The IMF and inclusive growth: achieving SDG8

Under the leadership of Christine Lagarde, the IMF endorsed the Sustainable Development Goals (SDGs) and portrayed itself as a champion of inclusive growth. However, little changed in IMF loan agreements, which continued to push the same harmful austerity and deregulation measures of the past. The next leader of the IMF needs to change the core operations of the institution to promote sustainable economic growth, full employment and decent work.

The IMF has not meaningfully supported the SDGs, and its policies undermine the ability of countries to achieve the 2030 Agenda. To illustrate this point, let’s take a look at SDG 8: “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work.”

In a recent report, the International Labour Organization (ILO) shows that the world is not on track to achieve SDG 8 by 2030. For that to change, a major shift in macroeconomic policies is needed.

Orthodox economic policy models, like those promoted by the IMF, focus on supply-side measures and assume that growth will eventually trickle-down. Reality has shown that this is not the case. Furthermore, these models have failed to bring sustained growth the developing world.

Under the guise of “efficiency” the IMF has worked at odds with a decent work growth agenda,  often undermined labour market institutions, pushing for cuts in public wage bills, deregulation and weakening of workers’ rights. This approach, along with sharp spending cuts, lead to a downwards spiral in which the economy shrinks, unemployment grows, poverty soars, and aggregate demand in the economy collapses. The IMF itself admitted that most loan programmes fail to meet  growth targets.

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In the news

• U.S. Mnuchin sees some ‘very good’ European candidates to lead IMF, Reuters
• The choice of the IMF’s next boss could be a coronation, the Economist
• Europe is at odds over who will replace Christine Lagarde at the IMF, CNBC
• [Ashoka Mody] Let’s choose the best person to lead the IMF, Bloomberg
• The International Monetary Fund leadership is not a bargaining counter, Social Europe
• A reform opportunity for the IMF, Project Syndicate
• Europe Wants to Keep the IMF. Here’s How Its Likely Picks Fare, Bloomberg
• Lagarde’s exit, fresh beginning for IMF?, Leadership
• After Christine Lagarde, who will lead the world’s most important economic job?, Financial Express
• Why Europe should give up the IMF, Politico
• IMF prospects fade for Dijsselbloem, Carney, Politico
• Raghuram Rajan to replace Christine Lagarde? Former RBI governor among top picks for IMF chief role, Business Today
• France urges IMF age-cap rethink in hunt for Lagarde successor, Financial Times
• Spain will propose economy minister as new IMF chief if backed by EU, el Pais

We are back! As Lagarde announces surprise departure, time’s up for the ‘gentleman’s agreement’

Christine Lagarde announced on 16 July that she had submitted her resignation as IMF managing director, effective 12 September, following her nomination for the Presidency of the European Central Bank. David Lipton, the former deputy managing director, has assumed the position of acting managing director in the interim period.

In her resignation letter, Lagarde noted, “On July 2, 2019, the European Council proposed to nominate me to the position of President of the European Central Bank. I had agonized over this proposal during the previous 48 hours and eventually decided to accept.” Interestingly, the letter further noted that, “On the other hand (!) I realize that there is no perfect time to go. The work left to be done is challenging and I know that the Board, Staff, and Management will have their hands full.”

According to the IMF’s Articles of Agreement, the Managing Director, “shall be chief of the operating staff of the Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the Fund. Subject to the general control of the Executive Board, he shall be responsible for the organization, appointment, and dismissal of the staff of the Fund.” 

An end to the ‘gentleman’s agreement’? Don’t hold your breath

Leadership selection at the World Bank and IMF is subject to a historic (and archaic) ‘gentleman’s agreement’, which has ensured that, over the past 75 years, the IMF managing director has always been European and the World Bank president is a US citizen. This agreement harks back to the creation of the institutions, when membership was limited to 45 states and when European powers still retained colonies.

Closing time

After following the IMF leadership selection process over 8 weeks and 92 posts we are closing the doors on imfboss.org.

Thank you to all those who have been involved and made this blog what is was. We’d like to thank all the partner organisations and our fellow bloggers.

Finally, a big thank you to our readers and followers.

Of course we’ll be flicking through the papers on August 4 to see what the French courts of justice say. If their decision jeopardises Lagarde’s position as IMF boss, well, I guess we’ll be back…

French court delays decision on Lagarde…again

The French Court of Justice has once again delayed their decision on whether to proceed with an inquiry into allegations of Lagarde’s abuse of authority when French finance minister. It concerns her approval of a settlement to Bernard Tapie, businessman and friend of Sarkozy. A decision that was submitted to a private arbitration panel, and whose ruling was not appealed despite doubts over their independence.

The new decision date is 4 August. Court official Gerard Palisse revealed that one judge had “declared himself incompetent”, requiring a replacement who would need time to familiarise himself with the case. No indication was given as to how this incompetency arose, if it was a sudden affliction or a longstanding ailment. Either way, it seems he left it to the last possible moment to declare it.

Even if courts do decide to proceed with the investigation when they next convene, the process could take years to make its way through the courts and might not even result in a trial.