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

By and Ullrich Fichtner

Part 5: Dropping €250 Billion over Europe


Klaus Stein, the IMF's German executive director, who occupies room 13-516 in the Washington headquarters, is the enforcer in a game that is becoming more and more fast-paced. A serious and cautious man, he sits a little stiffly in his chair, his white hair combed back and his glasses tucked into his jacket pocket.

Stein is a lawyer, not an economist. He worked in the budget division at the German Finance Ministry, where he ran former Finance Minister Hans Eichel's cabinet department. He has also worked at the UN in New York, but none of his assignments has been as exciting as his last three years at the IMF.

That included September 2008, when Lehman collapsed. And everything that followed.

Stein has a stellar reputation at the IMF, where those who work with him call him "reliable and straight as an arrow." But, like everyone else, Stein is maneuvering in a minefield, which in his case has four corners. One corner is the world in which he lives, where colleagues trust one another and, after a time, come to see themselves more as IMFers than as envoys of their respective countries. But there are three other corners that Stein has to address early in the morning, via e-mail and phone. German Chancellor Angela Merkel, with her changing views, wants influence; German Finance Minister Wolfgang Schäuble is sometimes a supporter of the IMF; and Axel Weber, the chairman of Germany's central bank, the Bundesbank, feels that what Strauss-Kahn is doing goes much too far.

Shifting the Foundations

Stein doesn't mention any of this. Instead, he says: "It hasn't been easy for Germany in the last few months. Germany wanted to be fiscally conservative." What has shifted is nothing less than the Fund's very foundations. In the past, the IMF intervened when countries were heavily indebted and became insolvent as a result of the devaluation of their currency. In the end, the IMF's actions were based on the idea that national crises had to do with liquidity shortfalls, to be resolved with cash and austerity measures. Credit was extended in return for conditions, and those conditions were stringent.

In the case of Greece, this past policy prompted the Germans to argue in Washington that the country wasn't facing a foreign exchange crisis, but a homemade budget problem coupled with corruption. Besides, the Germans pointed out, the IMF should not intervene because Greece, as part of the euro zone, was part of the EU's balance of payments.

This was all true. Nevertheless, Stein says Strauss-Kahn didn't want to "wait for the victims to go over the cliff before we were allowed to catch them." And in the end Merkel, and eventually the Bundesbank, did support the bailout package. The Greek crisis also introduced a new element: the concept of the "joint venture," or cooperation with other institutions, most notably the EU. The IMF dropped €250 billion over Europe, most of it coming from Asian contributions. The former Third World was coming to the aid of the old First World. It was undoubtedly a sign of a new world order.

Only the hierarchies and structures within the Fund have remained in place, for the most part, which is more pleasing to the Europeans than to anyone else. The executive board of the IMF meets on the 13th floor, at 10 a.m. on Mondays, Wednesdays and Fridays. Suits and ties are required when the 24 members of the board meet around an oval conference table, with a second row of assistants sitting behind them. At the meetings, which are conducted in English, the board discusses the IMF's projects, country by country and mission by mission. The Europeans coordinate their opinions in advance, and to save time each member distributes his or her statement to the others before the meetings. At the end, the group waits for Klaus Stein's statement, and Stein calls for "responsible action."

The executive board consists of 24 directors. Most are elected and represent groups. The Brazilian director speaks and votes on behalf of Colombia, the Dominican Republic, Ecuador, Guyana, Haiti, Panama, Suriname, Trinidad and Tobago and, of course, Brazil. Together, the group holds 2.41 percent of all votes.

Nine of the 24 directors are still Europeans, and five of the 24 are permanent representatives, appointed by their governments and not elected by anyone. The US director holds 16.74 percent of all votes, the Japanese director holds 6.01 percent, Stein holds 5.87 percent, and the French and British directors each hold 4.85 percent.

They constitute the top tier, with no potential for any of them to leave the board or be replaced by new members. Is it fair? IMF employees give a friendly smile when they are asked about fairness. Then they glance at their BlackBerrys.

An Open-Door Policy

The managing director, who chairs the executive board meetings, comes from Europe, and his first deputy director is from the United States. This is the arrangement that applied in 1950, and it continues to apply in 2010. There are 30 so-called senior officials at the IMF, and they are the organization's key decision-makers. Strauss-Kahn's inner circle includes his adviser Blanchard, Reza Moghadam, a British citizen of Iranian descent who is head of the strategy department and who was voted the most handsome man at the Fund by the IMF's female employees, the Chinese special advisor Min Zhu and Caroline Atkinson, director of the Fund's external relations department and its chief spokesperson. There is an open-door policy on the 13th floor, and DSK has an ad hoc management style. In the morning, members of his inner circle eat croissants together and discuss the state of the world.

Every other Thursday, the elegant Caroline Atkinson steps in front of a blue wall in a small, cool room on the ground floor to tell the world how it is being saved. Atkinson's press conference is a trip around the world in 15 minutes, in which she employs the official language of the Fund to recount a tale of progress and inform the press about the program's "promising developments."

Moghadam's job is to make sure that everything remains structured and yet constantly in flux to suit the crisis of the day. Moghadam is a sort of secretary general for the Fund. He introduces internal and external reforms and proposes new groups and strategies. In 2008, the IMF's key decision-makers simulated the crisis before it even began, and spent an entire day examining the hypothetical rescue of an Eastern European country, including press releases. Moghadam says: "At the center was the rule of structure conditionality which we had until recently -- if you didn't meet a performance criterion the way that the Fund programs work, financing stopped automatically, and nothing could change that. We abolished that and provided what we call structural benchmarks, which is more of a goal the state sets for itself. It's not a showstopper."

But what happens if a country still doesn't stand up to the pressure of reforms, or if a government faces the prospect of losing its citizens? What happens if, after years of hardship, the social fabric begins to fray? This was the experience in Indonesia, Argentina and Hungary. The Hungarians know very well how the IMF influences the countries it is supposed to rescue.

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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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