Why Christine Lagarde should never be head of the IMF … Christine Lagarde is in poll position. Having put her name forward last week, the silver-haired French finance minister may well become the new managing director of the International Monetary Fund (IMF). Lagarde has, with a depressing inevitability, secured the backing of most European countries. The UK was among the first to endorse her. There are rumours the mighty US could soon throw its weight behind Lagarde – making her bid a fait accompli. Europe seems determined to retain its prerogative of appointing the boss of the world's most important financial watchdog. Throughout the IMF's 65-year history, all 11 bosses have been from Western Europe. In return for allowing this stitch-up, America has traditionally provided the IMF deputy, while securing the top spot at the World Bank. – UK Telegraph

Dominant Social Theme: At this most critical time, this Western powers are about to make a critical mistake regarding this critical facility!

Free-Market Analysis: There seems to be emerging consensus in the constitutionally suspicious alternative Internet press that Dominique Strauss-Kahn was "stung" for any one of a variety of reasons. It was not rape, therefore, that brought him down but his effectiveness in dealing with the EU's economic crisis.

Alternatively, we have read, his arrest provided a distraction from the real and serious failures surrounding the great powers ability to deal with the unfolding crisis.

Finally, there is the idea that DSK wanted to continue to rejigger the voting mechanisms of the IMF. The US currently holds 17 percent of the votes in the IMF and IMF bylaws demand a majority of 85 percent for any substantial moves or changes in policy. Thus, the IMF is the US's creation and is beholden to it.

Anyway, we've stayed away from speculating. We don't seen any specific promotional value in what happened to DSK, other than to reinforce the meme that American justice is absolutely pure and non-discriminatory. But that's a pretty small, sub dominant meme, not one that would seem especially worth reinforcing at this point in time.

While we are not tempted to join the fray regarding DSK conspiracy theories, we have presented on several occasions the one powerful dominant social theme that has predictably emerged from the affair, which is that the IMF is an incredibly important institution and that its leaders are really, really, really important people.

In fact, if there were no IMF and no leadership it is likely – so we are informed – that the world's economies would probably collapse sooner rather than later. You can see our previous articles on the topic here:

www.thedailybell.com/2368/Perfecting-the-IMF.html

www.thedailybell.com/2307/Arrest-of-IMFs-Most-Magnificent-Man-Seen-as-Ending-the-World.html

We recently analyzed the memes in an article by Joseph Stiglitz on this topic, entitled, "The IMF cannot afford to make a mistake with Strauss-Kahn's successor." Now the UK Telegraph has issued yet another jeremiad on the importance of the IMF from columnist Liam Halligan. This focuses on the meme of IMF-as-most-important-institution-ever.

The institution he writes, "needs to reflect the extent to which the world has changed since it was launched from the ashes of the Second World War." Why? Because the markets could soon face another "Lehman moment." Lehman Brothers is widely held to have destabilized global markets in 2008.

From this (fallacious in our view) perspective, Halligan goes on to argue that it would be a "historic" mistake to appoint a European to head the IMF, especially given that non-Western countries compose most of the world's population now, some 80 percent. He cites other statistics too: The world's markets produce half the GDP and out-trade the West. They hold most of the world's currency reserves and are not mired in debt.

The IMF, he concludes, needs a leader from the developing world, a world that has arranged its finances better than the Western world. The West does not have a moral argument to make regarding IMF leadership. The mess it has made collectively of its finances has removed its credibility and "moral authority."

Halligan is also upset over the idea that the new leader of the IMF might be what he calls a "politician." Halligan claims the IMF "works properly" when it is taking an adversarial role and "banging political heads." The IMF must be seen as "tough – even unreasonably tough … an IMF that colludes with the political classes isn't enacting reform. It is simply helping the politicians bury their mistakes and kick any problems into the long grass where they will fester." Here's some more from the article:

The IMF should be respected – even feared. It is for the politicians to stand up and face the political music – explaining to their electorates why harsh actions are needed and why nations can't go on living beyond their means. Perhaps the most dangerous type of politician to run the Fund is a politician still hankering after high office. Strauss-Kahn, of course, was using the post and the influence it bestowed over trillions of dollars of bail-out cash, as a platform for a French presidential bid. As such, he turned the IMF into a soft-credit society for the eurozone's periphery nations, holding the single-currency together for the benefit of his Franco-German friends.

Strauss-Kahn's continued insistence on "just one more bail-out", rather than forcing Greece, Portugal and the rest to face up to genuine debt-restructuring, also made sure that the losses stayed with plebian taxpayers, rather than being shifted on to Europe's banks. He could have called in the favour, no doubt, when the need came to finance his campaign for the ultimate prize. It was not to be for Strauss-Kahn, of course. But what is to stop Lagarde following the same route? …

Running the IMF, now more than ever, requires economic expertise, massive intellectual authority and a willingness to be deeply unpopular – particularly, if you are a European, on your home turf. The emerging economies need to stop moaning, put their differences aside, and set their combined authority behind a world-class economic policy-maker to run the IMF. Such nations should be doing everything in their power to wrestle control of this pivotal institution from a Western political elite that is not only intellectually inadequate, but which seems determined to compound the world's economic problems …

Halligan is convinced that Lagarde has her own unfortunate political ambitions. As we can see from the above excerpt, he seeks a person of "massive intellectual authority" – and believes that person can only be found in the developing world.

We wonder exactly why somebody of massive intellectual authority would want to run the IMF in the first place. Anyone with massive intellectual authority would realize that the IMF is a dysfunctional organization that was constructed to increase Western dominance over the developing world, not to "help" countries recover from excessive debt.

The IMF is part of a fiscal and monetary tag team with the World Bank. The World Bank encourages dysfunctional, developing-world leaders to borrow more than their countries can withstand. Once the money has been wasted or spirited away, the country is effectively broke and the big western banks call for the IMF to step in.

The IMF's solutions are always the same. They tend to crush the middle class by reducing public subsidies and hiking taxes. Then they put tremendous pressure on remaining government officials to sell off a country's prime assets under the pretext that these are assets that need to be privatized. In truth these are mostly monopoly assets, like water and electrical facilities – and thus even privatization does not remove the monopoly status. One has just transferred a public monopoly into private hands. The profits are tremendous.

It is hard to avoid the conclusion (we won't) that the EU acted as the World Bank when it came to Europe's PIGS. These southern countries were given tremendous amounts of cash to supposedly make them financially healthy – or healthy enough to join the EU. But in addition to outright grants were numerous huge loans that were presented to all these countries during the faux-boom of the 2002-2007, many no doubt with EU cooperation. Now that the bill has come due, the EU is cynically calling on the IMF to ensure these countries make their payments.

Why isn't it working this time? Why have the protests only become stronger and deeper, threatening to tear apart the entire EU? We've presented the idea that the Internet itself has helped mobilize people in a way that Western elites were not expecting. Instead of crushing European middle classes and strengthening the EU, Eurocrats are discovering they may fundamentally weakened it and the euro besides.

The IMF, of course was supposed to play an integral role in this slaughter of the PIGS. The IMF is always involved in such pillaging. Of course, Anglosphere elites would much rather have the developing countries clamoring to "get in" than ignoring such institutions or seeking to remove themselves. This may yet happen however if the US continues to insist on its 17 percent control of the IMF.

Times are changing substantially, as are the attitudes of developing countries. The control that Western elites expected to exercise over these institutions is coming increasingly into question. Ironically, if the West does give up control and allow these institutions to play their putative role, they will become fairly useless to their creators. They will also be seen, increasingly, as the ineffective entities they actually are. For this reason, the US is not likely to cede any part of its 17 percent. Lagarde may get her dream post, but she may soon come to regret it.