Europe Against The World

Strauss-Kahn was in the process of making drastic changes in the IMF to benefit the developing world when he was suddenly caught up in a sex scandal [GALLO/GETTY]


Europeans Are Not Allowing The IMF To "Reform" To The Point Of Being Led By The Developing World.

By Pepe Escobar
Last Modified: 21 May 2011 11:54
Courtesy Of "Al-Jazeera"

So the trial of the century won't be Osama bin Laden's after all.

It will pit on one side "Ophelia", a Western African Muslim immigrant to the US, a 32-year-old widow who supports herself and her teenage daughter working as a chambermaid in a five-star Manhattan hotel.

On the other side, we find Dominique Strauss-Kahn (DSK), the 62-year-old French Jewish former head of the International Monetary Fund, former virtual winner of the 2012 French presidential elections, and former heavyweight of advanced capitalism.

Talk about a metaphor of the current civil war inherent to advanced capitalism, or - as a matter of fact - to life as we know it, where might is usually right and democracy has been reduced to a simulacrum.

For the past few days it has been possible to entertain the notion of history delivering some kind of poetic justice in the form of the IMF - thanks to an African Muslim female worker - finally being led by a technocrat from the developing world instead of the fund appointing one of the same old European faces.

That does not seem to be the case anymore.

The Ugly Sisters

Everyone in Washington and beyond knows that the "ugly sisters", the IMF and the World Bank, were designed as convenient tools for the West to lay down the law to emerging markets - the whole process sitting upon a supposedly "neutral" or "multilateral" velvet cushion.

Scores of economists who've worked for the ugly sisters throughout the past decades have ended up at very prominent positions - from ministries to Central Banks - across the Middle East, Asia and Latin America. This explains - among other absurdities - why they have always insisted in investing their countries' reserves in debt issued by the US or European Union nations. Well, because it's "safe".

At the same time, they've all bought into the fiction that the IMF was a "credible partner" to their governments. Well, it wasn't; the only IMF "credible partner" has always been the US treasury.

Before the 2008 Wall Street-provoked global financial crisis, the IMF's credibility was risible. Not only because of the way it handled the 1997-1998 Asian financial crisis, almost destroying whole economies, from Thailand to Indonesia, with its dreaded one-size-fits-all structural adjustment. Not only because of the way it handled Brazil and Russia. And not only because it did everything it could to destroy Argentina after it defaulted in late 2001.

It's in this policy wasteland that DSK - a super smart economist, lawyer and negotiator - started to make his mark. He immediately seized the opening of the 2008 crisis being discussed inside the G20 instead of the G8 - and thus including powerful voices from emerging markets.

In 2010, he even convinced the Europeans at the IMF to share some of those obscure leadership quotas with emerging economies. Talk about bias. The US holds no less than 16.8 per cent of voting rights; Europe a whopping 35.6 per cent. Germany, the UK and France, among them, hold over 15.5 per cent. China has only 3.6 per cent. Brazil, which represents nine South American countries, has only 1.3 per cent.

When someone as impeccably progressive as Nobel Prize winner Joseph Stiglitz praises your work, you know the IMF is really changing. Stiglitz took no time to recognise how DSK was trying to implement a new model - with less emphasis on Wild West privatisations and hardcore crushing of labour unions. 

It's as if the IMF had seen the light, Blues Brothers-style, and was now on the road to global wealth redistribution; in Stiglitz's analysis, "strengthening collective bargaining … restructuring tax and spending policies to stimulate the economy through long-term investments, and implementing social policies that ensure opportunity for all." 

No wonder what DSK was trying to do was not exactly praised by great swathes of the Western financial elites. Only a week before his spectacular, arguably self-inflicted demise, he said at George Washington University, "the pendulum will swing from the market to the state" and urged "a new form of globalisation to prevent the 'invisible hand' of loosely regulated markets from becoming 'an invisible fist'".



The Bankers Win Again

Most of France is convinced DSK was framed. That's a case for the French to solve reclined on their collective couch. Whatever happened in that suite at the Sofitel near Times Square, the fact is the post-DSK leader of the IMF ($521.000 annual salary plus immeasurable benefits) won't be near that revolutionary.

German chancellor Angela Merkel, neo-Napoleonic French President Nicolas Sarkozy, Italian Prime Minister Silvio "bunga bunga" Berlusconi, president of the European Commission (EC) Jose Manuel Barroso - they all scrambled to stress the next IMF head should be European. Many justified it by shamelessly invoking the current skewed rules - after all the EU is the IMF's largest "contributor".

It's essential to note that all these apologists range from conservative to ultra-conservative. They are not exactly worried about the developing world; the priority is those packages for suffering European economies such as Greece and Portugal; ie, how to reimburse large European banks to the detriment of local working people.

No matter that China insisted the new leader should come from the developing world. No matter there are competent candidates aplenty, from Turkish Kemal Dervis to South African Trevor Manuel, from Mexican Agustin Carsten to Indian Montek Singh Ahluwalia.

So in the end it may well be Christine Lagarde, 55, once again from France (they led the IMF for 26 of the past 33 years). Another splendid metaphor; a European trying to put the brakes on the vertiginous decline of Europe after Greece threatened to leave the embattled euro and had to be contained, by force, by the powerful European banks who lent it those euros in the first place.

Well, at least this time it would be a woman; a former synchronised swimming champion with a penchant for chic Chanel business suits; former head of the Chicago law firm Baker Mackenzie; former Best Finance Minister in Europe in 2009, according to the Financial Times; and most of all, someone Washington and Wall Street trust won't come up with "exotic" wealth redistribution ideas.

Pepe Escobar is the roving correspondent for Asia Times. His latest book is Obama does Globalistan (Nimble Books, 2009). He may be reached at pepeasia@yahoo.com.