The hawk with a line in pragmatism

Robert Zoellick is no shrinking violet. The new choice to run the World Bank was once a member of the “Vulcans”, the foreign policy hawks who framed the Bush policy of pre-emptive war.

He was a key plotter behind the overthrow of Saddam Hussein, along with the man he replaces, Paul Wolfowitz.

Even so, his nomination has been greeted with a sigh of relief across the globe. Mr Zoellick is, above all else, a professional, esteemed for mastering his brief as US trade representative, and during a string of top jobs at the State Department over the last two decades. Despite his “neo-con” flirtations, he rose to high office as a protégé of Republican elder statesman Jim Baker, the ultimate pragmatist.

President George W Bush presented his choice at a White House ceremony yesterday, underscoring the image of American “ownership” of the bank. He said Mr Zoellick had “earned the trust and support of leaders from every region of the world”.

Under a gentleman’s agreement dating back 60 years, the World Bank chief is always an American, while Europe gets the International Monetary Fund. Critics had hoped that the White House would at least offer the bank’s board a choice of candidates this time. It did not.

US treasury secretary Hank Paulson – a Goldman Sachs man, like Mr Zoellick – insisted that speed was imperative after the Wolfowitz debacle. “Given the turmoil, the vast majority of people I talked with wanted to move quickly,” he said.

The Australian, Brazilian, and South African finance ministers have issued a joint protest, calling for a “transparent selection process” next time that is open to all comers. It remains to be seen whether India and others will abstain to show annoyance.

The softly spoken, but irascible, Mr Zoellick steered China into the World Trade Organisation in 2001, helped to launch the Doha Round of trade talks, and played a key role in the creation of the NAFTA free trade zone with Mexico and Canada.

His first task will be to decide the fate of Mr Wolfowitz’s inner circle, parachuted into the top echelons of the bank to the dismay of permanent staff, and what to do about Mr Wolfowitz’s girlfriend, Shaha Ali Riza, seconded to the State Department at a salary of $193,590 (£98,000) on his orders.

Mr Zoellick pledged yesterday to restore the morale of the 13,000 staff. “The World Bank has passed through a difficult time. For all involved there are frustrations, anxieties and tensions. This is understandable but not without remedy,” he said.

The bigger task is to save the World Bank from irrelevance. Last year, it dished out $23bn in grants and soft loans, peanuts compared with the $325bn of direct investment in emerging markets by funds and foreign companies.

Two thirds goes to mid-income countries that now have easy access to the capital markets. This includes $40bn of outstanding project loans to China, even though China sits on reserves of $1,200bn and is itself supplying $20bn of development credit to Africa.

Allan Meltzer, professor at Carnegie Mellon University, said the body was long past its sell-by date. “It’s hard to see what good the bank has done anywhere. The big gains in poverty reduction have come from opening markets, not from bank loans,” he said.

For now, Mr Zoellick is a choice almost everybody can live with. In Germany, he is something of a hero. It was he who framed US support for reunification after the fall of the Berlin Wall (when France was cool), and he who rebuilt relations after the rift over Iraq.

His former double act with ex-EU trade commissioner Pascal Lamy has gone down in the textbooks as model of dealings between Brussels and Washington in an area where the two blocs so often clash as rival superpowers.

Mr Zoellick quarrelled later with successor Peter Mandelson. Relations broke down when Mr Mandelson hung up the phone during a row over farm subsidies. Not even Mr Zoellick’s enemies blame him for that.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/31/cczoellick31.xml