Perfecting the IMF
By Staff News & Analysis - May 23, 2011

The IMF cannot afford to make a mistake with Strauss-Kahn's successor The IMF will soon be confronted with the difficult decision of choosing a new head. If these were ordinary times, it might be of little moment. But these are not ordinary times. Whatever the result of the case against Dominique Strauss-Kahn, he was an impressive leader of the IMF and re-established its credibility, says Joseph Stiglitz. – UK Telegraph

Dominant Social Theme: Care must be taken to replace one irreplaceable man with another. (Or maybe a woman.)

Free-Market Analysis: We wrote recently of the sub-dominant social theme regarding Dominique Strauss-Kahn and the idea that members of the elite are irreplaceable. Like diamonds, each is Different but Infinitely Precious. Strauss-Kahn's alleged rape, according to the mainstream media, could hardly have come at a worse time. The criticality of the IMF is more evident today than at any time in the past, we learn. True, world leaders like Strauss-Kahn are inevitably subject to the same "justice" as everyone else (is this really true, or just in America?), but if care is not taken, his "justice" might leave chaos in its wake and a developing whirlwind of economic disaster.

Of course, it is not just Strauss-Kahn that is irreplaceable. In fact, as we have explored, history itself is usually written from the vantage of irreplaceable men: From British kings to dashing generals such as Napoleon, history is shaped by the brutal will of courageous rulers. Washington, Lincoln, Roosevelt in America – all these potentates shaped the US according to their vision and the US itself would have been a much different country without them. From Charles De Gaulle to Winston Churchill to John Kennedy – each world "leader" is celebrated in the mainstream media for his irreplaceable qualities.

We can see this theme being carried forth in a column (excerpted above) by Joseph Stiglitz, who provides another twist by focusing not on the irreplaceable man himself but on the necessity to find a person of equal caliber to take his place. In fact, it is generally necessary to continually build up both the institutions of public service and the selflessness of its leaders. Without its apparent puppets, er … respected leaders, an endless array of useless laws would not be so easily passed, so-called civil society would not be "honored" and the Anglosphere elite would not be able to operate its mercantilist schemes with impunity.

We can see the principle of the irreplaceable man operating in British leaders such as Tony Blair, who was endlessly feted and celebrated in the 1990s as a kind of "genius." His genius, it was said, had to do with making a modern melding of the caring nature of Labour with the harder-edged technocratic competence of modern authority. New Labour was supposed to sweep the world; in fact, it didn't end well. (It never does.) Blair left Britain in an unbalanced state with finances in a mess, austerity in the offing and an unresolved, bloody war in Afghanistan. He split the country so badly that it is said a Labour government may not be elected for another generation.

Then there is George W. "you're either with us or against us" Bush, another irreplaceable man. And yet, despite the invincible honor of this formerly impaired driver and self-described "war president," the results of his regime were not universally positive. At home, his policies of compassionate conservatism impoverished Americans, destabilized the economy and may yet end the dollar-reserve system.

Abroad, in Iraq and Afghanistan, Bush pursued victory with implacable rigor. The only trouble with his victories was that they were incomplete when he rode off into the sunset. And without Bush's personal presence, the victories that he claimed with such certainty seem to be unwinding. Cynics would maintain, in fact, that Bush's victories were more ephemeral than substantial, more imaginary than real.

Bush did manage to poison two nations, Iraq and Afghanistan, with depleted uranium, giving rise to birth defects and cancers for generations to come. This and the generalized bankruptcy he inflicted on his own country may in fact constitute his lasting legacy. It could be said therefore that Bush generated significant accomplishments, even if they are not the kind that the elites will want to publicize.

Stiglitz is of course bothered by none of this. The famous progressive economist is still stuck on the idea that the right individual is needed for the right time – that history can be created, or at least rewritten if there is a well-meaning dynamo in charge. He is most concerned that the right individual be found to replace the previously irreplaceable Strauss-Kahn. "Europe faces a financial crisis," he intones at the beginning of his screed, "and good leadership of the IMF will be essential to finding its way out."

The right leader is of importance because the IMF itself is so important, and also because there is a battle going on for this institution's soul. (Did you know the IMF had a soul?) It is being carried forth "between those who put the interests of the banks first and those who put the interests of the people first."

Stiglitz is convinced that working for the IMF is actually a higher calling. "An effective and fair IMF is essential," Stiglitz intones (one can almost hear the sermonizing), "an institution that looks not just after creditors in the lending countries but after the well-being of all."

In fact, this is an interesting perspective. The IMF was founded in part by David Rockefeller (who helped found most everything at the war's end) and is a member of a global-financial tag team. The World Bank is its other half. The World Bank's job is to ensure that this despot and that dictator spends lavishly, borrows inordinately and is either assassinated or resigns, leaving aforesaid country in the lurch. Enter the IMF to complete the rape by demanding higher taxes, reduced public services and most important a sell-off of the country's assets to Western conglomerates.

There is nothing in any of this that supports the "well being of all" – but Stiglitz has convinced himself that the better angels of the IMF are waiting to be produced by a leader of good faith. Here's some more from the article:

Whatever the result of the case against Strauss-Kahn, this much is clear – he was an impressive leader of the IMF and he re-established the credibility of the institution. He breathed fresh air into the IMF as he re-examined old doctrines such as those concerning capital controls. He raised new issues as he emphasized the critical role of employment and inequality for stability. He reasserted the role of economic science, including Keynesian economics, over the mishmash of long-discredited Wall Street doctrines, which had been central to the IMF's failures in East Asia, Latin America, and Russia.

He also listened to the increasingly vocal and informed voices of those in emerging markets. He supported the movement for reforms in the institution, including voting rights and governance. As the IMF transitions, it is important to maintain the reforms, and carry them forward. But the hard-fought gains of the institution could easily be lost. That's why the choice of the head – and the process by which the choice is made – is so important. It should go without saying that this implies that the head should be chosen on the basis of merit in an open and transparent process, and indeed the G20 has agreed that the old boys' system, in which Europe was entitled to head the IMF (with an American the second-in-command) has to go.

The understanding was that the next head would come from the emerging markets. To renege on that commitment would be a disaster for the IMF and the world. If the emerging world had no one to offer, that would be one thing. But there is an ample and impressive supply of qualified individuals. The required mix of skill and experience is, to be sure, unusual. The head must have a knowledge of economic science …The person must also have the ability to manage a complex international organization, have familiarity with the international players and the ability and credibility to deal with them forcefully.

Some menu! Stiglitz is entirely serious. This is "a true test of the IMF," he writes, "especially because its governance has been widely viewed as flawed and opaque." You think? The BRICS, Brazil, Russia, India and China, are still so suspicious of the IMF that they would rather go around it than work with it to create a new and more global currency. Stiglitz is aware of this, but the situation leaves him melancholy. "If they had confidence in the IMF, these countries could turn to that institution rather than self-insurance," he writes. "This would be more globally efficient – but developing countries are reluctant to rely on the IMF."

For Stiglitz, none of this is hypothetical. The ramifications of not selecting the right irreplaceable man (or woman) are grave indeed. All of us live together now … "IN AN AGE OF GLOBALIZATION." And what does that mean? "INTERNATIONAL COOPERATION IS ESSENTIAL."

One gets the feeling that people like Stiglitz wear these phrases on their foreheads to remind them (when they look in a mirror) that they must be used in every article and every speech. For Stiglitz, "there is a vital role for the IMF to play … It seems to have learned at least some of the lessons. The Institution seems well on its way to recovering a better reputation … the world needs a credible and effective International Monetary Fund."

In fact, an effective IMF is just about the last thing the world needs. Someone should hand Stiglitz a copy of Human Action by Ludwig von Mises. (On the other hand, he might melt into a puddle screaming, "Oh, what a world!") The reality is that INDIVIDUALS cause change within their own environments. Large public institutions such as the IMF operate by fiat – by law – and every law is a price fix. Thus, the IMF can do nothing but harm and throughout its long and illustrious career it is has seemingly harmed the citizens of most every country it has come into contact with.

Editor’s Note: Gold, silver coins legal currency in Utah! … The AP is reporting that Utah legislators have “made gold as good as cash.” Assuming the report is accurate, Utah becomes the first state (as we have long predicted) but not the last to legalize gold and silver coins as currency. Next evolution: precious metals depositories. “Store your gold and silver coins in a vault, and receive a debit-like card to make purchases backed by your holdings."

After Thoughts

And the IMF is doing it again: Europe is ablaze thanks to the IMF's recipe of high taxes, reduced public services and "privatization" – which is merely a euphemism for selling prime assets to Anglo-American multinationals. Institutions like the IMF are an affliction that never diminishes, a plague that never ends. They are irreplaceable, just not in a good way.

Share via
Copy link
Powered by Social Snap