The planet waits for the winner of a new presidential race

As head of the World Bank, James Wolfensohn has proved an unexpectedly successful champion of the interests of developing countries. But the next boss will bring a change of direction, writes Rupert Cornwell in Washington

The lobbying, and the subtle jostling for position are well under way. In Washington wine bars, names are bandied around like chips on a poker table. And no wonder. In the next three months, President George Bush will make one of the most important appointments of his second term when he names a new president of the World Bank.

The lobbying, and the subtle jostling for position are well under way. In Washington wine bars, names are bandied around like chips on a poker table. And no wonder. In the next three months, President George Bush will make one of the most important appointments of his second term when he names a new president of the World Bank.

Even in normal times, the post is hugely important. For all its detractors, the Bank remains the flagship global institution of development. After 9/11, that role became more important still.

This time the rumoured candidates are an especially intriguing mix. They include a controversial Pentagon official, a dethroned corporate diva, a rock star, a top US Treasury official and - some fondly hope - the former secretary of state, Colin Powell. The outcome is anyone's guess. But one thing is certain. Whoever is chosen will have a hard act to follow.

For the past 10 years, James Wolfensohn, a cello-playing former Wall Street investment banker and world-class schmoozer, has led the Bank in idiosyncratic and probably inimitable fashion. By turns domineering, generous, vain and inspirational, the Australian has given the institution its highest profile since Robert McNamara, a former US defense secretary, was president three decades ago, atoning for his role in the disaster of Vietnam.

Wolfensohn's management style has often been chaotic, frequently creating turmoil at the Bank's headquarters a couple of blocks from the White House. But he used the job brilliantly as a bully pulpit, invoking the political and moral urgency of the struggle against poverty. As Nancy Birdsall, the head of the Center for Global Development think-tank, puts it, he "rescued the Bank from its sinking reputation as an insider institution" that had peddled needlessly tough policies causing more pain than gain for its supposed beneficiaries.

Wolfensohn saw off the discredited neo-liberal "Washington consensus" of the late 1980s, that "structural adjustment", ie balanced budgets and rigorous market orthodoxy, was the best means of helping the world's poor. Within the Bank, he pushed through decentralisation, handing more power to locally based country directors.

He championed, with growing success, the cancelling of debt owed by the poorest borrowers which would never be able to repay them. He was the first Bank president to directly address Third World corruption, previously referred to by euphemisms such as "implicit taxes" or "sub-optimal procurement".

Last but not least, Wolfensohn made peace with many (but not all) non-governmental organisations. In this way, he deflected the NGO attacks that had done so much to seal the Bank's image as a cold-hearted bureaucracy, dominated by its Western shareholders and remote from those it was supposed to serve, insensitive to the environmental and human cost of its projects.

But it hasn't been easy. Often the Bank has been caught between a rock and a hard place, assailed from the right as a typically inefficient public-sector beast, and from the left as an agent of, in general, an uncaring capitalism, and in particular, of the US, the Bank's largest shareholder, which by custom chooses its president. Not surprisingly, defensive caution is hardwired into the Bank's institutional culture, however high-profile its boss.

"Wolfensohn has done a splendid job in difficult circumstances," says Bill Frenzel of the Brookings Institution in Washington. "You may not like his style, but the criticism of him has no logic. Yes, they talk with reverence of McNamara at the Bank - but that was when lending was expanding and the idealism was huge. Wolfensohn's time has been much tougher."

The challenges facing his successor are many, starting with the plight of the 80-odd countries where average per capita income is less than $2 (£1) a day. The World Bank must try to broker a settlement in the loan/grant dispute - concerning the strings attached to projects to help the Third World. The Bank needs better outside monitoring of the effectiveness of the aid it dispenses, and to give developing countries more say in running their affairs.

But the most important challenge could be the least obvious. Somehow, the next World Bank president must stem the decline in bank lending to middle-income countries, such as Brazil, Poland and Thailand. These states can borrow more cheaply from the Bank, but prefer to pay higher rates on the ordinary commercial market.

They are deserting the Bank for one simple reason - the sheer hassle of borrowing from it. The rules have not changed in half a century, indeed they have probably grown more complicated since the 1990s, thanks to new environmental and other safeguards on bank loans. "These countries are creditworthy. They should be treated as my credit union treats me, a low-risk client, based on my good credit record," Birdsall says.

The issue is arcane, but critical. Income from these more remunerative loans largely pays for the Bank's running costs, and thus the preservation of its unsurpassed expertise in agronomy, public health and other development issues, all gathered under a single roof. This is a "global public good", Birdsall argues, which cannot be put at risk.

The outlook is encouraging. The fight against poverty, Aids and illiteracy has climbed up the international agenda. Only last week, rich countries agreed to raise contributions to the IDA, the Bank's lending arm for the poorest countries, by 25 per cent over the next three years, to $34bn. Of this, 30 per cent is likely to be disbursed as grants.

The attitude of the US, however, remains crucial. Wolfensohn was a Bill Clinton appointee; his successor will be picked by a Bush administration that gratuitously shut the Bank out of reconstruction planning in Iraq - even though it contained more expertise on the topic than any other organisation, and had performed excellently in similar circumstances in post-war Bosnia.

Reports last week that the job might be offered to the Deputy Defence Secretary, Paul Wolfowitz, a man heartily distrusted in Europe as a neo-conservative architect of the Iraq war, seemed to suggest more of the same, that Mr Bush was thumbing his nose again to opponents around the world.

In fact, apart from the snub over Iraq, this White House has generally treated the World Bank with respect. "They haven't suggested cutbacks, indeed they've used the Bank and [its sister organisation] the International Monetary Fund to launch big initiatives like the Millennium Challenge and Aids," Frenzel points out.

Wolfensohn might have clashed frequently with Paul O'Neill, Mr Bush's first Treasury Secretary. But it was O'Neill, not the World Bank president, who was sacked - for his clumsy handling of the Argentine and Brazilian debt crises of 2001-02, development issues if ever there were ones.

For all its scorn of the UN, the Bush administration is whole-heartedly behind the Bank - not least because of the link between failed states, poverty and terrorism. "Over the years, the US has been able to make use of the World Bank at no political cost and low financial cost," Birdsall says, "and the Bush drive to expand democracy in the Middle East and elsewhere could broaden its role further."

Some right-wing critics will never agree. The bureaucratic bank is virtually unmanageable, they say, and its employees are all but unsackable. Why have a World Bank at all, especially as it accounts for only a fraction of the flow of development capital? But that, Bank supporters reply, is precisely the point. "It's the first buck that shows the way," says Frenzel. "That World Bank imprimatur attracts a heck of a lot of private capital."

And the decision about the first buck stops with George Bush.

IF POWELL CAN'T BE PERSUADED, COULD BONO STAR ON THE INTERNATIONAL STAGE?

Carly Fiorina: Former boss of the computer giant Hewlett-Packard. No track record on development issues, and her defenestration from HP is hardly a plus on her CV. But she is known to be keen on a job in public service. She has an almost Wolfensohnian drive, and would guarantee the Bank a high profile.

Paul Wolfowitz: US Deputy Defence Secretary. Would follow in the footsteps of Robert McNamara, another top Pentagon official who became president of the Bank. Might be vetoed by the Europeans in protest at his role in the Iraq war. Not a development specialist, but was US ambassador to Indonesia between 1986 and 1989.

John Taylor: Treasury under-secretary for international affairs. Former professor at Princeton and Stanford universities, and a top-flight macroeconomic theorist. But has lost bureaucratic turf battles within the Bush administration. He might be better suited to the IMF than the Bank.

Colin Powell: Former US secretary of state and the European dream candidate. Deeply respected around the world, and has taken a keen interest in development issues. The job is probably Powell's for the asking. Unfortunately, he's shown no sign of being interested.

Bono: It's not a joke. The Irish rock star has been endorsed by the Los Angeles Times. He is a passionate advocate of aid to poor countries, and led the 2000 Drop the Debt campaign. Would certainly keep the Bank in the headlines.