The I.M.F. and the French Lady Lawyer

by Tom Velk

12 July 2011

Is Christine Legarde really the right person to head the I.M.F.?

A composite conversational about the International Monetary Fund:

Europhile: The one-time chairman of Egypt’s Bank of Alexandria (a major middle-eastern financial player), Mahmoud Abdel Salam Omar (“MASO”) was arrested in New York and given the notorious on-camera “perp walk” after being charged with messing around sexually with a maid during his stay in the super-fancy Pierre Hotel. Just shows you how important it is in the financial industry to maintain European standards of behaviour.

Bystander: By that, do you mean the standards maintained by French bankers and politicians?

Europhile: Exactly. And solid European judgment in control of political money is now desperately needed. Portugal, Italy, Greece, and Spain (the “PIGS”) have been spending and borrowing so much, the private sector will no longer lend money to them. The Greek mob’s antics might well take down the entire Eurozone. Luckily, we have a Socialist playboy called D.S.K.—who wants to be elected President of France—in charge of a huge, $100+ billion (U.S.) dough pot called the International Monetary Fund. We can be sure he will bail out our fellow Europeans.

Bystander: No, that guy is in jail. Besides, lenders—especially the Germans—are unwilling to give more of their own money to the big-spending PIGS.

Europhile: Not to worry about the jailed playboy. We have a friend of his, a lady lawyer—Christine Lagarde (C.L.) by name—who doesn’t know much about economics (though the French have put her in charge of their finances), and who believes in bailouts for spendthrifts, now holding the top I.M.F. job. Moreover, the Germans, especially Mrs. Merkel, want a European—even a French one—to run the I.M.F., so that at least some of the money going to the PIGS will come from somebody “international,” that is, somebody who isn’t German.

Bystander: Who will be willing to fund such bailouts? Won’t that French lady lawyer end up bailing out the French banks who foolishly gave money to Greece? After all, the PIGS haven’t established a tradition of prompt repayment of “emergency” loans.

Europhile: Not to worry, C.L. got the job because she was supported by the U.S. and Europe combined. Remember, the West controls the IMF because their votes are roughly proportionate to the money they invested in the I.M.F. way back in the 1940’s, at its founding.

Bystander: But isn’t “the West” a terrible example? Europe and the United States are running up huge internal debts to finance their welfare systems. They also borrow big abroad to buy consumer stuff and commodities from the BRICs. For example, 40 cents of every dollar spent by the Obama government is borrowed money, and the “lender of last resort” in the world credit market is Asia, right? That means any money the U.S. or Europe contributes these days to the IMF is really borrowed from Asia, right? Therefore, shouldn’t the I.M.F. top job have gone to somebody who: 1) knows economics; 2) can view European PIGS with a degree of objectivity; 3) actually owns the money that will flow through the IMF to finance bailouts; 4) doesn’t have a pro-bailout disposition, and; 5) comes from Asia?

Moreover, aren’t Brazil, Russia, India, and China now rich with cash—or likely to become so—because of their strength in manufacturing (C&I) and raw materials exports (B&R)? In fact, aren’t China and other Asian countries the only net lenders left in the world? Wasn’t C.L. the wrong choice?

Europhile: Not to worry, C.L. has addressed all of your concerns. She says economists don’t “proclaim” her to be one of them, but she says she’s “not to be fooled by expertise.” Her strategy, she says, is to “pretend that I understand nothing and to force people who are in the know to explain their position.” She denies being an arrogant international bureaucrat, “though I can be very strong and very firm if people are bastards.” She wants the IMF to take a position on the Middle East and North Africa—she says that would be “mission-critical.” She brags about her role in raising the fraction of female partners from seven to 14 per cent at Baker & McKenzie (her old law firm).

Bystander: What the hell is that!? What does politically correct ideology have to do with her position on the wisdom of bailouts, her willingness to insist on repayment clauses in emergency loans, or her sense of obligation to the world’s taxpayers, whose money is entrusted to the IMF? The Asian money that’s in play really belongs to a folk who, after centuries of hard work with little reward, finally have a few bucks to rub together—has she said she will look after their welfare?

I hope at least she doesn’t come to the job with “a past.” I understand that the French playboy who had to resign the post she’s seeking was known as the “Great Seducer” even before President Sarkozy manipulated him into the appointment.

Europhile: Oops. I hoped you wouldn’t bring that up—there is the Tapie affair, which is a legal fight between the French government and a private businessman. C.L. caused the case to be moved out of the courts and into arbitration, maybe thereby abusing her authority. But she emphatically denies any wrongdoing.

Bystander: Doesn’t the playboy “deny with the greatest possible firmness all of the allegations that have been made against” him? Is there a difference between denying wrongdoing and denying “all charges with firmness?”

Europhile: Now you’re just being obstinate. A European woman, with a politically correct attitude, is the best person for the job. Period.

Professor Tom Velk is a member of the economics department and director of North American Studies at McGill.

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The I.M.F. and the French Lady Lawyer

by Tom Velk

12 July 2011