IMF Head Resigns to ’Pursue Happiness’

By Abid Aslam, IPS, 10 November 1999

WASHINGTON, Nov 10 (IPS)—Michel Camdessus, who championed structural adjustment programmes and who steered the International Monetary Fund (IMF) through—some would say into—the ’Asian financial crisis’, will step down early next year.

Camdessus said he planned to leave his post as Managing Director in mid-February, giving the multilateral lending agency’s executive board enough time to choose a successor.

His announcement late Tuesday was vintage Camdessus.

I wanted you to hear it from me personally rather than in the news, the 66-year-old Frenchman told a hastily-assembled gathering of IMF employees at the agency’s headquarters here - after the first media reports already had appeared.

He then read to his staff a statement that he had earlier delivered before the executive board, that his public-relations staff had copied and handed out to reporters, and that he later re- read—word for word—at a news conference.

Camdessus said his decision was based on personal reasons of which I did not even want to hear.

He refused to elaborate on these, other than to rule out ill- health, political pressure and possibility that ongoing investigations into the misuse of international funds by Russian authorities and commercial ’oligarchs’ would lead back to the IMF.

This is, I think, the right time, Camdessus said of his decision. The world economic outlook allows us to anticipate favourable trends for the world economy, so I see it as my duty now to suggest that you take advantage of these favourable circumstances to select my replacement.

A number of names have surfaced as possible successors to Camdessus, whose term in office would have ended in 2002.

These include Bank of France chief Jean-Claude Trichet; Italian Treasury Director-General Mario Draghi; Andrew Crockett, a Briton who heads the Switzerland-based Bank for International Settlements; Bank of England deputy governor Mervyn King; European Bank for Reconstruction and Development head Horst Koehler of Germany; and Philippe Lafayette, a French banker who had competed against Koehler for that job.

Traditionally, the IMF has been headed by a European while its Bretton Woods sibling, the World Bank, has been led by a U.S. citizen.

Camdessus joined the IMF in January 1987, having headed the French Treasury and Bank of France and having presided over meetings of the Paris Club of bilateral creditors.

His performance in steering debt reschedulings led some developing countries to support his appointment but he later drew brickbats for the determination with which he insisted that poor countries liberalise their markets and financial systems.

This approach mirrored the preferences of the U.S. Treasury and, overseas, the Fund was increasingly seen as a favoured tool of U.S. policy.

Yet, the agency and its leader also grew unpopular here among lawmakers, who missed no opportunity to snipe at the IMF whenever the U.S. administration asked them to approve more money for it.

They eventually capitulated on almost every occasion.

Right-wingers denounced Camdessus as a socialist while left- wingers excoriated him as a capitalist.

Isolationists argued the Fund wasted U.S. money and failed to promote U.S. values abroad while internationalists decried the heavy hand with which it went about restructuring the rest of the world in the U.S. image.

Free-marketeers insisted that the IMF stop bailing out private investors and let them feel the pain of unwise moves rather than encourage ’moral hazard’ and repeated mistakes. Populists joined in, seized by the notion that public funds were being used to rescue private gamblers.

When it transpired that the IMF had tacitly supported Ecuador in defaulting on privately-held bonds backed by the U.S. government, however, they cried foul.

Abolitionists demanded that the agency be scrubbed. Reformers wanted it to abandon long-term economic policy-making—especially through structural adjustment in developing countries—and to return to its original, narrowly monetary mission.

Everyone seemed to agree the agency was too secretive.

Camdessus’ departure long had been rumoured amid growing criticism of the Fund’s handling of financial crises which began in Thailand in mid-1997.

The IMF assembled international emergency loans of more than 100 billion dollars to contain the financial wildfire, yet the crisis pushed 40 percent of the global economy into recession.

Relative calm eventually returned to world financial markets but even some IMF staffers conceded that deflationary turmoil - job, wage, and purchasing-power losses—persist in the homes, factories and farms that comprise local or ’real’ economies.

Camdessus, however, insisted that the IMF’s basic policy of demanding austerity to stabilise economies, and then structural adjustment to bring them in line with global markets, was working in the latest crisis countries as they had elsewhere.

Rather, his main regret was that I have not been able to give a good name...to the Fund’s work. Stabilisation...structural adjustment...are still bad words.

So much so that, in September, the IMF won membership approval to give its Enhanced Structural Adjustment Facility a new name: the Poverty Reduction and Growth Facility.

The move was a cosmetic one, according to Steve Hellinger, President of the non-governmental, Washington-based Development Group for Alternative Policies and a former advisor to the World Bank and U.S. Agency for International Development.

The Fund’s policies continue to destroy the productive capacity of the countries in which it operates, said Hellinger, whose organisation is taking part in a joint review of structural adjustment programmes with the World Bank and citizens’ groups in borrowing countries.

Under Camdessus, the IMF was very successful at opening up economies and restructuring them in favour of foreign investors but in the process it destabilised and impoverished large portions of the world, he added.

His legacy will not be a pretty one, but he won’t be around to take the heat.

For his part, Camdessus said he would return to France to fulfil my constitutional duties of life, freedom and the pursuit of happiness.