THE WORLD'S BANKER
A Story of Failed States, Financial Crises, and
the Wealth and Poverty of Nations
By Sebastian Mallaby
Penguin Press -- 462 pp -- $29.95
Let's see now. World Bank President James Wolfensohn is an egomaniacal tyrant who sends bank vice-presidents to fetch his luggage and his female chief of staff to bring him coffee. He terrorizes executives in the hallways of the bank's lavish headquarters by asking: "Are you still here?" Thin-skinned and insecure, he meets criticism with rage. Unable to share credit, he passes off the work of others as his own while fantasizing about winning a Nobel Peace Prize.
Or perhaps Wolfensohn is a visionary leader who realizes that to rescue the 3 billion desperately poor people of the world, he must shake up the inefficient and cynical institution. He has selflessly given up the huge riches of the boutique investment bank that he founded in order to attack the scourges of hunger, disease, and poverty. A gracious host and talented charmer, he employs his own $400 million fortune and vast Rolodex of the world's wealthy and powerful to pursue his admirable aims.
Actually, Wolfensohn comes across as both characters in The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations by Washington Post columnist Sebastian Mallaby. But this readable book is much more than a portrait of a contradictory and complex character. It also offers a provocative account of Wolfensohn's two five-year terms -- the second is just about to end -- that bookmark an intense period of change in the World Bank's 60-year history.
As Wolfensohn took over in 1995, the bank was deeply troubled: Its professionals were "arrogant," its loan terms were "cruel," and its projects too frequently failed, says the author. With its $20 billion-a-year loan portfolio, the bank imposed vast dam and water projects on the Third World without regard to their effects on the environment or indigenous people. One 1980s project in Brazil destroyed 50,000 square miles of Amazon rain forest, an area about the size of Wisconsin.
The bank insisted on "structural adjustment" of the economies of fragile nations that were already struggling to repay loans long since stolen or squandered by corrupt dictators. It demanded repayment no matter what the cost: In the mid-'90s, Uganda spent $2.50 per capita for health care and $30 per citizen on debt repayment. Impoverished nations were forced by bank policies to borrow to service the old debt in a spiral that made no sense. Meanwhile, even during the early '90s, less than 1% of the Bank's loan portfolio went toward fighting AIDS.
As an energetic outsider, Wolfensohn could see these flaws even if he couldn't always fix them. He wisely insisted that the bank's highly educated but intellectually insular staff open itself up to the nongovernmental organizations (NGOS) that World Bankers dismissed as "no-gos." From the outside, NGOs such as Oxfam and CARE successfully began to pressure the bank to change even as Wolfensohn pushed from the inside. Consequently, the bank hired environmentalists and anthropologists and brought borrowing nations in on decision-making. To fight the graft and corruption among African governments and hold local officials accountable, the bank made the whole loan process transparent, even telling parents how many new classrooms they should expect to see.
The link between bank and NGO was a successful collaboration for a while. But sometime in the late 1990s, argues Mallaby, Wolfensohn swung the bank from arrogance to timidity, allowing the institution to be pushed around by the more radical groups. Mallaby details how environmental outfits eventually delayed and quashed dams and pipeline projects in China and Chad by frightening the bank away from seemingly justifiable investments.
In this, Mallaby himself is guilty of a little NGO-bashing. These "civil society" groups are, after all, not some nefarious conspiracy but usually grassroots organizations whose support grows out of a perceived need among the general public. Sure, some of the rhetoric of Friends of the Earth and its brethren is ill-informed and unscientific, but that's democracy, bro. Mallaby also errs by insisting that "nobody saw what was coming in Seattle" when the World Trade Organization talks collapsed as thousands protested in the streets. In fact, the WTO -- a sister organization to the bank -- had already splintered as developing nations refused to swallow more trade-liberalization nostrums. It wasn't the NGO members in turtle costumes who ended the talks. It was Brazil, Egypt, and India -- leading the poorer nations of the world to outvote Europe and the U.S.
Still, The World's Banker is an engrossing story. At its heart is a fascinating character and a lively retelling of the tortured history of an important institution that almost no one understands.
By Paul Magnusson