condoleezza Rice said during a visit to Moscow that the panel's results do not "seem to be the kind of thing that you would want to see the dismissal of the World Bank president over."

U.S. Vice President Dick Cheney had earlier backed Wolfowitz and advised him to stay on. "I think he's a very good president of the World Bank, and I hope he will be able to continue," Cheney said Monday.

But this support has so far only brought more attention to Washington's unchecked influence inside one of the world's most influential economic institutions.

The World Bank has 184 member countries, but only one, the United States, selects its president.

When the Washington-based World Bank was first set up in 1944 by the victors of World War Two, they reached an informal agreement allowing the U.S. to appoint the head of the World Bank, while Europe appoints the head of its sister institution, the International Monetary Fund.

Critics have long charged that both institutions, while professing to fight poverty, have largely been used as foreign and economic policy tools for the United States and Europe.

The latest episode further cemented this view.

"By jealously guarding its prerogative and elevating Mr. Wolfowitz to this influential position, the U.S. government has reinforced the perception that it views the World Bank primarily as a foreign policy tool to underwrite U.S. geopolitical and economic interests," wrote Bruce Jenkins and Nancy Alexander, two veteran World Bank watchers, in a recent online posting.

With more than $23 billion in loans last year and involvement in thousands of projects around the world, such as dams, roads, schools, hospitals, and irrigation systems, the World Bank maintains enormous international sway over many governments, and must be governed in a more accountable manner, observers say.

"Reforms are urgently needed if the Bank is to strengthen its legitimacy as a transparent, accountable, 21st century multilateral institution that can effectively pursue a mission of poverty reduction," Jenkins and Alexander said.

On Tuesday, another call to moderate the U.S. role at the Bank came from the independent Washington-based group New Rules for Global Finance.

"Paul Wolfowitz's problems at the World Bank stem in part from a widespread perception that he disproportionately represents U.S. interests rather than objectives that command a global consensus," said the appeal signed by dozens of economists, activists and academics.

Bank campaigners lobbying for changes in a global economy they say is skewed in favour of rich nations also joined the fray, and are demanding more than merely another U.S. replacement for Wolfowitz.

"The head of the World Bank Group, ostensibly the most important position in development financing, should not be the unilateral decision of the U.S.," said Sameer Dossani of the 50 Years Is Enough Network, an organization that has fought the Bank's influence on poor nations.

"If the World Bank has any hope of recovering from this ordeal, it must at least make some attempt at developing transparent and democratic procedures for hiring its own president," he said.