While worried heads of state and finance ministers from the eurozone countries search for a palatable solution to the current crisis in their monetary union, Robert Zoellick, head of the World Bank, has been providing a barrage of helpful rhetoric from the side-lines. “Up to this point, the European Union has been taking emergency liquidity steps,” he told the Wall Street Journal in September. “I’m not denigrating buying time. But I’m suggesting that when you buy the time, that you then use the time.
“The fundamentals are that if you have a monetary union, you need when the system comes under stress to have a commensurate fiscal union or you need to face the consequences for your monetary union and those that are weaker members.” In an interview with the German business magazine Wirtschaftswoche, he launched a more personal attack, saying Chancellor Angela Merkel’s government had no vision of how to solve the problem. “There has been a lot of political bumbling, but the economy and the markets need direction and clarity,” he is reported as saying.
So, apart from issuing almost daily finger-wagging advice, is he prepared to offer any direct aid to members of the Union as they try to rebuild their economies? Apparently not. “These are European decisions,” he says, and his PR team backs that up. “Direct support for the eurozone is outside the mandate of the World Bank,” a senior communications officer pointed out. But Zoellick, frequently described as a ‘sharp-elbowed negotiator’, and ‘Machiavellian’, has a history of broadening or bending the confines of his mandate when it suits the purposes of his political vision. So why not this time?
A one-way relationship
It would seem The World Bank and the European Central Bank (ECB) collaborate on projects outside of the eurozone crisis, notably the €54.5m the ECB has pledged to support the Global Facility for Disaster Reduction and Recovery (GFDRR), an organisation created to help poor countries reduce their vulnerability to natural hazards and climate change, but direct financial assistance for struggling eurozone countries has been less than forthcoming.
It would be unfair to say it has been completely defunt however, stating that development banks could provide up to $200bn in financing to help poor nations deal with shockwaves caused by the European sovereign debt crisis. Speaking before the G20 Summit, Zoellick said: “We have estimated with the regional development banks we can provide somewhat over $200bn in financing, drawing from a full set of tools. The World Bank amount of that is about $150bn.” His concern seems to be focussed on countries that might be affected by the eurozone crisis instead of the member states themselves, with particular attention paid to countries in southeastern Europe and the Balkans. It remains unclear whether Zoellick can retain this blinkered view. As Greece appears increasingly likely to be booted out of the euro camp and focus shifts towards Italy, how much longer can the rest of the world sit back and let it the eurozone self-destruct?
Perhaps Zoellick is biding his time, doing what so many other financial leaders have been doing for the past few years, hoping that the eurozone problems rectify themselves without having to contribute anything more than advice. If anything is to be learnt from recent events, it’s that problems won’t go away on their own. “I believe this can come together and I believe that since our annual meeting in September, the Europeans have been much more… focused about this issue, but I also believe there’s not a lot of room for error,” Zoellick told reporters after an event at the University of Michigan. A European problem indeed, Zoellick appears to be taking the tough love approach. It would be a mistake “to assume somebody else is going to bail you out,” Zoellick said. Europe should not expect “a silver bullet from China” or look for developing countries to bear the primary burden of helping it emerge from its debt.
Targeted liberalism
The man is a conundrum. Educated at Swarthmore College where he studied history before taking up law at Harvard and public policy at Harvard’s John F. Kennedy School of Government, he had a brief stint as a law clerk on the US Court of Appeals for the District of Columbia Circuit before moving into the federal government. His father is of German descent and fought with the US Army in Korea during World War II. Hearing his stories of battle, the young Zoellick, who speaks fluent German, developed a keen interest in history, and particularly military history.
One of the signatories to a 1998 letter by the Project for a New American Century advocating regime change in Iraq, he was later seen as a soft option (compared to hardliners like Vice President Dick Cheney and Secretary of Defense Donald Rumsfeld) when he was appointed second-in-command to Condoleezza Rice at the State Department. As US foreign policy analyst Tom Barry summed it up in a 2005 article for Counterpunch: “At first glance, Zoellick could be mistaken for an ideologue, as an evangelist for free trade and a member of the neoconservative vanguard. But when his political trajectory is more closely observed, Zoellick is better understood as a can-do member of the foreign policy elite – a diplomat who always keeps his eye on the prize.
This may explain his record as US trade representative from 2001 to 2005, when he proposed the abolition of all tariffs on manufactured goods traded in WTO (World Trade Organisation) countries. This policy would clearly benefit developed countries with strong manufacturing sectors (like the US), but developing countries would find it nearly impossible to get their budding manufacturing industries established without the protection of tariffs on imports. Mysteriously absent from the deal was any mention of agriculture, which forms the economic base of many poor countries but is fiercely protected with tariffs and subsidies in both the US and Europe.
When developing nations joined forces and walked out of the Cancun round of WTO negotiations in protest at the exclusion of agriculture, Zoellick was infuriated. He began to pursue individual free trade deals on a bilateral or regional basis, insisting, “We’re going to keep opening markets one way or another.” Later he wrote, “It would be a grave mistake to permit any one country to veto America’s drive for global free trade.”
His new strategy, called ‘competitive liberalisation’, sought to establish Preferential Trade Agreements between the US and single nations or regions in an effort to get neighbouring countries all competing with each other for access to the vast US market and weaken demands for a more level playing field. Eventually, Zoellick reasoned, this process would lead back to the multilateral liberalisation he had sought through the WTO.
Life in the fast lane
Fifty-eight year old Zoellick, who famously lives with his novelist wife Shelley Ferguson, two cats and two rabbits, has no known hobbies apart from reading, writing learned papers and long distance running. In his marathon days he would happily tell you his fastest time was just over two hours and 32 minutes, and when he was on state visits abroad his security team had to ride motorcycles to keep up with him on his morning jogs. He has given up the racing now, but still has the lean physique of the runner who always looks like he needs a good square meal.
That look might have earned him some respect when he was assigned to sort out the appalling violence and starvation in Darfur in 2005. Negotiating hard behind closed doors during his four visits to the country, he was once filmed wearing a wristband that said ‘Not on our watch’ whilst out mingling with refugees. Was this the sign of a powerful policy wonk who would later keep the interests of the world’s dispossessed at the forefront of World Bank strategy?
Perhaps not. In 2008, when Robert Zoellick had been in the top job at the World Bank for nearly a year, he began to lecture the world about the catastrophic consequences of high food prices on the world’s poorest people. His solution, as always, was free trade, which he argued was a humanitarian necessity.
Heal the world
Critics, however, pointed out that the (perhaps unintended) effects of free trade constraints on poor countries had already resulted in them losing the stockpiles of grain that would have seen them through poor harvests and unable to support their own farmers with tariffs against cheap imports. It took the World Bank’s own Independent Evaluation Group to point out that the policy was not working for its intended beneficiaries.
Then in 2010 Zoellick had to face the prospect of another revolt by pesky developing nations. The issue was the World Bank’s continuing support for dirty energy projects, despite its own espousal of the climate change and clean energy agenda. A controversial decision to approve a $3.75bn loan to South African power company Eskom to build a 4,800 megawatt coal-fired power plant brought the issue to a head. The plant will meet the low-cost energy needs of industrial users while the loan will be repaid in part by cash-strapped domestic users. Local residents lodged complaints with the World Bank pointing out that the project would almost certainly create air, water and land pollution in their area and adversely affect their livelihoods.
So when the World Bank issued a request for a general capital increase in April last year, there was an outcry. “We will be calling on governments to oppose a general capital increase for any part of the World Bank Group unless the Bank Group ends support for all dirty energy projects that do not have energy access for the poor as their sole purpose,” said Gerald LeMelle, Executive Director for Africa Action. “The Bank Group must focus its limited resources on new renewable projects that provide affordable, reliable, and clean energy to those who are in greatest need.”
Mission creep
Not surprisingly, observers expressed some concern in April this year when they heard Zoellick’s latest idea − that the World Bank should start supporting the work of civil society organisations “working on accountability and transparency in service delivery”, a move that would give it a more direct role in bringing about political change in recipient countries. How this would work was highlighted in a speech Zoellick delivered in 2003 to the Institute for International Economics: “The United States seeks cooperation – or better – on foreign policy and security. Given that the US has international interests beyond trade, why not try to urge people to support our overall policies?”
This message seems to underpin his entire agenda and contain a warning for Europe. After earning the Order of Merit of the Federal Republic of Germany for playing a key role in negotiating the reunification of that country, he had this to say to his European friends: “I know Germans and Americans share values and experiences. Yet the question we must address now is whether we have shared interests as well. Many recent Euro-Atlantic squabbles… reflect America’s reassessment of its national interests in a changed world and Europe’s conservatism in adjusting. Will there be a basis for a trans-Atlantic unity absent the intense cohesion of shared dangers?” As developing nations continue to grow and flex their muscles, is Zoellick trying to position himself as a kingmaker? If so, it seems that all the old alliances are now up for grabs.