The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations [Full Text]

Sebastian Mallaby (New York: Penguin Press, 2004), 400 pp., $29.95 cloth.

Sebastian Mallaby Sebastian Mallaby

Peter Rosenblum (reviewer)

Sebastian Mallaby's The World's Banker is a very readable book that tells the story of James Wolfensohn, the World Bank's recently departed president, who served two five-year terms. It is an indication of Wolfensohn's high public profile that many people know his name, which cannot be assumed about his immediate predecessors (Lew Preston, unlikely; Barber Conable, perhaps). No one else has been so closely associated with critical decisions defining the world's premier development bank since Robert McNamara, the former U.S. secretary of defense, who served as president during another critical decade, the 1970s.

Wolfensohn is a larger-than-life figure: a self-made man, banker, cellist, and philanthropist. Even while making millions of dollars as a private banker, Wolfensohn set his sights on becoming World Bank president, giving up his Australian citizenship a decade before his appointment to increase the prospects, and eventually outmaneuvering Lawrence Summers, the former Bank economist and Clinton cabinet member, to secure a nomination from President Clinton. During Wolfensohn's tenure, the Bank broke with a discredited history of structural adjustment, overcame resistance to facing critical issues of debt relief and corruption, shook up a stultified bureaucracy, moved more than 70 percent of country managers out of Washington into the client countries, adopted the language of participation and local ownership, and brought the critics into the discussion.

The World's Banker is a smart journalist's account of the story of a man and some of the key events that served to transform or give substance to his vision. There is travelogue, personal anecdote, and the intricate reconstruction of events that serve as exemplars of some larger argument. Each chapter is structured around an event or series of events that highlight policy choices. For example, an early trip to Mali tells the story of how Wolfensohn acquired a vision for what the Bank could be when dynamic staff were engaged directly in the countries struggling with democratic change. Cote d'Ivoire, another destination for Wolfensohn, was a model case for the ineffectiveness of the Bank's approach at the time: cold distance separated the Bank from the countries’ leaders, who sucked in money to repay old debt without any sign of new investment, enthusiasm, or hope. The account of a trip to Indonesia conveys the way in which corruption climbed up the Bank's agenda. And the case of Uganda is used to convey the great prospects for local ownership when a dynamic minister and willing government lead the way.

But in this tale of great men (and a few women) crafted to tell a larger story, subtlety is often lost. The events themselves feel "touched up": characteristics are accentuated in some cases, suppressed in others. "Good guys" and "bad guys" are clearly labeled. While Mallaby is sympathetic to Wolfensohn's critics inside the Bank, he dismisses the outside critics. The NGOs are definitely "bad guys," even if some of their accomplishments are grudgingly accepted; they are caricatured rather than characterized. According to Mallaby, these groups play dangerous games with the truth, divert resources that should be used for poverty alleviation, and threaten the future of the Bank. Some of the "good guys" are also a bit surprising: there are, for example, “heroes” like Summers, China, and Exxon Mobil.

Summers appears several times in the book as a foil to Wolfensohn—first as competitor for the job and then as articulate critic, speaking for technocratic competence over broad participation and consultation. I have no doubt of Wolfensohn’s arrogance, but when highlighted through the battle for the nomination, with Summers in the role of shrinking violet, something is missing. This is the same Summers who almost didn't make it into the Clinton cabinet because of his outsized ego. Famously curt and impolitic, he is remembered at the Bank for his internal memo (which was leaked to the press) encouraging the migration of "dirty industries" to the developing world. (Summers infamously wrote in it, "I’ve always thought that underpopulated countries in Africa are vastly underpolluted.") In other words, there may have been many other reasons than competition from Wolfensohn to reject Summers, but we don't learn about them. China is another unusual hero. In one chapter, it plays the role of a well-intentioned developing state that has to suffer the irrational campaign of Tibet enthusiasts from the West, convinced that a project would lead to a massive transfer of Han Chinese to Qinghai, a traditional Tibetan space. The activists were entirely out of line, writes Mallaby: after all, China has successfully moved populations for years, and Qinghai is not really Tibet. Unfortunately, China arrested the journalists the NGOs had invited to verify their claims. The case went to the Inspection Panel, an independent body within the Bank that is generally respected for reviewing compliance with the Bank’s own policies, though it has no actual enforcement power and its opinions remain secret. Though the panel found that internal policies had not been followed, Mallaby dismisses its opinion as part of an NGO takeover in the Bank. He also dismisses, using the same reasoning, the Safeguard Policies, which set out internal rules for how the Bank should handle such issues as forced displacement, environmental destruction, and indigenous people that were relevant in the Qinghai case.

Finally, an even more unlikely hero: Exxon Mobil, the world's largest oil company, which led a consortium to develop oil fields and build a pipeline in Chad. The chapter on the Chad project acknowledges the high risks that the project faced. The usual outcome of such projects looks something like Nigeria, Angola, Sierra Leone, or the Democratic Republic of the Congo, to name four of the most mineral-rich countries in Africa. Normally, the Bank would stay far away from such a project—and NGOs would make sure it did. But, in Mallaby's account, Exxon Mobil had a secret weapon: a U.S. anthropologist who spoke the local languages and outfoxed the NGOs at their own game.

This, for me, is the most troubling of Mallaby's stories. I know the characters, having spent time in Chad, studying the pipeline project and, among other things, traveling with Exxon Mobil's anthropologist, Ellen Brown, into the oil-producing villages in May 2004. Mallaby, however, doesn’t seem actually to have traveled to the villages with her—if he had, he would have been surprised. At the time that I went, at least, Brown was under assault. Villagers frustrated by the failed promises and the inadequate compensation took out their anger on the one person who most represented the company to them. Consistent with his antipathy to NGOs, Mallaby describes the innovative project as if it came about because of the largesse of the oil companies or the wisdom of the World Bank. Nothing could be further from the truth. Local and international organizations were on the front line of all of the project’s battles. Indeed, the Chad oil project actually could be told as the story of how local groups succeeded in making themselves heard in Washington through Western NGOs that didn't necessarily agree with their positions. Contrary to Mallaby's claim, representatives of these NGOs did travel to Chad and were forced to adapt to the wishes of local communities, which wanted the oil pipeline built, but with due protection to ensure their livelihood and the country's benefit. With such an innovative project, many in the Bank appreciated the need for continued pressure from NGOs to hold the Bank, the country, and the oil company to their commitments. At one point, I sat with a high-level bank official and an economist for the Environmental Defense Fund, one of the more actively excoriated NGOs in Mallaby's book. The economist asked how the Bank would enforce the Chad agreements given its previous failures. "You will make us," he replied without sarcasm.

Mallaby's book is essentially an insiders' tale, and as such outsiders don’t belong. For this reason, NGOs have been anxious about the book's effect in shaping public opinion on the World Bank—an anxiety that is all the more justified because of the book’s journalistic account and readability.

—Peter Rosenblum, Columbia University

Read More: Aid, Development, World Economy, Poverty, Oil, Labor Rights

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