Money Is Power An Inside View of the IMF's Massive Global Influence

By and Ullrich Fichtner

Part 2: From Capitalist Mean Machine to Think Tank


It has become increasingly clear in recent years that multilateralism doesn't work. It's a failure because the UN has a bland secretary-general and is always showing up in the wrong place and at the wrong time; and because not even climate conferences can achieve the desired objectives, even though only the most pig-headed still have doubts about climate change.

For a long time, the IMF seemed the least capable of doing everything differently and more effectively. It had been damaged since the Asian crisis in the 1990s. Some 400 were let go, and they were paid one month's salary in compensation for each year of service. By the time Brazil had repaid the last of its loans, only very small borrowing countries remained. The fund had become irrelevant.

DSK came to Washington in 2007, after having been nominated by French President Nicolas Sarkozy. The two men had been rivals, but now France was strengthened and Strauss-Kahn disposed of -- a diabolical plan on Sarkozy's part, as it seemed.

In 2007, the IMF had only $2 billion in lending commitments on its books -- an amount best described by the word "peanuts." Today that number has jumped to $195 billion. At the 2008 annual meeting of the World Economic Forum in Davos, Strauss-Kahn called for a global stimulus plan. It was a shocking idea, given the IMF's history of reacting after a crisis and never taking preventive action. Now the IMF had about $900 billion at its disposal -- up from $250 billion before the crisis -- enabling it to intervene quickly anywhere in the world.

The central question could be whether the IMF has what it takes to serve as a global economic government. There are some indications that it does. They include the collective experience of 122 banking crises Strauss-Kahn has counted since the establishment of the Fund, as well as the fact that there is no other institution that understands the sometimes productive and often destructive interactions between real economies and their tax laws, on the one hand, and modern Wall Street, with its investment banking, on the other, as well as the IMF and its staff of technocrats do.

Writing the Rules

The organization has changed. "We have learned that in order to be really effective, we need the people of the country we're engaged with to understand what we are doing," says Strauss-Kahn. The IMF, once a capitalist mean machine, has turned into a think tank that employs what Fund staffers call "soft power."

Is this enough? The IMF has hardly any sanction powers. And what happens after the crisis? Should the IMF simply receive more authority? How would it be legitimized? The United States, which wrote the rules in 1944 and had the representatives of other countries sign their names to a document some didn't even understand, has veto power on key decisions. Will poor countries fall by the wayside if the IMF coordinates global financial policy in a way that suits the G-20?

SPIEGEL's journey of discovery into the world of the IMF lasted 10 weeks. It began in Washington, and then led to Hungary, Greece, Oslo, Brussels, Boston, New York City and back to Washington, where the Fund is headquartered, on the corner of H Street and Pennsylvania Avenue.

In the beginning, the IMF didn't even bother to refuse interview requests. The organization doesn't simply open itself up to visitors; it has been criticized too much in the past. Then, Strauss-Kahn decided to open the doors, and from that point on there were no more barriers or taboos. The only rule was that most interviews were to be conducted off the record, and quotes had to be submitted for authorization. The IMF isn't cowardly: During the course of the 10 weeks of research, only one quote was retracted by an interview partner.

Members of an Exclusive Club

The IMF headquarters building is a labyrinthine world of fluorescent light, potted plants and identical floor lamps, a world of numbers focused on computers, and that generates relatively little paper. Each department decides how its members should dress. The German office requires suits, while a shirt with no tie is sufficient in the team of adviser Olivier Blanchard. IMF employees get to work early, at about 7 a.m., and go home late, and they keep their BlackBerrys next to their beds, with the sound muted. The IMF never rests. "We will feel the effects of the last crisis until the next one begins," says Strauss-Kahn.

IMF salaries range from $40,000 (for entry-level employees) to $400,000 (for Strauss-Kahn). Non-US citizens pay no income taxes, which makes the IMF an attractive employer. Few people leave their IMF jobs. They feel like members of a club that divides itself up into smaller sub-units during the few hours of leisure time, clubs of soccer players, photographers and cooks. When IMF people are asked why they are still there, after all the failed missions and all the malice that has been directed at them, they say: "Because we have real impact."

John Lipsky, an American citizen, is the second-most powerful man at the fund, the first deputy managing director. He says that one can "think the unthinkable here. This is an organization where real pioneers were at work. As long ago as 1944. In the seventies. And again today. What we have to do at the moment is without parallel." It is considered an achievement by DSK's team that the Frenchman defines the fund as being "subtly independent" and doesn't see the American with the twirled moustache as a minder sent by the US central bank, the Fed, but as an equal-ranking, or at least almost equal-ranking, thinker.

Entire Nations at Stake

Crises can be addictive. Roger Nord, senior adviser for Africa, came to the Fund in 1983. He spent time in Hungary, the former Czechoslovakia and Nepal, was there during the Asian financial crisis, and now wants to save Africa at a time when the Fund is chiefly concerned about Europe and the United States. Poul Thomsen, a blonde native of Copenhagen, started working for the IMF in 1982, on the day Mexico went bankrupt. In 1987 Thomsen went to Eastern Europe, where he witnessed the borders coming down. He later rescued Iceland, before he was sent to Greece to reeducate an entire nation to live a life without corruption and tax evasion.

These are the kinds of dimensions that the IMF works with. Entire nations, continents, millions of people and billions of dollars are at stake. In the end, all it takes to change the world is a few strokes of a pen or adjustments to the limited number of instruments that economists recognize: monetary and interest rate policy, the tax system and employment, government borrowing and foreign trade, national products and price trends.

No one knows how all of these things are interconnected. There are scientific certainties, but not many, and then there are probabilities, assumptions, opinions and trends. The IMF has to turn these concepts into programs, commit itself to figures and percentages, and to instructions to governments. In doing so, it resembles a circus artist juggling balls and frying pans and chairs and teacups, all at the same time. If everything remains suspended in the air, the outcome is a perfect state. If pans or teacups crash to the floor, the result can be civil war -- or at least a need to rethink strategies.

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lakechamplainer 10/05/2010
1. Who elected Strauss-Kahn?
I found this to be a very informative article. Kudos to Klaus Brinkbaeumer and Ullrich Fichtner. I get the sense the that Strauss and the other IMFers were trying to be careful about what they said, but didn't realize how it would sound to an average person. For example, * Print * E-Mail * Feedback 10/04/2010 Money Is Power An Inside View of the IMF's Massive Global Influence By Klaus Brinkbäumer and Ullrich Fichtner Photo Gallery: 9 Photos Martin H. Simon / MHS Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform. The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation. Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests. On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust? 'The Money Is The Medicine' These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin. Who elected him to anything? Who his he to say how human beings should order their societies? In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore. As an American, I don't recall a process being followed to give up sovereignty and assign it to the IMF, and to assign them control of a large chunk of my tax dollars. I certainly don't support it, and it is clearly against the US Constitution.
BTraven 10/07/2010
2.
Zitat von lakechamplainerI found this to be a very informative article. Kudos to Klaus Brinkbaeumer and Ullrich Fichtner. I get the sense the that Strauss and the other IMFers were trying to be careful about what they said, but didn't realize how it would sound to an average person. For example, * Print * E-Mail * Feedback 10/04/2010 Money Is Power An Inside View of the IMF's Massive Global Influence By Klaus Brinkbäumer and Ullrich Fichtner Photo Gallery: 9 Photos Martin H. Simon / MHS Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform. The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation. Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests. On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust? 'The Money Is The Medicine' These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin. Who elected him to anything? Who his he to say how human beings should order their societies? In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore. As an American, I don't recall a process being followed to give up sovereignty and assign it to the IMF, and to assign them control of a large chunk of my tax dollars. I certainly don't support it, and it is clearly against the US Constitution.
Presumably the man who runs the IMF does not know that his organisation could became redundant given that most countries "helped out" by the IMF have learned its lesson, namely to stockpile as much money as possible. China does it, Brazil too, even Argentina piles lot of cash. From one extreme to another one.
esperonto 10/08/2010
3. a bee in the bonnet
Its plain to me that these old guys who want the New World Order have what is known as a "bee in their bonnets", meaning a little idea they hope to capitalize on, which is more grandiose in concept than in its true practice -- namely, that this New World Order will not pan out. It will fall apart, but perhaps before doing so, a few people will get rich, and that is all it is really about. Humanity will shirk off the stress the NWO is putting on them with all this military action, and they will relax back into normal humans and laugh at the diabolicalness of the western minds trying to push people over the edge.
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