Grasping Reality on TypePad, by Brad DeLong

Martin Wolf wonders why his Economic Forum members are so silent on the issue of Paul Wolfowitz and the World Bank:

Economists' forum: One should not be the only person to comment on one's own column, but I am shocked that not one member of the forum had anything to say on corruption, governance, the World Bank or Mr Wolfowitz. These are surely pretty big topics - or, at least, the first two are.

Some of it is that we are not at all sure what went on, and many people wish to reserve judgment.

But judgment is getting hard to reserve. The principal thing to note is that Mr. Wolfowitz is now on story #4. In order, the stories are:

1. That Shaha Riza's extra-sweet deal at the U.S. State Department was decided on not by Paul Wolfowitz--who had nothing to do with it--but by the World Bank's Board of Directors.
2. That Shaha Riza's extra-sweet deal at the U.S. State Department was negotiated by Paul Wolfowitz, but he was doing exactly what the Board of Directors wanted.
3. That Shaha Riza's extra-sweet deal at the U.S. State Department was dictated by Paul Wolfowitz, but that he had kept the Bank Board of Directors informed of what he was going to do beforehand.
4. That Shaha Riza's extra-sweet deal at the U.S. State Department was dictated by Paul Wolfowitz, and Wolfowitz did not inform the Bank Board of Directors, but a whistle blower wrote to the Board's Ethics Committee after the deal was done, and the Ethics Committee did not object, so nobody now has any standing to object.

From this and other evidence, I don't know but I think I can guess what the story Paul Wolfowitz tells himself is, and it goes like this:

They hated me. And so they told me that I couldn't have Shaha Riza as one of my close personal aides and pay her what I was paying Kellums and Cleveland. They told me I couldn't have her as one of my close personal aides at all. This was unfair: she, after all, was the reason I got interested in being World Bank president in the first place. Well, if I couldn't have her at my right hand, I was at least going to make sure that she was paid well. What I did was no deep secret--anybody who wanted to could have found out about it. But I was strong then, and nobody's home government wanted to pick another fight with the Bush administration, so they pretended that they did not know. Now I am weaker, and they think they can take me down, and so they pretend to be shocked! shocked!--they are having their own little Claude-Rains-Captain-Renault-Holier-than-Thou moment. Liars. Hypocrites. Bureaucrats. Corrupt friends of kleptocrats. They knew, and they didn't object. Or they ought to have known. Or they could have found out if they had dug for the details. And it's all their fault.

By contrast, the Bank staff have not changed their public story. And, reading between the lines, I think I know what the real story is:

We told Wolfowitz that he could not recuse himself on personnel matters involving Shaha Riza and yet keep her in the Bank as one of his confidential aides and with him as her boss. We told him to move her somewhere outside his authority. We never imagined--having told him that recusal on personnel matters was insufficient--that he would then interfere in personnel matters affecting her to the extent that he would dictate her salary and give her a massive raise: we expected him to delegate that task of exactly where and at what pay grade to some vice president somewhere.

When we discovered what he had done after the fact, we knew that our home country governments did not want another fight with the Bush administration, so we let it drop. But it was still a bad and unethical thing for Wolfowitz to do. And now that the Bush administration is weak and people care little about appeasing further, now that it is clear that Wolfowitz has been a disaster as World Bank president, now that the issue has been raised not by us but by the press, and now that Wolfowitz has responded by telling lots of lies, we are ready to do now what we should have done when we discovered this and make a huge stink--hopefully, a huge enough stink to drive him out of the World Bank presidency, for which he has shown himself unsuited.

As corruption goes, this particular episode is penny-ante corruption--a matter of $50,000 a year, perhaps $500,000 in present value--but it is corruption, it is a straw, and it is the straw that breaks the camel's back.

Should this be the straw that breaks the camel's back? The only difference between Wolfowitz's intervention in Riza's salary and his intervention in Kellums's and Cleveland's is that there were rules against the first because Riza was already at the World Bank. If Wolfowitz were highly qualified to be World Bank president and were doing an excellent job, it would be time for a simple reprimand. This doesn't mean that what Wolfowitz did is a good and ethical thing--it is a bad and unethical thing. But it is not worth ending the tenure of an excellent and effective World Bank president.

But Wolfowitz is not an effective and excellent World Bank president. In a good world, this act of corruption would be the straw that breaks the camel's back.