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Come July, could an African or Asian head the World Bank?

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UN Millennium Development Goals 1 to 4

Who will head the World Bank after 2012 June? A global coalition of development activists and non-governmental organisations is calling on the World Bank’s governors to ensure that Bank President Robert Zoellick’s successor is chosen in an “open and merit-based process” that will give borrowing countries a major say in the selection.

In an open letter released shortly after the Bank’s announcement this week that Zoellick will step down at the end of his five-year term in June, some 60 groups and activists from around the world said any candidate should gain the “open support” of at least the majority of World Bank member countries and of the majority of low- and middle-income countries that make up most of its borrowers.

IPS News has reported that the arrangement which currently exists is absurdly called an informal “gentlemen’s agreement” (there are no gentlemen in this matter, now 68 years old, of leading poor countries into irredeemable debt and condemning their citizens to hardship and poverty). This agreement of exploitation, for that is what it is, exists between the USA and the countries of western Europe – specifically Britain, France and Germany – and provides that a national of USA will hold the top position at the World Bank Group, and that a national of Europe will hold the managing directorship of its sister institution, the International Monetary Fund (IMF).

“It’s a World Bank, not a US Bank. It needs the best candidate to get the job with support of wide Bank membership, not just the US,” IPS reported Collins Magalasi as having said. Magalasi is executive director of Afrodad, one of the lead NGOs which released the open letter calling for a change in the way the World Bank Group’s leader is chosen. The coalition includes Oxfam International, Civicus, and the African Forum and Network on Debt and Development (Afrodad).

The open letter has said: “The candidate must gain the open support from at least the majority of World Bank member countries, and from the majority of low and middle-income countries. As the Bank only operates in developing countries, and has most impact in low-income countries, any candidate that was not supported by these countries would seriously lack legitimacy. In addition to encouraging developing countries to nominate their own candidates, the best way to ensure that developing countries play a central role throughout the selection process is for the successful candidate to be required to gain the support of a majority of both voting shares and member countries.”

UN Millennium Development Goals 5 to 8

“This need not require any formal changes to the Bank’s articles of agreement, but could simply be agreed by the Board, to build on the limited proposals agreed in April 2011. To make this work, countries would need to vote independently, not through their constituencies, and declare their support publicly. It is time for the US to publicly announce that it will no longer seek to monopolise the Presidential position.” You can read the full letter at the website of the European Network on Debt and Development (Eurodad).

Bloomberg Businessweek has reported that China has called for the next World Bank chief to be picked based on merit. The next leader should be selected “based on the merit principle and open competition,” Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing. Liu was apparently responding to a question on whether the next head should be from a developing nation. Since according to the US Treasury, the largest foreign holder of US debt is China, which owns about US$1.2 trillion in bills, notes and bonds, that sounds like an ungentle nudge from across the Pacific that it’s time the old order was scrapped.

The World Bank Group is quite top heavy. As its senior management the WB Group has: one president, three managing directors, a chief financial officer, two senior vice presidents, six vice presidents for the World Bank Group’s six operational regions, seventeen vice presidents for the Group’s divisions and departments, one director general. The IFC (International Finance Corporation) has one executive vice president and chief executive officer, nine vice presidents. The MIGA (Multilateral Investment Guarantee Agency) has one executive vice president, one vice president and chief operating officer, five directors.

While from the three managing directors downwards it may look like the WB Group senior management is representative of the variety of countries to which it lends, this is illusory – these people are financiers first and are free-market standard-bearers and privatisation evangelists. At those positions in the World Bank, as in the IMF, there are no nationalities – there is only capitalism.

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Written by makanaka

February 16, 2012 at 18:45

The IMF, its directeur général, and a New York hotel maid

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Friday afternoon, South Asia

"Do you really think I've nothing better to do?"

The business zine ‘Emerging Markets’ has reported that French finance minister Christine Lagarde “has emerged as the frontrunner to succeed Dominique Strauss-Kahn as IMF chief as the chances of former Turkish politician Kemal Dervis receded”. Apparently, there were hopes that Kemal Dervis would become the first emerging market politician to head the IMF, but these have faded Lagarde emerged as frontrunner to succeed DSK.

The zine has said that “senior policy officials” consulted by it said they were backing the French finance minister (pic left) in the wake of Strauss-Kahn’s dramatic resignation. A key ally of former Turkish economy minister Kemal Dervis, a leading contender for the role, acknowledged that his chances of clinching the top job had receded.

Asked whether Dervis woud become managing director Homi Kharas, a deputy to the former Turkish finance minister now at the Brookings Institution in Washington, told Emerging Markets: “Unfortunately I think it’s unlikely.” He said Lagarde’s appointment could undermine the IMF’s legitimacy if her candidacy is secured solely through a political deal among rich nations. “Major countries at the end of the day are prepared to forgo the principle of technocratic appointments for the short term expediency of having a politically trusted friend and that seems to be the way that the world is currently governed.”

The result will be a revolt against the Fund by developing countries, he added. “What we will see from the emerging nations is that they will vote with their feet. “Developing nations can make [international financial institutions] less relevant as global institutions and restrict them to being essentially institutions that play in the arena of the spheres of influence of the rich countries. That is what is happening more and more.”

Wednesday evening, South Asia

The IMF is obviously very slow to learn, or chooses not to, or has jettisoned Strauss-Kahn. Following its first bland, utterly non-committal and quite unconcerned statement about l’affaire DSK, it has come out with a second which, if possible, bests the first at idiocy in the face of a massive loss of moral face.

Here is the statement:

The IMF logo seen during a news conference in Bucharest, March 2009. Photo: Reuters/Bogdan Cristel/Files

“The following can be attributed to William Murray, an IMF spokesman, in response to questions regarding contact with the Managing Director and on speculation in media about his status: ‘We have not had contact with the Managing Director since his arrest in New York. Obviously, it will be important to be in contact with him in due course. We are aware of widespread speculation about the Managing Director’s status. We have no comment on this speculation, other than to note, as we did earlier this week, that the Executive Board was briefed informally on developments regarding his arrest in New York. We continue to monitor developments. Meanwhile, Mr. John Lipsky remains acting Managing Director, and the Fund continues its normal work’.”

This sounds a lot like the IMF is saying – “well it’s just one of those things, let’s just say not very much out of the ordinary is happening and let’s assure you that we’re still doing what we do best, which is wreck the lives of people in developing countries”.

Under Francois Mitterrand, Strauss-Kahn served as a minister, then became a corporate lobbyist in the 1990s. As finance minister in the 1997-2002 Jospin “Plural Left” government, Strauss-Kahn privatized several public firms—France Télécom, Crédit Lyonnais bank, and defense firm Thomson-CSF. After resigning as minister in 1999 in a bribery scandal, he remained a major figure inside the PS and corporate circles, taking the IMF post after being nominated by Sarkozy in 2007.

As IMF chief, he has overseen deep social cuts impoverishing workers in many indebted countries—Greece, Ireland, Latvia, Hungary, Romania, and Pakistan—in exchange for IMF loans. He recently oversaw financial negotiations with the military dictatorship in Egypt, as it tries to combat the resistance of the working class following the departure of Hosni Mubarak.

Zhu Min, Group Executive Vice-President, Bank of China, speaks during a session at the World Economic Forum Annual Meeting of the New Champions in Tianjin, China 28 September 2008. Photo: World Economic Forum

The ‘Letter from China’ blog in The New Yorker points to some of the turmoil over leadership of the IMF, and what is slowly being seen as Asian pressure over what has so far been Western dominance of the Fund and Bank senior positions.

As pressure builds on Strauss-Kahn, said the blog, today’s Huanqiu Shibao is decidedly less cautious: “If a Chinese person takes the post”—of managing director—“it will greatly promote economic exchange between China—the country with the largest trade volume and holdings of foreign reserves—and the international community.” Another Huanqiu article referred to speculation in the Western press that China’s top official at the IMF, Zhu Min, a Johns Hopkins-and-Princeton-trained economist, is among the oft-mentioned candidates. The story concluded gloomily that Western reports generally see Zhu as insufficiently experienced, and likely to reach only a deputy managing director “this time, in part because “Europe and America will oppose the appointment of a Chinese person to lead the IMF.”

Monday evening, South Asia

Dominique Strauss-Kahn, head of the International Monetary Fund, is lead from a police station Sunday, May 15, 2011 in New York where he was being held. Photo: AP

In Europe and in the multilateral financial institutions, positions are cautiously being taken over the Strauss-Kahn case. So far, the Euromedia has focused a great deal on the effect l’affaire DSK is having on the French presidential election and the challenge to Sarkozy. But what about the IMF and World Bank? Silence. What about the men and women who run these enormously powerful and influential organisations – what do they have to say about this case and its reflection on their collective values? More silence.

We have heard from The Economist, which has long been a staunch ally of the Fund and the Bank. “Whatever the fall-out on French politics, Mr Strauss-Kahn’s arrest has left the IMF reeling. One insider called it a ‘disaster’,” the commentary noted. “Although he had been expected to leave within a couple of months, Mr Strauss-Kahn, unless quickly exonerated, will now presumably be forced out far sooner. That leaves the fund without a political heavyweight at the top in the midst of important negotiations with European policymakers over Greece’s debt crisis.”

What is noteworthy is the ways in which these institutions are discussed by the biggies of global and international economics. Only 10 days ago, Joseph E Stiglitz is University Professor at Columbia University, a Nobel laureate in Economics, and the author of ‘Freefall: Free Markets and the Sinking of the Global Economy’, had this to say about the IMF and DSK.

“For progressives, these abysmal facts [growing inequality, recession, unemployment] are part of the standard litany of frustration and justified outrage,” wrote Stiglitz. “What is new is that the IMF has joined the chorus. As Strauss-Kahn concluded in his speech to the Brookings Institution shortly before the Fund’s recent meeting: ‘Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda.’ Strauss-Kahn is proving himself a sagacious leader of the IMF. We can only hope that governments and financial markets heed his words.”

I really wonder what Prof Stiglitz thinks of his encomiums now. Reality outside the cozy models of macroeconomics can be startlingly, starkly different.

Sunday evening, South Asia

Le Nouvel Observateur's website on Sunday was entirely Strauss-Kahn.

The Sunday lurched on about L’affaire DSK and in my view the most confused reactions have come from the media in France. They seem confused about what they ought to feel and say. There are some responses concerning the blow to the honour and prestige of France dealt by the sordid allegations, but there is also a sense of bemoaning the end of a challenger to Sarkozy, and quite a few mutterings that this is a dreadful plot to trap Strauss-Kahn.

Here is a selection of the reaction and early views on the impact of L’affaire DSK.

Euronews has reported that lawyers for Dominique Strauss-Kahn, the head of the International Monetary Fund, said on Sunday that their client will plead not guilty to accusations of trying to rape a maid at a New York hotel. “A spokesman for the New York Police Department said Strauss-Kahn faces charges of a criminal sexual act, attempted rape and unlawful imprisonment. The IMF chief does not have diplomatic immunity and was set to appear in court later on Sunday.”

Business Insider has quite bluntly said that ‘IMF Throws Dominique Strauss-Kahn Under The Bus’. “The IMF is not exactly standing up for the man,” they wrote, referring to the bland and shifty IMF statement issued today. “The IMF has already had to investigate and apologize for one Strauss-Kahn sex scandal (an affair with a subordinate). Strauss-Kahn survived that one, after apologizing publicly to the IMF and his wife. His surviving this one, at least with his job intact, seems unlikely.”

The New York Times has pronounced in a headline, ‘Arrest Throws French Politics Into Disarray’. This is hardly so. What has thrown France and its suffering workers into disarray is not such conduct, but the imperial ambitions of Sarkozy in Africa and his government’s ramshackle social spending at home. “For months, France has been buzzing with speculation that Dominique Strauss-Kahn, the popular chief of the International Monetary Fund, would quit his job in Washington to take on President Nicolas Sarkozy in next year’s presidential elections,” the NYT said. “On Sunday, French politicians and media met news of his arrest in New York for alleged sexual aggression with stunned disbelief and expressions of national humiliation. The incident threw Mr. Strauss-Kahn’s political party, the Socialists, into confusion and set the stage for a new political calculus that could allow the National Front, the far-right party led by its founder’s daughter, Marine Le Pen, to become a more dominant force during the election campaign.”

The Guardian has got to the point. “The allegations threaten to severely damage the standing of the IMF, where Strauss-Kahn was leading the response to the global financial crisis.” The newspaper reported that Strauss-Kahn had been on his way to Europe to discuss the worsening European debt crisis. A meeting in Berlin with Angela Merkel scheduled for Sunday has been cancelled. He was also scheduled to meet European financial ministers on Monday and Tuesday and was to have discussed how best to tackle Greece’s debt crisis and finalise Portugal’s €78bn bailout package. The British newspaper also provided the information that the Sofitel hotel in New York where Strauss-Kahn was staying is in the heart of the theatre district, and he had a US$3,000 (£1,850) a night suite.

In Paris, France Soir asked in disbelief: “Accusé d’agression sexuelle, DSK est-il victime d’un complot? DSK est-il victime d’un complot, d’une manipulation? Quelques heures après le coup de tonnerre et l’annonce de l’arrestation du patron du FMI, les déclarations en ce sens sont de plus en plus nombreuses.” Melodrama apart, what this means is that France Soir has said that Strauss-Kahn could well be the ‘victim of a conspiracy’ and the ‘target of manipulation’.

A more bizarre response has come from Liberation, which usually seems to have its finger on the pulse of things. “Pour 2012, DSK semblait le mieux armé pour répondre au désarroi des Français, épuisés par la crise et désorientés par le règne foutraque de Sarkozy: l’expérience internationale, la crédibilité de l’économiste, la fibre sociale, le savoir-faire d’un négociateur hors pair leur laissaient penser qu’il saurait mieux que tout autre défendre leurs intérêts et ceux de la France.”

Roughly translated, this means: “For 2012, DSK seemed best equipped to respond to the distress of the French, who are exhausted by the financial and social crisis and disoriented in the reign of Sarkozy. With his international experience, the credibility of being an economist, his knowledge of the social fabric and negotiating skills left them thinking that he would defend their interests and those of France.” What exactly is Liberation talking about? Perhaps it’s not a good idea to get their writers to consider anything serious on a Sunday morning.

The New York Daily News on the IMF head

[Earlier post] It’s too early to tell the whys and wherefores, but here’s a small selection of reportage about the astounding Strauss-Kahn incident. The French media have lots to say too, since the IMF head is/was expected to run for president of France.

Update: The IMF has released a very short statement on the bizarre affair. Here is the text from the IMF website:

Ms. Caroline Atkinson, Director of External Relations at the International Monetary Fund (IMF), issued the following statement today: “IMF Managing Director Strauss-Kahn was arrested in New York City. Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case; all inquiries will be referred to his personal lawyer and to the local authorities. The IMF remains fully functioning and operational.”

The Boston GlobeThe head of the International Monetary Fund was taken into custody and accused of a sexual assault yesterday, just before he was to fly to Paris from John F. Kennedy International Airport, authorities said. Dominique Strauss-Kahn was accused of attacking a maid earlier in the day at a Times Square hotel, authorities said.

WNYC News Blog – NYPD Deputy Commissioner Paul Browne confirmed that Strauss-Kahn, the 62-year-old managing director of the International Monetary Fund, was being questioned by detectives from Manhattan’s Special Victims unit about an alleged sexual assault said to have taken place around 1 p.m. Saturday at the Sofitel Hotel. “The 32-year-old maid reported that Strauss-Kahn emerged from the bathroom naked and sexually assaulted her,” said Browne.

Update: Al Jazeera has carried a brief and generally unflattering profile of the IMF head. It has called him an architect of France’s economic recovery in the late 1990s, Strauss-Kahn, popularly known in France as “DSK”, served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that led to the privatisation of some state firms.

The profile has said that Strauss-Kahn, 62, was forced to resign from Socialist prime minister Lionel Jospin’s government in 1999, after he was caught up in a corruption scandal, but a court later cleared him. A former professor of economics at the Institut d’Etudes Politiques de Paris, Strauss-Kahn has come in for criticism over his luxurious style, seen by some as inappropriate for someone who wants to become the leader of the French left. Despite being based in Washington, he has continued to spend a lot of time in France, and the New York Post newspaper reported that he had a deal with Air France to get on any flight. New York police pulled him off a Paris-bound flight on Sunday night.

Some early reactions from the press in France:

Dominique Strauss-Kahn, popularly known in France as 'DSK', served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that led to the privatisation of some state firms. Photo: Al Jazeera/AFP

Le Parisien – En Direct.  DSK arrêté à New York pour “tentative de viol” présumée – Dominique Strauss-Kahn était venu au siège du Parisien-Aujourd’hui en France pour y rencontrer des lecteurs. Le patron du FMI et favori des sondages pour la présidentielle 2012 en France.

Le Monde – Le directeur général du Fonds monétaire international (FMI), Dominique Strauss-Kahn, a été arrêté samedi 14 mai à l’aéroport JFK de New York et placé en garde à vue pour une agression sexuelle présumée dans un hôtel de la ville.

RTL.fr – Le mot utilisé et qui fait parler tout Internet est “sodomy”, qui signifie avant tout “agression sexuelle”. Le directeur général du FMI, Dominique Strauss-Kahn, 62 ans, a été placé en garde à vue samedi à l’aéroport JFK, à New York, où il est interrogé.

nouvelobs.com – Le directeur général de l’institution avait fait l’objet d’une enquête concernant une liaison qu’il avait eu avec une subordonnée. Le directeur général du FMI Dominique Strauss-Kahn, arrêté samedi à New York suite à des accusations d’agression sexuelle.

Le Monde – L’arrestation samedi 14 mai à New York de Dominique Strauss-Kahn, accusé d’agression sexuelle, pourrait donner un coup d’arrêt à la potentielle candidature à la primaire socialiste pour la présidentielle de 2012 du directeur général du FMI.

It looks very like prescience for, on 6 April, Bretton Woods Project published an article titled, ‘Heading for the right choice? A professional approach to selecting the IMF boss’. This said: “In 2009, the IMF agreed to ‘adopt an open, merit-based and transparent process for the selection of IMF management’. It was a commitment that was long overdue. The informal ‘gentlemen’s agreement’ made at the end of World War II that European governments could select the head of the IMF so long as the US got to choose the World Bank boss had long been regarded as outdated and illegitimate.”

The impression that the rich governments which have run the IMF have dragged their heels on this enormously important issue is hard to avoid. “It matters who the head of the IMF is, and it matters how they are chosen. It matters for the legitimacy of an organisation that, through the stringent conditions often attached to its loans, has a powerful hand in economic policy making – and hence politics – in many countries, particularly poorer ones.”

I am sure that those who have long been calling for IMF reform will be wondering about this week-end’s events concerning Strauss-Kahn. They are: ActionAid, Afrodad, Bond, Bretton Woods Project, Cafod, CRBM, Christian Aid, CIDSE, 11.11.11. Halifax Initiative, Eurodad, Jubilee Debt Campaign, Forum Syd, New Rules for Global Finance, The Norwegian Forum for Environment and Development, Oxfam, The Social Justice Committee of Montreal, SLUG, WDM, TWN and Weed.

In Dakar, a call to ‘clear away invaders’

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Ringing statements from Bolivian president Evo Morales and former Brazilian president Luiz Inácio Lula da Silva have been made at the World Social Forum 2011. Addressing tens of thousands who marched through Dakar, the Senegalese capital, to mark the start of the World Social Forum 2011, Morales called for a programme of social struggle to build a new world. “There must be awareness and a mobilisation to put an end to capitalism and clear away invaders, neocolonialists and imperialists […] I support the popular uprisings in Tunisia and in Egypt. These are signs of change.”

Lula told delegates that economic doctrines imposed on the world’s poorest countries no longer have a place in modern societies. “In South America, but above all in the streets of Tunis and Cairo and many other African cities, a new hope is being born. Millions of people are rising up against the poverty to which they are subjected, against the domination of tyrants, against the submission of their countries to the policies of the big powers,” said Lula.

Marching in the streets of Dakar. Photo: Abdullah Vawda/IPS

Marching in the streets of Dakar. Photo: Abdullah Vawda/IPS

In its eleventh year, the Forum remains a space for open and honest debate. Senegalese President Abdoulaye Wade did not hesitate to declare himself a supporter of the market economy which most here reject, and threw down a challenge to participants regarding their engagement with established global institutions such as the United Nations. “If you who are here, if you had supported the idea, then Africa would already be on the Security Council. Since 2000, I have followed your movement and I still – excuse my frankness – ask myself this question: have you succeeded in changing the world at the global level?”

IPS news has reported that this is a challenge participants in the WSF take very seriously. Kenyan social justice activist Onyango Oloo was a key organiser of the 2007 edition of the Forum in Nairobi; he was unable to attend this year, but he suggested that the building of another world is already begun, away from the fleeting attention of the media. The WSF is a place where those builders can meet each other directly. Organisers said 75,000 people from 132 countries attended, to share their experiences of injustice and resistance, to test each others’ analyses and return home newly-inspired.

Eurodad has reported that a new international debt justice campaign has launched at the World Social Forum in Dakar. Several civil society organisations are launching a global campaign for a new international debt court. The campaign, “Defuse the Debt Crisis,” calls upon French President Nicolas Sarkozy (G20 Chair in 2011) and the international community to establish new rules for debt justice. These rules must ensure fair settlement of debt disputes when a country struggles to repay its loans or when the legitimacy of a debt is in question.

Countries all over the globe are experiencing worryingly high levels of sovereign debt, much of which has been caused by reckless private lending which triggered the global financial crisis. Unsustainable and illegitimate debt impedes development and prevents poverty reduction in developing countries. A fair and lasting solution to the debt problem is urgently needed.

European activists on stilts carry a banner reading "For a world without borders" as they walk in a march on the opening day. Photo: Rebecca Blackwell/AP

European activists on stilts carry a banner reading "For a world without borders" as they walk in a march on the opening day. Photo: Rebecca Blackwell/AP

“The European approach to the current debt crisis repeats the errors that helped turn the sovereign debt crisis of Southern countries in the 1980s into what was later called “a lost decade for development,” says Oygunn Brynildsen Policy Officer at Eurodad. “Rather than holding investors responsible for the risks of their investments, public funds are being used at the expense of tax payers to bail-out the private sector,” she added.

However, “there are alternatives to handle such protracted crises in ways which do not put the burden on the poor,” says Nuria Molina, Eurodad Director. “Rather than condemning debtor countries to protracted adjustments, while securing profits from risky investments, governments must put in place fair and transparent debt workout mechanisms based on well-tested insolvency principles.”

The Guardian reported that migration and movements of people are a key theme of this year’s World Social Forum, along with the growing role of the countries of the “south” and the evolving geopolitics of south-south relations. The city’s Cheikh Anta Diop University, which is hosting the forum, has seen its population explode overnight. The expansive campus – if you get lost, allow three-quarters of an hour to find your way – is home to around 80,000 students: a city within a city. The forum brings another 75,000 participants weaving in, out and among the university’s daily crowds.

“The mobilisation here at Dakar is beyond any expectation,” said one of the forum’s organisers on Wednesday. The overwhelming size of the forum shows both the momentum of the claim that “another world is possible” and brings the limitations of the current structure into sharp relief, she adds. More local and regional forums are needed, interjects another organiser, to complement the world edition and deepen the movement against “globalisation under the interests of capital”.