STRAY THOUGHTS: IMF, the Paris Elite and Madame Lagarde's 'Perfect English'

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By Julio Godoy

Paris journalists argued in a recent "debate" on the national public radio 'France Info' that Finance Minister Christine Lagarde is an ideal European nominee to lead the International Monetary Fund (IMF) because she speaks "such perfect English".

Beyond the parochial predisposition such an argument reflects, it seems that French journalists and other members of the Paris "elite" believe that the ability to speak perfect English is an "atout" -- a trump card -- only bestowed on the very best and the brightest. They seem to have hardly other arguments to defend the candidacy of Madame Lagarde.
 
The most repeated are that Europe has always led the IMF, and this tradition should be "respected"; that European countries are among the largest contributors to the Fund; and, more importantly, that given the present crisis of the Euro, the European common currency, a European politician should lead a global institution -- the International Monetary Fund -- to help a European bloc solve what is essentially a European problem.

The European rationale approving Madame Lagarde ignores the economic weight that numerous countries in Asia, Africa, and Latin America have gained during the past decades. Here again some basic and crucial facts: the People’s Republic of China and Japan are today the second and third largest economies of the world, relegating both Germany and France to a lesser role in matters industrial, economic, and political.

China and Japan own the largest currency reserves of the world, and also very large chunks of European and U.S. sovereign debt. And "perfect English" is spoken nowadays almost by every second-rang technocrat in Mexico City, Brasilia, and Buenos Aires, not to speak of New Delhi, Johannesburg, or Singapore.

But beyond these fundamental facts to which the Parisian parochialism pays no attention, there are other stark realities that speak against European occupation of the leading chair at the IMF. These have to do with the very nature of the European monetary crisis and with the original sin of the European monetary union.

It may appear alien to members of the French elite, or those who believe to belong to it, but there are indeed some basic prerequisites that a monetary union has to fulfil. For those who never worried about these elementary settings, I suggest reading the works of the Canadian economist Robert Mundell. He worked out sine qua non of a monetary union more than forty years ago, in the 1960s -- and, his work continues to be considered the cornerstone of optimum monetary union theory.

But when France, Germany, and the other European members of the Euro zone decided to admit countries such as Greece, Spain, Portugal, and Ireland in the monetary union, they did not pay any heed to the basics of economics. Now they are paying a high price.

The fact is that Greece cannot be saved from bankruptcy and still allowed to wheel and deal with the Euro. The Greek financial and economic situation is so dramatic that devaluation is the only way out -- that is, by Greece leaving the Euro zone and reintroducing the national currency.

Greece must ignore the European diktat of austerity and negotiate substantial debt relief -- against the interests of some French private banks that count among the largest holders of the Greek debt. Instead of salvaging the Greek economy, the austerity orders from Paris and Berlin, and their opposition to debt negotiation, are pushing Greece further toward abysmal ruin.

Much against the European conviction, reaffirmed also by the nomination of Madame Lagarde to lead the IMF, the Greek drama, and the Euro crisis, cannot be resolved by the IMF -- and least of all, by a politician belonging to one of the most incoherent governments in Europe, that of Nicolas Sarkozy.

Quite the contrary: It may offend Parisian pump politicians and their parochial partisans, but the IMF under Dominique Strauss Kahn, or DSK, neither saved Greece nor will save the Euro -- by supporting the European austerity calls, the IMF under DSK went back to its disgraceful 1980s recipes, which forced countries like Mexico to stagnate for decades.

Now, in complicity with Europe, and against the very basic European interests, the IMF is pushing Greece towards a downward spiral of austerity and recession, in an apparent move to salvage what is beyond remedy -- the European monetary union of countries as disparate as Germany and Greece.

Yet another argument not to elect Madame Lagarde to the IMF is that this institution does not need yet another politician pursuing her own political agenda. What the IMF, and the world, need is a new political programme, to deal with the dangerous instability that emerged with the end of the Breton Wood system and the liberalisation of international financial markets.

In short: It would be a major mistake for Europe -- and for the world at large to acquiesce in it -- to catapult Madame Lagarde into the managing director's chair of the IMF.

Actually, the bad European handling of the Greek crisis, and the good ones of other recent financial crises, such as those of Mexico in 1994, and especially that of South East Asia in1997, which were managed and solved swiftly, suggests that Europe would rather benefit from the advice of the leading financial technocrats of Thailand, Singapore, and the like, instead of falling back to its incestuous political mores. For, against the modern South Asian, Brazilian, or South African financial expertise, the perfect English of Madame Lagarde would appear a qualification of the third best.

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