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WorldVoices: A New IMF Director

[Editor’s Note: WorldVoices—a recurring feature of the WorldPolicy blog—links to opinion and analysis of current events from English-language news sources around the globe.]


By Harry W.S. Lee

Following Dominic Strauss-Khan’s departure from International Monetary Fund, Christine Lagarde, France’s former finance minister stepped into the office this month as the organization’s first female managing director.

Lagarde was chosen over her closest competitor, Agustin Carstens, head of the Mexican Central Bank. She’d received backing from non-EU economic giants like India, Russia, Brazil and China. Observers from the developing world had eyed this as the first potential opportunity since the Fund’s birth in 1945 for a non-European to take the helm. Some opponents cast doubts on Lagarde’s suitability for the top job, pointing to her European background.

Still, her expedited appointment comes in the midst of a eurozone crisis that is taking its toll on some of the zone’s peripheral members. Indeed, a large number of analysts have attacked her performance as finance minister in France and her central role in an early and ineffectual bail-out plan for Greece. Others commentators focus on her immediate challenges lying ahead:

 

In a BBC interview, Paulo Nogueira Batista, one of the 24 members of the IMF’s executive board, who represents Brazil and eight other Latin American and Caribbean nations criticized the selection process.

I still think that the selection process of the managing director is highly unsatisfactory because it's a predetermined election. This is a result of something more fundamental. It's not only the convention between the U.S. and the Europeans, the fundamental fact is that there is a very skewed distribution of voting power in the institution. And this very skewed distribution of voting power allows this old fashioned convention to continue.

 

Speaking to the Voice of Russia, the Kremlin’s radio service, Dmitry Smyslov, an expert with the Institute of the World Economy, expressed more enthusiasm for the IMF’s election processes in the run-up to the race.

The U.S. has almost 17 percent of votes in the IFM and the EU has 31 percent. Together they can promote their candidate and this candidate is likely to be Christine Lagarde.  But the very fact of the nomination of a candidate from the CIS [Commonwealth of Independent States, or former Soviet republics] and the presence of a Mexican candidate is a milestone and a step forward. One thing, which reflects the changes in the elections, is that for the first time a woman candidate has been nominated.

 

Writing for Jakarta Globe, an Indonesian daily, Catherine Bremer discusses what France’s former finance minister might bring to the table as the Fund’s director.

Her charisma and the expertise in international relations which she built up as French finance minister will carry weight with governments around the world as she replaces the disgraced Dominique Strauss-Kahn. Supporters say Lagarde, the first woman to head the IMF, will have the political muscle to press indebted euro zone states into delivering on promised budget reforms.
 

 

For the Guardian, Phillippe Marliere evaluates Lagarde’s performance as France’s finance minister.

First, Lagarde sided with the European Central Bank in opposing any form of restructuring of the Greek debt. Then, she softened her stance and agreed to a new bailout along the same austerity lines that made the previous bailout fail. In true neoliberal fashion, the candidate to the IMF directorship supported the idea that Greece should privatise state assets, to be sold to Chinese buyers. These failed policies have inflicted nothing but unnecessary suffering on European peoples, and have largely contributed to boosting a resurgent far right across Europe. Lagarde was one of their main instigators.

As finance minister, Lagarde has mostly been the executor of Nicolas Sarkozy's policies. It is hard to find one single decision, debate or policy that she has initiated or imposed her mark on. At home, her voice has hardly been heard in economic debates, let alone in political debates in general.

Lagarde's choice as IMF director seems all the more inappropriate insofar as she could soon be placed under investigationfor having allegedly misused her powers to help Bernard Tapie—a former business tycoon and friend of Sarkozy—in a business dispute with the French state (whose interests Lagarde was supposed to represent). In an out-of-court arbitration ordered by Lagarde, the state was made to pay €403m to Tapie. Socialist MPs have challenged the probity of her decision, arguing that to remove the case from the courts was largely to Tapie's benefit. This, they consider, "had the aim of favouring personal interests to the detriment of public interest". After the Strauss-Kahn fiasco, the IMF might be embarking on a Lagarde debacle.

 

For Project Syndicate, a non-profit newspaper based in Prague, a former chief economist of the IMF, Raghuram Rajan, while citing the Eurozone crisis as the most challenging issue for Lagarde, lists others that he deems are equally urgent.

…[T]here is a challenge that seems to be pressing, but is not. In her campaign for the position, Lagarde emphasized the need for diversity among the IMF’s top management. But what is really needed is the selection and promotion of the best people, regardless of national origin, sex, or race.

Clearly, the IMF’s existing culture and history will bias its selection and promotion of staff towards a certain type of person (for example, holders of PhDs from U.S. universities). That commonality in backgrounds among IMF personnel allows the Fund to move fast in country rescues, not wasting time in endless debate. In the long run, more diversity is needed. But if it is attempted too quickly, in order to paper over the fact that a European is in charge once again, the Fund risks jeopardizing its key strength.

 

…and finally, in AllAfrica.com, part of AllAfrica Global Media, an editorial from Abuja expresses hopeful demands for reforms in the global trading scheme.

…[I]n the wake of the global financial crisis in 2010, the need to reform the Fund became resounding and inescapable. Reforms that would produce a shift on six per cent of quota shares to dynamic emerging markets and developing countries were advocated. The reforms were designed to put in place measures to protect the voice of the poorest countries. If everything goes as scheduled, the reforms should be implemented in 2012.

Now, as the Frenchwoman Christine Lagarde takes over the helm at the IMF, it is our hope that the reform programme will go ahead as scheduled. The 6 percent quota shares should not be restricted to only the BRIC countries of Brazil, Russia, India and China. Africa should also come into the picture, since a member country's assigned quota determines its financial commitment to the Fund as well as its voting power.

It is our view that the IMF should not apply homogenous solutions for all economic problems especially as they relate to developing countries. Each country has its own peculiarity. The Fund's continued emphasis on devaluation of currencies at every turn has proved to negate its policy of exchange rate stability in the affected developing countries. These countries are also groaning under the demand by the IMF for the withdrawal of subsidies on strategic products that touch on the life of ordinary citizens.


Harry W.S. Lee is an editorial assistant at World Policy Journal

[Photo courtesy of International Monetary Fund on Flickr]

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