IMF attempts to turn back the clock

Posted: May 23, 2011 in Economy, Euro, Europe, Financial crisis, IMF

Is it 1961 or 2011? I’m wondering because the International Monetary Fund (IMF) is acting more like the former than the latter. If it was 1961 (the year of my birth, BTW), there would no question that the next leader of the IMF should be a European. But it’s 2011, folks, and the outdated, cosy, cold-war agreement that the leader of the IMF should come from Europe while the leader of the World Bank should come from the U.S. is not only outdated, it’s dangerous.

As Bob Dylan would say, “the times, they are a changin” but as far as the Western Global Political and Economic elite goes, change isn’t desirable or good. It’s clear to anyone with a brain in their heads that the economic and political momentum on the planet has shifted from the west to the east. But instead of trying to make this transition work as seamlessly and painlessly as possible, the soon-to-be-have-nots are kicking and screaming and hanging to every ounce of political and economic power they have for every possible second.

If the stakes weren’t so high, it would almost be funny. But they couldn’t be higher: with the global financial system in danger yet again — this time from the Euro zone yet again — Western political leaders are intent on reinforcing the status quo by selecting another French politician as the leader of the IMF. Outside of her gender, is Christine Lagarde that much different from Dominique Strauss-Kahn? Does France, and Europe itself, a country and a continent with declining economic and political influence, really deserve this job, especially in a time of financial crisis?

Frankly, no, they don’t. And shame on anyone who is pretending that this selection process will be merit based and include everyone. Come on! People, it’s a done deal. The US and Europe have the votes to sew this up and nothing else but raw votes and raw political power matter. Yes, Australia and South Africa are in favor of a change to the status quo, but Brazil is willing to go along with a European candidate, God knows why. A back-room deal, maybe?

Really, it is shameful, short-sighted and flat-out stupid that preserving the status quo and the delicate feelings of the Europeans matters more than saving the global financial system. Because that’s what’s at stake. The weaker members of the EU are literally burning with riots in Spain and Greece, economic depression in Ireland and any kind of sensible solution off the table, but so what. We’ve got important status-quo preservation work to do.

Not that actually opening up the IMF managing director selection process and choosing someone from outside of the current EU-US power axis would necessarily make a difference, but a different outlook and some emerging market cred might help. But we’ll never know, will we because we’re getting more of the same.

As Martin Luther King once said, “Freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed.” If it was up to the current powers that be, IMF vote re-alignment would happen eventually, say in about 100 years. If emerging markets want more say commensurate with their growth prospects and potential to contribute funds to all these bailouts, they better start demanding more. Because otherwise, it ain’t gonna happen.

Next time, I’ll share more of my thoughts on the so-called solutions being put forth by the powers that be in regard to Greece, what’s likely with Spain and a few other thoughts. For now, I’ll leave you with some links:

  • Markets aren’t going to give the Euro any breathing room: The markets are going to continue to pound the Euro, Greek, Spanish and Portuguese debt until the Euro Zone, IMF, US and anyone else with influence on the situation realizes that more needs to be done beside rearranging the deck chairs on the Titanic currently known as the Euro (from Business Insider).
  • Political protests go viral across Europe: Many Europeans are fed up with austerity; it’s being seen in elections, which many not produce the desired results, but will at least send a message (Roar Mag).
  • IMF Candidates by the numbers: Are you kidding me? This should be in The Onion, not the New York Times. Right, a candidate from Azerbaijan has a chance because that country has the highest growth rate in the world. And sure, Singapore is right in there because it’s unemployment rate is 2.5 percent. Or, OMG, maybe Paraguay, because it has low debt. Yeah. (Reuters via New York Times).

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