Wednesday, May 25, 2011

IMF: High Time to Democratise IMF

Dominique Strauss-Kahn | Credit: Wikipedia

By Julio Godoy

IDN-InDepth NewsViewpoint

PARIS (IDN) - Besides his notoriety as a womanizer and philanderer, former International Monetary Fund's managing director Dominique Strauss-Kahn enjoys a high international professional reputation as an able economist and politician. He won this prestige rather late in his career, during his tenure at the IMF. It explains to an extent international media's ambiguous and incoherent response to his being jailed in the wake of an alleged sexual assault on a hotel maid.

DSK, as Strauss-Kahn is known in the French media, served as minister of economy and finances in Paris almost 15 years ago -- between 1997 and 1999. At the time, most international media, including some of those who now praise DSK as an able politician, dismissed the French economic policy under Socialist Prime Minister Lionel Jospin as a "Keynesian relict". Thanks to that policy, Jospin's government led France through a five-year period of high growth, low unemployment, and sound fiscal figures. The international media that now praise DSK, attribute to him most of the success of Jospin's government, even if , he, DSK, was its member only during the first two years.

In 1999, DSK had to resign -- he faced accusations of having illegally pocketed money from a university students' relief organisation closely linked to the Socialist Party. DSK also predated documents for the student group, in order to justify ex post facto that he received the money as a lawful remuneration.

Later, DSK was involved in yet another French opaque corruption scandal -- he had access to video material produced by an infamous fund raiser who had worked together with former president Jacques Chirac in the latter's well known corrupt dealings to finance his (Chirac's) party.

In these cases, and despite evidence, the very slowly grinding mills of French justice exculpated DSK. In all these cases, DSK always gave the impression of being a less than thorough administrator of his own affairs. In that sense, he epitomised the proverbial French public servant -- a careless dazzler, who knew that, whatever his wrongdoings, he would get away with them.

Now that he has been forced to resign as IMF director, Europe insists that the post must be again occupied by a French public servant. The arguments that Europe advances to support this wish are, well, very DSK-like -- less than thorough. First and foremost: Since its founding in 1944, at a time when most nations in Africa, Asia and Latin America either did not exist as sovereign countries, or had no political clout in global affairs, the IMF has always been the private playground of a European bureaucrat, Angela Merkel, Nicolas Sarkozy, and their peers argue.

Second, they argue, Europe and the United States are the largest money contributors to IMF finances. Traditionally, the government in Washington occupies the topmost post of the World Bank. Therefore, the head of the IMF belongs to Europe, the argument goes.

By arguing this way, European leaders demonstrate that they have learnt nothing from the most recent world economic developments. They pretend to ignore that the global economic weight has moved away from the northern hemisphere, towards the South and the East. That China and Japan now own the largest financial reserves of the world. That if Beijing and Tokyo one day decide to sell their dollar or euro denominated state bonds, a financial catastrophe of unimaginable dimensions would break loose; one that would make the current crises appear as monkeyshines.

European leaders also ignore that economies of India, Brazil, South Korea, China, and South Africa have been steadily growing at rates the European Union can only dream of. That the IMF and World Bank policies affect so many people outside Europe and North America, that it is simply undemocratic to take no notice of it. In one word: Europeans pretend to take no notice of so many epochal global changes, that one is tempted to believe that they live in a different world.

Yet another European argument in favour of maintaining the IMF as its reserved domain is that the present continental financial crisis -- the virtual insolvency of countries such as Greece, Portugal and Ireland -- is a priority for the Fund. As if during the Mexican or South East Asian financial crises of the 1990s, their respective governments demanded the Fund to be led by one of their nationals!

Furthermore: for the past 30 years, practically since 1982, IMF has been pivotal to mismanaging the economies of many developing countries, from Mexico to Ghana, seriously affecting the local social fabrics. In this period, IMF was always controlled by the U.S. and the European governments, especially France. The U.S. still enjoys an exclusive veto right on all major IMF policy decisions.

German chancellor Merkel, French president Sarkozy and their peers also ignore that academic and administration capabilities -- if they are qualifications for the position -- are no longer a monopoly of European technocrats, and that Argentinean, Brazilian, or South African economists can also lead an international organisation such as the IMF with the same -- or better -- able hand as an absolvent of the Paris École Nationale d'Administration.

Finally, there is yet another DSK-like argument against the new European candidate for the IMF. Christine Lagarde, the French minister of finances and economic affairs, may face a lawsuit for abuse of authority, for her handling of yet another opaque French corruption scandal that ended with a compensation of some 400 million euro in favour of the infamous French entrepreneur Bernard Tapie.

Given the quality of French justice, the bet that Lagarde won't face a prosecution is a sure one. And yet, after the DSK scandal, IMF most certainly does not need yet another managing director whose reputation is tainted by his or her less than thorough handling of her or his own affairs.