More Bad News at the IMF

CAMBRIDGE: Bad news is all the IMF has been getting in the last year. First came a divisive fight over naming a new Managing Director: Germany pushed a little known and unqualified bureaucrat and failed to have him accepted. In the end, Chancellor Schroder was given a fig leaf to hide his embarrassment in the form of the present managing director, Horst Kohler, whose main qualification for the job is being German, unlike his two predecessors De Larosiere and Camdessus, who were distinguished French inspecteusr de finances, i.e. they belonged to the cream of cream in the bureaucratic elite of France. The next slap came from criticism by American Republicans of the IMF’s strategy as nothing but unending bailouts. That criticism was enshrined in the Meltzer Report, which now hangs even more ominously over the IMF because the Republicans now rule in Washington.

America’s Congress has never had much sympathy for the IMF. Democrats question tough-minded programs; Republicans criticize bailouts; nobody has anything constructive to offer. But criticism of the IMF not only comes from the American right. A few shots across the bow came from inside the community, from just across the street at the World Bank. The most notable barrage here was the affaire Stiglitz, when the World Bank’s chief economist accused the IMF of malpractice, gaining applause from bad economists and failed policy makers worldwide.

The latest hits have just happened. First came the resignation of IMF chief economist Michael Mussa, a formidable University of Chicago-educated economist renowned for good judgment. He predicted most of the crises that came along but that did not raise his popularity with the IMF’s board. Mussa was also remarkable for a flamboyant presentation of his views, which was hard for some IMF folk to tolerate in so stuffy environment.

The final hit is comes in the form of the resignation of the IMF’s first deputy managing director, Stanley Fischer, who was in charge of assuring continuity and good sense as well as staff morale. These two departures come on top of a steady exodus of talent to Wall Street in recent years.