Banking on hegemony
By Emad Mekay

WASHINGTON - Ever since the incumbent president of the World Bank, James Wolfensohn, announced earlier this month that he will not seek another term, a debate has raged over the possible successor, with names of potential candidates popping up almost on a daily basis. But many watchdog groups say the real issue is not the race, but the lack of democracy at both the Bank and its sister institution, the International Monetary Fund (IMF).

"The debate should not be focused on who runs the Bank but on two other issues," says Rick Rowden, a policy analyst with ActionAid USA. "One is the undemocratic selection process and why the US just gets to call the shots and put in its guy. But even that is a relatively minor issue. The real task at hand for citizens in all countries is to question the undemocratic nature of the IMF and the World Bank themselves."

Since Wolfensohn, the Bank's 71-year-old two-term president, said on US television on January 2 that he is likely to leave the job by the end of May, Washington's famous rumor mill has been churning out potential successors ranging from little-known technocrats to former president Bill Clinton and outgoing Secretary of State Colin Powell. A new website - www.worldbankpresident.org - is soliciting news, comments and tips on who might be the next World Bank leader. There are already 17 names on the list; none has publicly denied being tapped for the position.

The list features names like John Taylor, undersecretary of the US Treasury; Anne Krueger, deputy managing director of the IMF; Randall Tobias, former pharmaceutical executive who heads the Bush administration's anti-AIDS efforts; Christine Todd Whitman, former director of the Environmental Protection Agency; and Elaine Chao, the US Labor secretary. The one-time favorite, US Trade Representative Robert Zoellick, dropped out of the running two weeks ago when he was nominated for the number two slot at the US State Department.

But the uncertainty surrounding who will take the reins of the Washington-based lender does not change certain facts that have always accompanied the post, say critics. The new president will probably be a US citizen, and the choice will be made largely behind closed doors, despite the enormous impact of the Bank's policies on the lives of millions of people in the developing world. The US president, by custom, selects the president of the World Bank. Similarly, the managing director of the IMF has traditionally been a European, handpicked by European governments, much to dismay of citizen groups and some governments in developing countries.

The wisdom behind this division of power, which came after the two institutions were formed in Bretton Woods at the end of the First World War is that the countries that give the most money (and which were victorious in the war) should be in charge. The US, the world's largest economy, naturally plays a central role. It is the single largest shareholder in almost every multilateral financial institution. According to the Congressional Budget Office, the US share in the World Bank - which lent US$20 billion for various projects last year - is roughly 14-22%, while its share in the IMF lies between 17 and 22%. The IMF lent $40 billion in 2003.

Yet, campaigners urging more openness and transparency at the two institutions point out that they are really funded by the taxpayers, and citizens deserve a say in their leadership and spending policies. In addition, the programs imposed by the Bank and the IMF affect the daily lives of more and more people in poor nations, who are demanding fairer representation. "These institutions are designed to represent the world of the 1940s," Rowden says of the status quo. "The world has changed in profound ways. Citizens today demand a great deal more accountability and transparency from governing institutions."

Another argument for better transparency, openness and fair representation in these institutions is that the two profess a mission that includes alleviating poverty and helping poor nations. Critics say their records so far belie that claim. "I think the agitation you see surrounding the World Bank and the IMF comes from the growing recognition among people that these institutions are not doing what their rhetoric would suggest," says Soren Ambrose, a policy analyst with the Washington-based group Fifty Years Is Enough. "It also shows that they need to be more accountable to the people in the countries where they are active rather than to the business interests in the countries that provide the money."

It is not only development groups that fault the IMF and the World Bank for their so-called "democracy deficit". In both 2000 and 2004, developing countries and others (including Japan in 2000) protested their exclusion from consideration in the choice of the IMF managing director. The World Bank and the IMF condition loans and support to low-income countries on factors like democracy and good governance, but many developing countries complain that the institutions fail to abide by these principles internally.

In 2001, a joint IMF-World Bank committee came up with a set of recommendations that called for nominations from any member country. The boards of the two sister institutions thanked the committee for its views, but never embraced them in practice. Last year, Rodrigo Rato, a European, was appointed head of the IMF after being nominated by European nations. The US made no objection in what was interpreted as an early preemption of a European objection when it is Washington's turn to pick the World Bank president.

"Allowing the Europeans to pick the IMF head ensures that they do not have a huge interest in rocking the boat too much," says a Bank-IMF insider. "It is taken for granted that the system is not going to change and that nothing is going to change now, this year, and for this appointment."

(Inter Press Service)