The race which decided who would be heading up the International Monetary Fund (IMF) is finally over. Yesterday, France’s finance minister, Christine Lagarde, who beat Mexico’s Agustín Carstens to the post, was announced as the new managing director of the international financial institution. You will likely recall that our very own Trevor Manuel dropped out of the race at an early stage, recognising perhaps that he was no match for the determined Europeans’ self-interested attachment to the top post at the IMF.
Now that this matter has been settled, we would perhaps do better to turn our attention to the architecture of the international financial institution. In fact, what we should be having is a conversation about a people centred and democratic “development finance” institution -- because for all intents and purposes, sadly, it appears that it will be business as usual at the IMF under Lagarde (who’s recent implication in a corruption case on the allegation of “abuse of authority” has been suspiciously downplayed).
In a press statement released by Lagarde, which coincided with the news of her ascendance to the managing director post at the IMF, she said, "The IMF has served its 187 member countries well during the global economic and financial crisis, transforming itself in many positive ways. I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit."
The IMF's detractors (count among them the thousands of Greeks protesting against austerity measures) would beg to differ.
Also taking quite the opposite view to Lagarde is Jeffrey Garten, a professor at Yale University, and architect of the Global Monetary Authority (GMA), a proposed alternative to the IMF. He contends that the prevailing global financial apparatus is incapable of solving the American-fuelled global financial and economic crisis. He argues that the IMF is “irrelevant to this crisis” and reminds us, “the group of seven leading industrial countries lacks legitimacy.”
Garten’s alternative, the GMA, purports to have more strength and independence than the IMF, amongst other features, it aims to provide long overdue oversight of global capital movements in an effort to minimise the sort of cowboy speculation that has sunk the world into America’s depression. The glaring limitation is that the GMA rises out of the ashes of the same orthodoxy of the IMF and the World Bank in that it determines Northern leadership to be central to the equation.
However, alternatives and challenges from the South have indeed emerged.
It is after evaluating the dominant financial institutions and acknowledging the problems related to their modalities (power, political influence, vested interests and policy prescriptions) that many progressive thinkers and movements have increasingly explored the idea of new financial models.
Such ideas have been further ignited by the arrival of popular governments to power in Latin America – mainly of Venezuelan president Hugo Chávez, who jointly with the late Néstor Kirchner of Argentina, launched the idea of a Bank of the South. The idea has been endorsed by Ecuador, Bolivia, Paraguay and Brazil.
The Bank of the South (Bank de Sur) sets as its goals sanitation, free and qualitative public schools and financing for nutritional sovereignty. It basically seeks to challenge the orthodoxy of the uncontested and undemocratic IMF and World Bank policies of the last 30 years. It may sound grand and idealistic but more than ever; the global South and probably Greece, Ireland and Spain too, could use a good dose of hope and fresh approaches.
Bank de Sur suggests a transparent and accessible information policy, thus enabling monitoring and participation in its operations by citizens. It calls for external auditing of its policies, loans and internal operational activities. It also explores more equitable decision-making processes to prevent the bank from being dominated by the richest countries in the region.
Another regional challenge to the IMF is the Asian Monetary Fund (AMF). Initially proposed by Japan in 1997 at the height of the Asian Financial Crisis of 1997-98, its development was obstructed, largely, due to the opposition and antagonism expressed by both the United States and the IMF.
Nevertheless, soon after the Asian crisis, the Association of Southeast Asian Nations (ASEAN) pressed ahead with the establishment of the Chiang Mai Initiative Multilateralisation (CMIM), a regional initiative that makes financial support available to Asian countries facing financial problems -- outside of the support of the IMF.
Recently visiting senior research fellow at the Institute of Southeast Asian Studies, Omar Shresta, argued, "Many Asian countries, especially those which suffered during the Asian financial crisis of 1997/98, continue to view the IMF’s role and its policy prescriptions negatively. Though they may not articulate this publicly, they have less than full trust in the IMF as a reliable partner in times of need.”
Thus, in recent weeks, reports have emerged that there are new developments at the Asean+3 Macroeconomic Research Office (AMRO) in Singapore, whose capacity has been boosted to once again look into the establishment proper of the AMF. AMRO has been tasked to undertake the foundational research for the formation of the AMF and suggest a plan for its governance structure and procedures, including its market sustainability.
Although not as explicitly democratic or development orientated as the Bank de Sur, the proposed AMF will remove a lot of the red tape and conditionalities of the IMF. It will also enable countries with greater affinity, parity and goodwill towards each other to define their financial relationships and shared economic agendas.
The Asian Tigers do not intend to be caught napping again.
Recent alternatives to the IMF in Africa are centred on continuing the orthodoxy of the IMF through the Africa Development Bank and the moribund NEPAD (New Partnership for Africa's Development) project.
There have, however, been inspiring remnants of the great, albeit besieged, African Socialist project. These include the Arusha and Monrovia Declarations. Nearly 40 years earlier, the Arusha Declaration expressed aspirations similar to those of Bank du Sur, insisting on self-reliance, skills development, education, accountable leadership as well as egalitarian social and development planning.
About 15 years later, the Lagos Plan of Action included a proactive approach to energy and environmental management, prioritised food and agricultural growth and self-sufficiency in each African country as well as articulated a development plan for industry and trade. The programme was located within the Organisation of African Unity and the Economic Commission for Africa.
Tragically, though unsurprisingly, all this was scuppered by the era of IMF-inspired structural adjustment. The cash cow that has been the post-colonial Africa was not going to be surrendered without a dirty fight.
However, today there are greater possibilities for increasingly influential emerging economies such as Brazil, South Africa, China, Russia, India, Mexico, Vietnam, Nigeria and Turkey to provide a countervailing force to neutralise the hegemony of the United States and the European Union in the global financial system.
Although still too often compliant to the pervasive global financial system, there is now greater scope for the kind of multi polar, home grown approaches that Bank du Sur, AMF and Lagos Plan of Action offer. And, the South has far greater power, as the largest payers into the IMF.
What possibilities could emerge, if, for example, more countries collectively grew spine, took Argentina’s approach of the 1990s and basically told the IMF to take a hike?
Am browsing and am so impressed by this piece. Apart from providing insightful and very welcome alternatives to the IMF, it is an inspiringly good piece of research. Again Sister Pheko...tell them
What I love most about this article is that it offers clear and well thought out alternatives. How much longer can African countries afford to pay illegitimate debts to former colonial states and do so with a smile? Can we ever develop at our own pace to achieve our greatness? Any chance of a follow up article to expand on this question Maam Pheko?
This article helped me answer a fundamental uneasiness I have long had regarding the Bretton Woods triplets. They really have it in for Africa and we haven't been able to shift away from their neo liberal model of conducting business. Why don't we try our own Bank of the South for the continent?