IMF Still Colonial
The International Monetary Fund will probably continue to be headed by a European after the resignation of France's Dominique Strauss-Kahn, but the debate over his replacement indicates this degree of Eurocentrism is unlikely to prevail the next time a successor is sought.
The persistence of the unwritten rule that the managing director of the IMF must be a European brings with it 'a stench of colonialism,' Moisés Naim of the Carnegie Endowment for International Peace wrote in an article for the Brazilian newspaper Folha de São Paulo.
Since the IMF and the World Bank were founded in 1944, the heads of these institutions have come from Europe and the United States respectively, a power-sharing scheme that no longer holds water with the economic growth of emerging countries and the financial crisis that has weakened rich nations since 2008.
The new global economic reality has been recognised, for instance, by the emergence of the Group of 20 (G20) major industrial and emerging economies, which meets to discuss key financial and economic issues.
The scandal over Strauss-Kahn's alleged sexual assault of a hotel maid and his arrest, and the subsequent debate over the appointment of a new IMF director, have not drawn attention to the nature of the unspoken rule.
If there were a choice between a 'principled' Westerner, male or female, 'so long as they do not support the (free market) Washington Consensus, or a servile person from an emerging country, I would prefer the former,' Celso Amorim, a former foreign minister of Brazil, told IPS.
The Brazilian government said it does not rule out accepting a European director, nor does it necessarily insist on a representative from an emerging nation, but it does want a transparent selection process based on merit and 'broad consultation with the member countries,' Finance Minister Guido Mántega wrote in a letter to the G20.
The point is to put an end to the geographical, or geopolitical, criteria for the appointment, as well as the European monopoly based on agreement with the United States. According to observers in Brasilia, the Brazilian position is largely due to the conservatism of the candidates from emerging countries, in contrast with Strauss-Kahn, a socialist.
The Brazilian government looked favourably on the 'democratising' changes introduced by Strauss-Kahn, such as an increase in the quotas determining the participation of emerging countries. Brazil's quota, and therefore its voting power, was raised from 18th to 10th most influential.
Strauss-Kahn also introduced flexible lines of credit and softer loans, something developing countries have demanded since the foreign debt crisis of the 1980s and 1990s.
Among the possible candidates, Brasilia favours Montek Singh Ahluwalia, deputy chairman of India's Planning Commission. As well as being experienced in international finance, he represents a country allied with Brazil in the IBSA Forum, along with South Africa.
However, Europe and the United States still hold 47 percent of the IMF votes between them - 30 and 17 percent respectively - and they still hold the keys to IMF decision-making. The new powers, Brazil, Russia, India, China and South Africa or BRICS, have a combined vote of only 11 percent.
The other debate, over the role of the IMF in the modern world, has also been stymied by the crisis.
Conflicts over divergent economic interests 'are not played out at the IMF,' whether among the great powers or between these and other countries, Fernando Cardim de Carvalho, a retired professor from the Federal University of Rio de Janeiro who lectures at U.S. universities, told IPS.
The main arena now is the G20, although it is a battleground for rhetoric because conflicts 'are solved within each country by deciding on economic policies that serve the interests of each one,' Cardim said.
In fact, the U.S. Federal Reserve's recent decision to inject 600 billion dollars into the market, called monetary relaxation, has an impact all round the world, and the IMF can do nothing about it, said Carlos Thadeu de Freitas, a former head of Brazil's Central Bank.
Having a representative of the emerging world at the helm of the IMF would have a purely 'symbolic' value and is not feasible right now, though it could be negotiated as a commitment for the next change-over, he said.
The IMF should have 'a constructive role in the creation of more stable international monetary and financial rules,' going beyond the role it has played since the 1980s as an 'instrument for imposing the policies of industrialised countries on developing countries,' Cardim said.
'Brazil has always been keen on the IMF going back to its original role, from which it departed prematurely': a forum for coordinating macroeconomic and exchange rate policies, as well as providing short term financing for countries with a balance of payments deficit, 'with the least possible interference in the political autonomy of a country,' he said.
But since the 1980s, the IMF has become a sort of 'school inspector' of developing and debtor nations, imposing on them the behaviour demanded by creditors, in 'complete subordination to the policies of the U.S. Treasury Department,' especially in the 1990s, the professor said.
Even the changes promoted by Strauss-Kahn were cosmetic, like accepting the 'legitimacy' of capital controls, which are actually in the original statutes of the IMF, and even less orthodox ideas. The voting power of the emerging countries has increased, but has not affected the 'hegemony' of the bloc of wealthy nations, he said.
Furthermore, the IMF 'only has effective power over the countries that ask for its help,' said Cardim. It wields no influence on China, the United States or Germany, for instance, although their economic decisions affect the entire world, devaluing the dollar and accentuating Brazilian deindustrialisation, for example, he said.
© Inter Press Service (2011) — All Rights Reserved. Original source: Inter Press Service