Thursday 26 April 2018

Preparing for a clean sweep

Hillary Clinton is frontrunner to succeed man who presided over a quiet revolution but US could lose its grip on top job

ROBERT Zoellick's decision to step down as World Bank boss at the end of June creates a vacancy that will allow President Obama to completely refashion the upper echelons of his administration in advance of next November's presidential election.

When Mr Zoellick announced this week that he would not be seeking a second five-year term as president of the World Bank the almost universal reaction was "Robert Who"? Unlike several of his predecessors at the World Bank or his counterpart at the IMF, Christine Lagarde, Mr Zoellick has opted for a low profile during his five years at the global financial institution.

The World Bank and the IMF were traditionally the good and bad cops of international finance. It was the World Bank, with its mission to reduce global poverty, that lent money to the world's poorest countries while it was the more hard-assed IMF that went in to sort things out when countries, both rich and poor, got into financial difficulties.

Despite this division of labour, the managing director of the IMF has always been a European, while the presidency of the World Bank has been reserved exclusively for Americans.

Mr Zoellick succeeded former US Deputy Defence Secretary Paul Wolfowitz as World Bank president in July 2007. While he has been largely anonymous in the role since then, that, given the controversy which surrounded Mr Wolfowitz's tenure, may have been no bad thing.

Mr Wolfowitz was eventually forced to quit as World Bank president when it emerged that he had arranged a promotion for his girlfriend, a World Bank employee.

After the abrasive neo-con with a messy personal life, the squeaky-clean Mr Zoellick must have come as a welcome relief. Even so, as a Bush appointee Mr Zoellick was unlikely to have been re-appointed by the Obama administration when his five-year term expired in July.

By announcing his decision this week not to seek a second term he may well have making a virtue of necessity.

With Mr Zoellick out of the frame, all attention has now turned to his possible successor. The frontrunner at this stage is former US first lady and current Secretary of State Hillary Clinton, although Mrs Clinton's spokesperson has denied that she is interested in the job. However, if the speculation surrounding Mrs Clinton were to prove accurate, it would not be the first time that a US president has used the World Bank presidency as a means of levering a politically awkward subordinate out of office.

By early 1968, Robert McNamara's opposition to the Vietnam War had made his position as Defence Secretary untenable. However, as a Kennedy appointee, President Johnson was reluctant to sack him outright.

The situation was resolved by appointing Mr McNamara as World Bank president, a position he occupied with distinction until his retirement in 1981.

With US Treasury Secretary Tim Geithner having already disclosed that he will be stepping down at the end of Mr Obama's first term and mounting speculation about the future of Vice-President Joe Biden, whose 70th birthday falls next November, appointing Hillary Clinton to the World Bank could be one of a series of moves that would allow Mr Obama to make a clean sweep of the upper reaches of the administration if he wins a second term in November.

And what about Mr Zoellick? During his almost five years at the World Bank the former US Trade Representative has presided over a quiet revolution. In 2010, he succeeded in persuading the member countries to agree a $3.5bn capital increase, the first at the World Bank in over 20 years. Developing countries, including China, also contributed a further $1.6bn in additional capital, which increased their voting rights at what has traditionally been a Western-dominated organisation. China is now the third-largest World Bank shareholder after the US and Japan.

Mr Zoellick has also opened up the World Bank's top jobs to non-Western candidates, with half of all vacancies now being filled by candidates from developing countries. He recently appointed a Chinese national as chief economist.

That's the good news. However, as the controversy generated by last year's appointment of Ms Lagarde to succeed her priapic countryman Dominque Strauss-Kahn as World Bank managing director demonstrated, the top jobs at the two multilateral financial institutions are still a western closed shop.

Developing country candidates need not apply. Any attempt by the United States to exercise its traditional right to nominate one of its own nationals to head up the World Bank is likely to generate a controversy of similar intensity to that which greeted the Lagarde stitch-up at the IMF.

Unless Ms Clinton changes her mind, or more likely has it changed for her, then there is at least an outside chance that, for the first time since it was founded following the 1944 Bretton Woods financial conference of the wartime allied powers, the World Bank will have its first non-US president.

But will it? When push comes to shove will the US, particularly in an election year, be prepared to surrender its grip on the World Bank? If Ms Clinton sticks to her guns and refuses to take the job then Larry Summers, the former Treasury Secretary, president of Harvard and chairman of the National Council of Economic Advisors, has been touted as a possible candidate.

While Mr Summers's economic credentials are impeccable his political judgment is highly suspect. He was forced to quit as Harvard president in 2006 when he made comments that seemed to suggest women lacked the aptitude necessary for "hard" sciences such as physics and chemistry.

A Summers' World Bank presidency would carry with it the risk of renewed controversy of the kind that forced Mr Wolfowitz from the position five years ago.

Could America's grip on the World Bank survive a repeat of such unpleasantness? With the developing countries determined to increase their influence, it might be a good idea not to bet on it.

All of which means that her professed lack of interest notwithstanding, the Obama administration will move heaven and earth in order to persuade Ms Clinton to accept the position. Appointing Ms Clinton, an extremely popular global figure, represents the best way of ensuring America gets to keep its grip on the job.

The speculation surrounding his likely successor has inevitably distracted attention from Mr Zoellick's next career move. His successful tenure at the World Bank healed most of the wounds from the Wolfowitz era and cemented his reputation as a "safe pair of hands". While he could never be accused of possessing an excess of charisma his ability to, quietly and effectively, manage a complex multilateral organisation is further testament to his undoubted administrative abilities.

His next move is likely to be into the private sector -- did anyone mention Goldman Sachs? -- where his contacts book is likely to prove extremely attractive to potential employers.

After a decent interval in the private sector, the path would then be clear for Mr Zoellick to re-enter the public sector.

He will be a very strong candidate for a senior position in the next Republican administration, if not after the November 2012 election then certainly four years later.

Irish Independent

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