Christine Lagarde, the new managing director of the International Monetary Fund (IMF), caught many by surprise recently in Bangkok when she announced that, under her watch, the agency will "listen more" to Asian voices. It will "revise the textbook of
Of course this came as a pleasant shift in the IMF’s position, which was widely seen – especially during the1997 “tom yum kung crisis” as being arrogant, naive and hopelessly rigid.
It was in her speech at a dinner talk hosted by the Bank of Thailand that Lagarde came up with the rare “confession” from a top executive of the IMF.
She said at one point: “Let me be candid. We are well aware of the history of our relationship with Asia. We recognise that sometimes we have not listened enough when in fact you were right. And we know that not all bad memories have completely gone.”
Lagarde then declared: “Tonight I want you to know that the IMF has learned – and the IMF has changed. In our interconnected world, we know we must continue to change. We must continue to work toward being an even more effective partner for Asia – and for Thailand.”
Her timing worked in her favour. Had she spoken those words after criticisms were made from the floor – and she must have been forewarned – her credibility wouldn’t have been as effective as it turned out to be.
Soon after her speech was delivered, at least two outstanding speakers from the audience stood up to take the IMF to task for its past misconduct, at least in the eyes of Asian scholars.
Tawatchai Yongkittikhun, secretary-general of the Thai Bankers’ Association, echoed the long-standing criticism from countries that had fallen victim to the economic crisis of 1997 and have since recovered sufficiently to deserve the current IMF chief’s praise. He said the IMF’s “one-size-fits-all” solution has adversely affected Asian countries.
Masahiro Kawai, dean and chief executive officer of the Asian Development Bank Institute, pointed out to the IMF chief that there was a strong feeling in Asia that the IMF “is owned by the Europeans”. He said Asia would not want the IMF to play any role in this region unless it specifically demands them under very special circumstances.
Lagarde was prompt in her response. She insisted that the IMF doesn’t “belong to Europe”. She regarded the institution as one that must serve the entire community of 188 members.
Saying she was frustrated “inside my heart by the critical remarks” because “the IMF you described just now isn’t the IMF that I know”, Lagarde invited critics to visit her headquarters to observe how things have changed since she took office slightly over a year ago.
But a few weeks after that “confrontation” at the Thai central bank’s headquarters, she was verbally assailed from within the IMF itself. Peter Doyle, former adviser to the IMF’s European Department, which is running the bailout programmes for Greece, Portugal and Ireland, poured scorn on the agency’s “tainted” leadership and said he was “ashamed” to have worked there.
Doyle said in a letter to the IMF executive board that he wanted to explain his resignation after 20 years. He wrote of “incompetence”, “failings” and “disastrous” appointments to the post of managing director, stretching back 10 years.
The controversial letter, dated June 18 (a few days after Lagarde spoke in Bangkok), said the failings of IMF surveillance of the financial crisis in Europe “are, if anything, becoming more deeply entrenched”.
Doyle wrote: “This fact is most clear in regard to appointments for managing director which, over the past decade, have all-too-evidently been disastrous.”
He didn’t spare Lagarde, either. “Even the current incumbent is tainted, as neither her gender, integrity or elan can make up for the fundamental illegitimacy of the selection process.”
Suddenly, Christine Lagarde’s response in Bangkok was rendered severely insufficient. Her promise to “listen more closely” to Asian concerns and to change how the IMF thinks, analyses and works isn’t good enough. The very fact that the IMF chief has to be a European and the World Bank president an American is the very fundamental issue.
Unless qualified Asians are considered for these two top posts – in view of the rising influence and importance of this region – cosmetic changes in the form of promises to “listen more” to Asian frustrations won’t even begin to scratch the surface of the issues related to the failures of these two international institutions.