TEXT OF INTERVIEW

KAI RYSSDAL: Paul Wolfowitz will leave the World Bank as of June 30th. The statement from the board of directors late this afternoon says mistakes were made on both sides and that Wolfowitz acted in good faith. The search for a successor will begin immediately.

Before the announcement, I spoke with Krishna Guha at The Financial Times. And I asked him what the recent intrigue will mean for the bank’s future, no matter who’s in charge.

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KRISHNA GUHA: Well, I think it says a couple of things. First of all, that it really is necessary for the bank to have a leader who commands the respect of his staff, the support of his executives and the support of the shareholder government who sit on the bank’s board and ultimately provide all of its funds. That obviously means the U.S. government, but it doesn’t mean just the U.S. government. It means, of course, the big European players who contribute a lot of money, but really all the major governments in the world.

RYSSDAL: Do you think it will have an effect on contributions to the World Bank from those governments?

GUHA: Absolutely it will. If this all ends in the least bad way it could from now, we might yet see a successful IDA fundraising round — this is the bank pool of money that it uses to make very concessional loans to poor countries in Africa. But were this to end unhappily, either side — either the Europeans or the U.S. administration — might feel unwilling to pony up the cash.

RYSSDAL: Mr. Wolfowitz came to the bank with an agenda that included cleansing a lot of its recipient countries with corruption and scandal. The irony is cheap here, but what does this episode say about the bank’s ability to continue with those agendas?

GUHA: Well, it clearly shows that if you’re going to preach a message of good governance . . . And here I think it’s really more of a question of governance rather than actual corruption —, no one is suggesting Mr. Wolfowitz is personally corrupt. So what this story tells us is that if you’re going to preach this message, you better make sure that as a bank you have your own house in order. But I think it also teaches that this is not an easy subject to address. It’s a very important subject, but when Mr. Wolfowitz first addressed the corruption questions in the developing world, he made it all sound a little bit easy, a little bit black and white. I think he in time came to understand himself that, while corruption is a huge obstacle to development, it’s not possible just to say “Well, we’ll walk away from a poor country if it has corruption in it.”

RYSSDAL: The bank in time was set up in a very different point in history, when the economic situation globally was very different. Is this a time perhaps when people will start questioning whether we need a world bank, whether private capital can’t do what it does and better?

GUHA: I think certainly people are asking those questions, and I think the next head of the World Bank will have to provide some much better answers about what the bank is for in the long run. But I think that it’s still too soon to say that the bank can just be replaced by private foundations and private capital markets. But there are a lot of very, very poor countries that still are not credit-worthy for private markets.

RYSSDAL: This choice was controversial from the beginning. To what extent do you think the controversy was deepened by Mr. Wolfowitz’s desire to shape economic development policies to fit U.S. government foreign policy aims?

GUHA: There’s certainly a very wide and deep perception, both among the staff and among board members, that that was the case. Mr. Wolfowitz always claimed that it was not so, but there were certainly enough cases where it looked as if you could see evidence of this. For instance, he suspended some big loans to India on the grounds of corruption, but not to Pakistan — a country next-door with very similar corruption problems at a time when, of course, Pakistan was crucial in the war on terror in Afghanistan. I think what this shows is that you really need to have a president who’s seen as not being in the pocket of the U.S. administration. Because even if such person then acts in a way that is fair and reasonable, they’ll always be suspected.

RYSSDAL: Krishna Guha covers the World Bank for The Financial Times out of Washington, D.C. Mr. Guha, thank you.

GUHA: Thank you very much, indeed.