What we've learned about the World Bank

The whole Wolfowitz phony scandal that last night resulted in his resignation from the World Bank has, as the WSJ writes today, exposed this institution to a wee bit of scrutiny from outside its chummy circles.

An American appointee has been ousted from a multilateral institution by a staff and media cabal on trumped-up charges solely because they disliked Mr. Wolfowitz's priorities. The inmates are now in charge. Yet the U.S. will still be expected to provide the bulk of funding to these institutions--more than 16% at the World Bank--while it cedes de facto control of its operations to a multilateral elite. That's a recipe for declining American influence.

If there is a silver lining here, it is that the public has been able to get a glimpse of how the World Bank works and what it actually accomplishes. Among other lowlights, we've recently been reminded that the bank annually pushes billions in loans to countries like China and Mexico that can easily get credit in private capital markets. We've seen that many of those loans go to projects in places like India or Kenya that are riddled by corruption; the bank may have lost as much as $8 billion to corruption in 25 years of lending to the Suharto regime in Indonesia. We've also learned that the bank funds literally hundreds of projects from Albania to Niger that were ill-conceived and proved to be failures.

We've seen that senior bank personnel, such as former Indonesia country director Dennis de Tray, openly argue that corruption is no big deal and should not get in the way of the bank's "helping people." We've seen how the bank trashed the careers of longstanding and well-regarded employees such as Bahram Mahmoudi, who blew the whistle on a misamanaged project. We've seen how Shengman Zhang, the bank's No. 2 under former President Jim Wolfensohn, seems to think there's nothing amiss with calling for Mr. Wolfowitz's resignation despite the fact that Mr. Zhang's wife was swiftly promoted while working under him.

We've seen how the board of directors apparently covered for one of their own--British Executive Director Tom Scholar--when he was accused of having a conflict of interest because of a personal relationship with an employee at the bank. And we've seen how the bank has served as a well-paid sinecure for out-of-office politicians such as Dutchman Ad Melkert, who has moved comfortably within multilateral institutions making an enviable tax-free salary while performing incompetently and behaving dishonorably.

Why we should be pouring so much money into a corrupted institution should be a question for America's politicians. Just because it has a feel-good sounding mission doesn't mean that it is accomplishing that mission. If it can't be cleaned up, then what good is it?