Imagine you are sitting in an interview room for a very important job. You have your best pressed suit on, possibly from Chanel. You are trying to demonstrate that you really would be the best candidate for the job. Your interviewers start asking you tough questions about economics, a subject you have never studied in-depth and don’t know much about. Then, one of the interviewers throws you a soft question. Very open-ended, so you can say whatever you like and not sound stupid. What do you do?
Well if you are Christine Lagarde you laugh and refuse to answer. Her Twitter session on Thursday was about the least interesting way possible to find out what Lagarde thinks. And when a questioner asked “What do you see for the future of the IMF?”, Lagarde simply answered “;)!!!!” That is a less than illuminating answer. The IMF boss job will affect the lives of hundreds of millions of people around the world through the policies the IMF demands of its borrowers and the advice it gives to its members. And the leading candidate thinks it is a joke. The joke is on us. The selection process is a joke. Reform of the IMF is turning into a joke as well. To be relegated to the dustbin while the institution soldiers on punishing ordinary citizens for the sins of dictators, corporations, other countries, or bad governments.
Let’s see more of the “in depth” answers Lagarde gave on her Twitter chat. One questioner asked “Do you think fighting against inflation is still a priority in the EU?” Lagarde showed off her hawkish credentials with “fighting inflation is a priority the world over. inflation hurts more the less privileged.” This may accord well with the thinking in the IMF fiscal affairs department from the 1980s, but doesn’t really show an understanding of the economics of developing countries.
Or how about her answer to a question about the fiendishly complex subject of International Financial Reporting Standards: “ifrs should be elaborated and reformed when necessary to adapt to the reality of the economy and not be procyclical”. So what kind of reform would you like? When would it be necessary? Are the current standards appropriate? What role would the IMF have? How would developing country interests be represented in any reform effort? Well we just don’t know.
And another simply questions to stake out a position: “Do you think the IMF should be reformed? What exactly will you do?” To which Lagarde replied with little exactness: “reform is under way to improve representativeness at governance and staff levels, it should continue to warrant legitimacy”. Very imprecise and completely ignores the policy issues facing the Fund and the reform needed in lending operations, taxation issues, debt relief, conditionality, capital controls advice, exchange rate surveillance, etc. Does Lagarde really think that the Fund has it all perfect now and the only thing that needs to change is a few more voting shares?
On the thorny questions of Greek debt and the role of the euro, a questioner suggested Greece default. Lagarde answers with the stock European official answer: “very hazardous and unpredictable solution in my view! We must keep the eurozone together, and invent sustainable solution.” What is that sustainable solution? No idea of course, but if we go by past action the “sustainable solution” would be further squeezing ordinary citizens in Greece, slashing public services, and privatising the whole country without regard to the social impacts.
The whole exercise demonstrated two things clearly: we need a proper public debate so the views of the candidates can be probed in-depth; and this selection process has been so flawed we have a slew of candidates that just are not up to the job.
The Guardian newspaper is giving people a chance to vote on Lagarde. They ask in a poll: “Would Christine Lagarde make the best head of the IMF?” I would quibble with the way they phrased the answers, making it a choice between her “distinguished record” and “emerging nations need more of a say”. It isn’t about nationality! If Christine Lagarde hailed from Francophone Africa I would still call her unsuitable.
IMF Boss 
An interesting article. She doesn’t sound like the most lucid economic thinker since Keynes, but then again she was answering within a 140-character limit on Twitter. Also, she wouldn’t necessarily have known whether her answers were going to be read by people who knew what inflation was, let along QE or other more complex terms.
So I wonder if her government track record as French Finance minister (about which I know little) and the quality of decisions she made there are more significant in determining her suitability to the job than her Twitter answers.
LikeLike
Hi Al,
Of course twitter is not the right format to have this type of Q&A. This is why we asked the candidates to have a public debate. Neither of them answered. Our contributing analysts weren’t very positive about Lagarde’s work as a finance minister. See the piece on imfboss.org under “Candidate assessments” and you will see two contributions which throw light on the problematic issues during her tenure at the French finance ministry.
On top of that, the Greek debt crisis shows a lot about her ability and goals during financial crisis. While most analysts, NGOs and economists were saying last year that the IMF/EU package just wouldn’t work – and that Greece’s unsustainable debt burden needed to be tackled, Lagarde was at the forefront of European efforts to ensure that private banks got fully repaid with not repsonsibility for irresponsible lending. Instead the burden was put on ordinary Greek citizens through the most drastic austerity package. Eventually as Greece’s outstanding debt moves from private banks onto the balance sheets of public institutions, the main strategy of the European powers, private creditors will be made whole, while the public across the eurozone will join ordinary Greeks in bearing the cost of the inevitable default.
All in all not a fantastic record to be running on.
LikeLike