Christine Lagarde: This is Not Your Father's IMF

♠ Posted by Emmanuel in at 8/01/2011 12:01:00 AM
One of the critiques levelled against Christine Lagarde in succeeding the ill-fated Dominique Strauss Kahn was that she was too closely associated with contemporary powers-that-be lurching from one crisis to another on the European scene. Having since assumed office as the current IMF managing director, it's only natural that she distance herself from recent manoeuvring while attempting to create an aura of objectivity. Familiar to all those who say they wish to set politics aside (as if that's really possible), the "technocratic pose" is now in effect. To accomplish this task, she lauds the IMF's activities in Europe in recent times while keeping her predecessor's name silent [shh], all the while striking themes of technocrat-speak for a post-DSK era of forced-upon austerity for any number of industrialized countries. She says...
The IMF had been an intellectual leader during the global economic crisis, with its early call for coordinated policy stimulus, Lagarde stated. “It has been a flexible financial partner, reforming its lending instruments and making available a record amount of support, totaling about $330 billion. And it is helping build a stronger global economy, through its policy advice and technical assistance efforts.”

But the IMF had to adapt to the changing needs of its members, Lagarde stated. She set out four organizing principles for an IMF that is even more effective, noting that they each begin with the letter C.

• The IMF must be client focused, preserving the stability of arguably its most important client, the international monetary system. But member countries are also the IMF’s clients. “And so by focusing on the policies needed to stabilize the system as a whole, the IMF can help its members find the policies best suited to deliver strong and stable growth over the long run,” Lagarde said.

• The IMF must understand better the connections both between and within countries. IMF staff are just completing a study of how policies in the world’s five most systemically important economies—China, the euro area, Japan, the United Kingdom, and the United States, affect stability in others. Within countries, the IMF must better understand connections such as macrofinancial linkages.

• The IMF must be comprehensive. “When evaluating the strength of an economy, we need to look beyond the standard economic and financial criteria to make sure that we don’t miss other factors—such as social concerns, or political economy issues—that may threaten macroeconomic stability,” Lagarde said.

• The IMF must be credible in how it works and how it is governed. “All countries should get fair treatment from the IMF—fair in listening to their views, fair in evaluating their policies, and fair in reporting them to the world,” Lagarde said. Credibility of the IMF’s governance is also essential for the institution to be effective. “For too long, the IMF’s voting structure reflected the economic realities of bygone days. But this is changing.” Last year, Lagarde noted, IMF members agreed to boost the voting power of the world’s fastest-growing economies.
Once again, it's odd how she champions credible IMF reform when she herself was chosen on the basis of le ancien regime of European countries determining among themselves who should head the IMF. Moreover, I would certainly love to hear her version of why troubled Eurozone countries which availed of IMF funding were able to do so despite not primarily suffering from balance of payments problems which the institution was established to address [1, 2, 3].

In a way, the IMF is no more credible than it was before in terms of representativeness--Lagarde's leadership is certainly not a harbinger of change. It is also arguably less credible than it was before by encouraging "mission creep"--helping bail out rich countries whose woes do not deal with things the IMF was tasked to address. Indeed, this may not be your father's IMF but something rather less desirable.