Tom Clausen, ex-head of Bank of America, found it difficult to cope with the mandatory attacks from US politicians. Barber Conable, a skilled US politician, was wonderful on Capitol Hill and fine with the developing country customers, but was slow to grab the administrative structure of the bank. Arguably Lewis Preston, ex-head of JP Morgan, who is now retiring early because of ill-health, has failed on the political count. But with Jimmy Wolfensohn the bank gets the person it should have got instead of Tom Clausen in 1981, when Robert McNamara left. He had been nominated by Mr McNamara, but this was not supported by the US administration.
This was the second time that Mr Wolfensohn was passed over for a job that he should have got: he was deputy chairman of Schroders in London and was the favoured candidate to take over when Gordon Richardson became Governor of the Bank of England, but the ruling family did not want a young and bouncy Australian in charge of its merchant bank.
These apparent reverses have been for the best. Rejection in London pushed him into building his career in New York, where he was a partner at Salomon Brothers and led the reconstruction of Chrysler Corporation. He also became a US citizen. Rejection for the job at the World Bank pushed him into setting up on his own. His investment banking boutique in New York now advises some 30 multinationals, and he has joint ventures with Fuji Bank in Japan and Lord Rothschild in London. He also helped the performing arts by rebuilding the finances of Carnegie Hall in New York and the Kennedy Center in Washington. This is glitzy, top-of-the-range stuff; much more fun than running a London merchant bank; and in a way more useful to the World Bank than the plodding professional Wall Street approach.
Mr Wolfensohn is the outsider who has made a virtue of coming from afar.
But the combination of financial expertise and interest in the top echelon of American society may not appear wholly appropriate qualifications for an organisation that is supposed to help the developing world. Here Mr Wolfensohn carries the endorsement of Al Gore, the vice- president, whose concern for the environment earned him the sobriquet of "Ozone" from President Bush during the election campaign. And he has apparently been a long-time devotee of the late Barbara Ward, the acclaimed British writer on development issues. The World Bank job is a dangerous one, for it has damaged many reputations, but Jimmy Wolfensohn looks a winner. He is good at coping with reverses; and he is a lot of fun.
So what should he do? It is easy to sketch the issues facing the bank. On the one hand it has to secure support from its principal funders, the main developed countries. This is a grave problem for IDA, the bank affiliate that gives subsidised loans to the poorest nations, and which needs its funds topped up next year. It is particularly important to rebuild congressional support, for the US remains the largest single donor to IDA.
Next, the bank needs to become leaner so that it can more credibly face the "fat cat" attacks from Congress. Here Lewis Preston has made a start, but this must go much further. It is not just a question of asking "how can we do this more cheaply?" it is more one of asking "do we need to do this at all?" It is not clear that people within the bank realise the scale of change that will be imposed if it does not act more decisively.
Then the bank needs to rebuild its relationship with its customers. It is quite alarming the extent to which the bank's (broadly sensible) policies have become a target for attack from people in Western charities who may not be very knowledgeable about finance but who are honourable and who can see the downside of well-meant advice.
But I think there is something even more fundamental that the bank needs to do, which is to question both its structure and its raison d'tre.
The structure of any international organisation is bound to be cumbersome, but need it be this cumbersome? There is a fundamental illogicality in an institution owned by governments - and therefore subject to all the political pressures that such ownership imposes - trying to promote the private sector in its client countries. The core bank structure is probably set firm, but it is worth asking whether parts could be hived off into market-based entities. The bank rightly calls for privatisation; could it not privatise parts of itself?
This leads to the question: what is it for? To provide finance for projects that the market will not support? But if the market won't provide finance it is worth asking if the projects should be supported at all.
Of course there will be some things that only large international organisations can do. For example, the bank and the IMF have been at the core of the rescue of Mexico. The bank will soon be making the largest loan it has ever made to the Mexican banking system and a parallel loan to the social sector. Finally, no one should sneer at the body of expertise that the group has built up.
But the future direction of the World Bank needs some imagination, some lateral thinking. It needs to be run well, of course, but that is not enough. Its whole role needs to be rethought; and with luck it will now have someone who can help it do so.Reuse content