IMF stitch-up locks out developing countries

Ben Fox reports on the appointment of Christine Lagarde as head of the International Monetary Fund (IMF) - at the expense of candidates from other countries.

Christine Lagarde’s appointment as the International Monetary Fund’s new Managing Director is certainly the biggest political surprise since Sepp Blatter was ‘re-elected’ FIFA President last month. Ms Lagarde is able (she chaired one of the IMF’s leading policy committees) and politically astute but she is the wrong candidate at the wrong time.

For all the talk about appointing the best candidate for the job and giving more emphasis to developing nations, Europe and the US have again used the position as part of a wider political carve-up. An American is in charge of the World Bank while Frenchman Jean-Claude Trichet is soon to retire as President of the European Central Bank.

Initially it was widely believed that the Bundesbank governor Axel Weber would succeed him – instead the ECB post went to another fiscal hawk, Italian Mario Draghi. The result is that Angela Merkel and Nicolas Sarkozy were determined that their candidate of choice would get the IMF job after Dominique Strauss-Khan’s sudden departure. Watch out for a German to get the next big post in the EU or global economic governance.

The last thing Europe, and particularly the eurozone, needs from the IMF is one of its own in charge. Ms Lagarde is clearly extremely able, but it would be in the eurozone’s interests for the IMF head to have the freedom to tell its leading countries, such as Germany and France, some truths they will not want to hear. That is why someone from the developing world, like Mexican candidate Agustin Carstens or South Africa’s Trevor Manuel, who was finance minister from 1996-2009, would have been a better fit.

During the series of botched deals, panicked bail-outs and austerity packages, Strauss Khan had been the most influential curb on the likes of Angela Merkel, Christine Lagarde and George Osborne. If all three had had their way, the terms attached to the Greek and Irish bailouts would be far tougher.

The narrative still being pursued by the French and German governments is that debt restructuring cannot even be contemplated. The likes of Greece and Ireland must live up to their commitments to sell off their state-owned assets and slash spending even deeper than the huge cuts they have already pushed through.

The evidence of the last year is that this approach has simply not worked. However, the main point about the IMF selection is that Europe clearly sees this post as its own. This is not consistent with the principles behind the IMF. The IMF is arguably the most important institution in global economic governance and was established as such in 1945. It should not remain the preserve of the West.

Yet as soon as Mr Strauss-Khan was forced to resign, European leaders lobbied for another European at the head of the IMF. Belgian Finance Minister (and aspiring candidate) Didier Reynders argued that:

“…it would be preferable if we (Europe) continued to hold these posts in the future.”

Angela Merkel, meanwhile, stated:

“We know that in the mid-term developing countries have a right to the post of IMF chief and the post of World Bank chief… [but that] in the current situation, when we have a lot of discussions about the euro, Europe has good candidates to offer.”

However, although the eurozone crisis is one of the biggest challenges that will face the IMF over the coming years, it is not the only one. The long-running trade and currency battle between the US and China is symptomatic of the increasing dominance that China and India, as well as the likes of Brazil and South Africa, are gaining in world trade. Despite this, EU countries hold 30% of the voting rights in the IMF. China, India, Brazil and South Africa, by contrast, have a mere 10% between them.

That Ms Lagarde’s appointment was virtually guaranteed as soon as European leaders rallied round her candidacy demonstrates that the US and Western Europe still run the IMF. For the institution to maintain its credibility it must change its structure if it is to be more than just a relic of the Cold War.

Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today. 

18 Responses to “IMF stitch-up locks out developing countries”

  1. Peter Tarlan

    @JohnRentoul The phrase "relic of the cold war" has become a relic itself. Can we ban it? #BannedList

  2. Pucci Dellanno

    IMF stitch-up locks out developing countries: writes Ben Fox in Brussels

  3. Hens4Freedom

    RT @leftfootfwd: IMF stitch-up locks out developing countries: writes Ben Fox in Brussels #NewsClub

  4. Ed's Talking Balls

    I agree, it should have gone to a developing country. Still, at least it wasn’t Gordon Brown.

  5. Max

    RT @leftfootfwd: IMF stitch-up locks out developing countries

  6. 13eastie

    What has changed in the last eight weeks since LFF was pleading that Gordon Brown be given the job?

    Or are we to understand that he succeeded in turning Britain into a developing country?

  7. SlashedUK

    RT @leftfootfwd: IMF stitch-up locks out developing countries: writes Ben Fox in Brussels #NewsClub

  8. Leon Wolfson

    No, the understanding I’ve seen is that’s the Tory goal…

  9. Hens4Freedom

    RT @leftfootfwd: IMF stitch-up locks out developing countries: writes Ben Fox in Brussels #NewsClub

  10. Africa Finance Daily - Thursday 30 Jun, 2011

    […] IMF stitch-up locks out developing countries – Left Foot Forward […]

  11. AltGovUK

    RT @leftfootfwd: IMF stitch-up locks out developing countries: writes Ben Fox in Brussels #NewsClub

  12. Anon E Mouse

    I think the government missed it’s chance by NOT forwarding Gordon Brown for this job.

    With the least popular Prime Minister in history being constantly in the news, it would have reminded everybody just how appalling an individual he actually was and how much damage he has done to the Labour Party.

    As I watched the Labour Party conference last year and they played “Soul Man” as Brown entered I nearly choked on my beer laughing. Bonkers.

    Every time Brown opined on something people would immediately remember the way he lied to the British people about the Lisbon treaty or 10p tax – whatever.

    Every news report on Greece would have Brown featured somehow and people would remember how he bullied Alistair Darling or Peter Watts treatment – fellow members of the Labour Party.

    The government missed an opportunity I feel and the more the public can be reminded of how bad Gordon Brown was the sooner the Labour Party can get a grip and start acting as a real opposition to this government…

  13. Semmone

    RT @leftfootfwd: IMF stitch-up locks out developing countries: writes Ben Fox in Brussels #NewsClub

  14. Leon Wolfson

    No, the referendum offered was on the EU constitution, NOT Lisbon. A different thing, and without a number of important elements, in good part because of EU-Tory obstructionism and anti-democratic manoeuvring. The lying is from, well, the LibDems. The Tories, sure, what they’re doing is expected, but…

    And no, cheap shots about the fact that the goverment has been forced into climb-down after climb-down, and is costing the country billions with things like the tuition fees – expensive for universities, for students AND for the government – saying Labour isn’t effective is denial.

  15. Anon E Mouse

    Leon Wolfson – Your unquestioning, drooling support for the party that rewarded city slickers, spivs and bankers means you are blinded to the truth.

    You do the typical micro responses on this blog. You fully understand the point I make regarding the unpopularity of the unelected Prime Minister, Gordon Brown and how his position in the IMF would continue to remind people of just how bad Labour turned out to be.

    Not their bloodthirsty warmongering in support of George Bush or their lies about the reasons for that war but their general ineptitude. (Mind you the Labour Party never elected him leader either to be fair).

    Brown claimed he’d ended the economic cycle of “Boom and Bust”. He claimed Tony Bair would serve a “Full Third Term” whilst briefing against him on the very day terrorists were attacking the underground. The list goes on. The man was a disgrace and if the government could constantly remind people of how bad he was it would damage Labour big time.

    That’s why people like me, that Labour need to win elections, just laugh as party activists respond with “lawyerly” excuses and answer just a tiny point instead of addressing the big issues and moving on.

    The way your emails go Leon Wolfson it’s as if Labour didn’t have it’s most catastrophic election result for decades.

    Even in the last elections, leaving Scotland aside, they couldn’t even win outright in Wales and got less of the popular vote than William Hague. But still the lying machine of the party rolls ever onwards.

    Or are you saying now that Blair, Mandelson, Watt, Darling, Cambell and all the other Labour party members that have written memoirs are lying?

    As for Labour being effective just look at the polls. They should be light years ahead with all these unpopular cuts and every time the government U Turns the less the reason people have to vote for the party. Until the party starts being honest they have no hope.

    Personally I’m waiting for Gordon Brown’s “British Jobs for British workers” but then I remember, despite Labour’s denials, the report that Andrew Nether produced regarding the open borders to our country and realise that Brown was just lying again.

    Your replies to people in this blog are nothing more than the actions of a Labour lickspittle Leon Wolfson…

  16. Ed's Talking Balls

    Substance over form. We should have had a referendum on the Lisbon Treaty; a rebranding exercise does not deflect from the fact that Labour broke a promise. As I’ve said elsewhere, no party has the monopoly on deceit and I certainly won’t take lectures on honesty from the Labour Party or any of its members! Dodgy dossier, anyone?

    As for tuition fees specifically, I’m sure that Labour was committed to implementing the recommendations of the Browne Review. Labour lost the election, heavily, so couldn’t finish the work it had started when introducing tuition fees. However, it’s more than a tad opportunistic now to blame a new government for doing what you yourselves would have done.

  17. Anon E Mouse

    Leon Wolfson – Not only did Labour bring in tuition fees they actually had the bare faced cheek to say they had “legislated to prevent their introduction”.

    Besides if the university still get the money why would they care where they came from as long as they got he money?

    And why should I work on (the equivalent of ) minimum wage to pay for doctors to get a free education when I don’t have that advantage?

    Labour advocate unfairness it seems and certainly no longer represent the working man. Those days are long long gone…

Leave a Reply