Simon Johnson, Chief Economist at the IMF in 2007-08, has emerged as one of the most insightful and amusing commentators on the institution since he left it. AFP reports that on his blog, “The Baseline Scenario,” Johnson argues that Lagarde has taken an aggressive position on the fate of the euro that should be disagreeable for most IMF members.
Johnson says Lagarde “personifies the strategy of gambling for eurozone resurrection with other people’s money. Why would taxpayers in US and elsewhere want to support her on this basis?”
The article concludes with a prediction from Johnson: “As IMF chief, he said, `she will most likely continue to throw loans at the eurozone problems,’ — referring to the possibility of preventive loan facilities for Spain, Italy, or Belgium. That, he said, could require the IMF to tap its shareholders for `at least another $1 trillion’ in credit lines.”
A veritable outpouring of letter writing about the IMF has been going on amongst financial, academic and elite circles. Hardly a day goes by when the letters page of the Financial Times and other papers doesn’t carry something on the IMF. And almost all say the same thing, ‘not so fast Europe’. Lets review some of them:
First up is to note the Times of India leading article which calls for a non-European to be in the job. “For over 60 years, Europe’s monopolised IMF’s stewardship while the US sits entrenched atop the Bank. This cosy arrangement was fine when the West’s clout was unchallenged. That’s no longer the case. More so, in the post-Lehman world where emerging economies have helped the West beat recession’s blues by driving growth, providing markets and offering investment havens. ”
Continue reading “Letter writers to the fore: Not Europe this time!”
The next IMF boss will have a lot of power – a soapbox to pronounce on economic issues, hundreds of billions of dollars lending to force crisis-stricken countries to change their policies, a vast team of policy wonks to promote the ideas they like. Isn’t it time they were held a bit more accountable to the citizens of the world?
One way to start would be to get all the candidates to answer questions in public – on TV, to parliamentarians, direct to citizens – the more opportunities the better. But what questions should we ask? A colleague suggested they should tell us what they think about major economic issues of the day. Here’s a list drawn from chapter 5 of the UN’s excellent World Economic and Social Survey 2010:
“Instead of increasing investment and growth, capital and financial market liberalization had the opposite effect by increasing volatility and uncertainty, which negatively impacted the long-term investment that is critical for structural transformation and development.” Do you agree?
“Reforming global rules in order to re-establish the capacity of public authorities both globally and nationally to curb excessive private risk-taking and ensure that finance serves the real sector,instead of the other way around, is an urgent priority.” Will you back the efforts of national authorities to control volatile capital flows?
“It is necessary to end the competition over foreign investment using regulatory and tax policies that characterized individual country policies in the past three decades.” How do you think this race to the bottom can be reversed?
Let’s hope civil society groups, parliaments and the media can add to this list – and force the candidates to give decent answers – how else can a truly merit-based process operate?
A UN document provides a fantastic indictment of the hypocrisy of EU leaders (hat tip to New Rules for Global Finance). The submission, dated 18 May 2011, by the European Union delegation to the United Nations is in relation to “the role of the UN in global economic government. It reads:
“7. However, it should be noted that the reform of the BWIs would be incomplete by
focusing purely on the question of quota and voice. The review of the Fund’s and Bank’s
governance should be comprehensive and address the full range of reform elements. For
instance, an open and transparent process for the selection of senior management, based on
merit and regardless of nationality, is still an important issue to be tackled, as well as the
promotion of staff diversity to better reflect the global nature of the BWIs.”
Really now? You don’t say? And who would it be that needs to “tackle” the issue? Would it perhaps be the Europeans themselves?
Continue reading “EU’s left hand doesn’t know what the right hand is doing”
In an unprecedented move, late on Tuesday in Washington, the IMF executive directors that represent Brazil, Russia, India, China and South Africa issued a joint statement on the IMF selection process. The statement of course demands a “truly transparent, merit-based and competitive process for the selection of the Managing Director of the IMF and other senior positions in the Bretton Woods institutions.” What is more important is that it shows unity and the demand that the next IMF head be a reformer. This will be a blow to the hopes of Mexico’s Augustin Carstens but also a sharp rebuke to the Europeans and a warning to the US.
Continue reading “BRICS come together and demand change, European arguments rebutted”