Now that the curtain has finally fallen on the lengthy drama of former IMF Managing Director Michel Camdessus’ succession, the time has come to distribute grades to the players on stage.
German Chancellor Gerhard Schroeder earns a D-.
Schroeder decided from the start that the next managing director at the IMF would be a compatriot. The French had had it good for too long running international institutions. Now it was Germany’s turn to secure the high exposure that comes with the job.
Apparently Schroeder was sleeping when the Asian miracle collapsed and Russia went belly up in 1997-98. To head the most influential international institution, he came up with the name of an obscure junior minister in the Ministry of Finance, Caio Koch-Weser.
The relationship between the IMF and the World Bank, the “Bretton Woods sisters,” is anything but brotherly. Koch-Weser spent 26 years at the World Bank, a stint that provided Larry Summers, U.S. Treasury secretary and a former chief economist at the World Bank, with an opportunity to evaluate him. Summers did not like what he saw.
Schroeder, however, would not listen to anyone, much less to the warnings of the French that his blitzkrieg would end up a Berezina. And so it did.
The Portuguese presidency of the European Union earns a D.
The Portuguese rushed to support Germany’s candidates rather than assume the role of a neutral referee, as they should have. I suspect this was because EU President Antonio Guterres and his comrades, the Portuguese Social Democrats, simply owe to much to their German counterparts, who supported the Portuguese socialists long before and well after the 1974 revolution.
The French government gets a C-.
There was a time when the French were not afraid to tell the rest of the world, first and foremost the Americans, to get lost. It was not always effective and the motivation was sometime dubious, but it was entertaining. Not anymore. The “methode Jospin,” as it’s called in France, is not to displease anyone. And so Paris never stood up to Berlin.
Too bad, because the French had a first-class candidate to succeed Camdessus. At least that was Camdessus’ opinion. Camdessus had given the French authorities very advanced notice of his desire to retire early. He then approached his junior from his days at the French Treasury, Jean-Claude Trichet, governor of the Banque de France.
Trichet had two reservations. First, the idea of having yet another Frenchman would never fly. For 32 years of the organization’s half-century existence, the IMF managing director has been French. In addition, the French authorities had already had enough difficulties securing the job of European Central Bank president for Trichet if Wim Duisenberg retired halfway through his eight-year term. A dedicated civil servant as well as the driving force behind the creation of the euro, Trichet would have come forward if the French authorities had put forth his name. This did not happen, and the Europeans settled for second best.
The Japanese Ministry of Finance gets a C.
Japan, the IMF’s second-largest contributor, wanted to have a say in a selection process that traditionally has been confined to the United States and Europe. Unfortunately, like Germany, it chose the wrong candidate.
Except for among foreign-exchange traders, whose foresight extends only as far as the next two minutes, nobody has ever taken “Mr. Yen” seriously. Lately, Eisuke Sakakibara, former vice finance minister, has become a vocal critic of the IMF, the policies implemented during the Asian financial crisis and the Eurocentric attitude of the Washington-based institution.
It’s too bad that nobody on the board of directors of the IMF can remember the Japanese representative, working at the time under the leadership of Sakakibara, ever objecting to those policies. Besides, if you want to fix an institution, you don’t look to the Japanese Ministry of Finance for an example. And to replace Camdessus, who is close friend of former Malaysian Deputy Prime Minister Anwar Ibrahim and a genuine supporter of democratic values and human rights, there are people better qualified than the number one apologist for Malaysian Prime Minister Mahathir Mohamad.
The U.S. gets a B.
At least President Bill Clinton had the guts to say no to Schroeder’s first choice. The French and other Europeans hostile to Koch-Weser waited courageously for the White House and the Treasury to take the hot potato off their shaky hands. And it worked, but just this once.
Despite the cases built up against the IMF inside the Beltway, the institution has been immensely useful for U.S. global interests. Look at the Mexican crisis of 1994-95, and Russia and Ukraine today. To have an American citizen running the organization could easily become a political embarrassment when the next financial crisis strikes. And this is said with all due respect for the outstanding capacities of interim IMF Managing Director Stanley Fischer.
For the Europeans, the lessons of this messy process are many :
* If they want to be taken seriously by the rest of the world, they should stop making fools of themselves. A well-defined decision-making mechanism must be implemented under the stewardship of the relevant council of ministers.
* Second, as Koelher will badly need support from his European constituency, the EU must come up with strong ideas on what it wants to do with the IMF. The main reason Washington allegedly dominates the IMF is because the Treasury puts forward ideas and then fights hard to get them implemented. The Europeans should look again at how to rebuild a proper international monetary system and foster strongly needed stability among the three major currencies. Not only is this the mission that justified the creation of the IMF, it would be the best way to prevent the occurrence of ever-bigger financial storms.
* Finally, consolidation of Europe’s 30-percent-plus combined shareholding in the IMF is long overdue. Unfortunately, the way Schroeder acted to get his way will not encourage Europeans members to consider it any time soon. Some victory for Europe, indeed.
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