By Patrick Bond/ Professor of Sociology at the University of Johannesburg in South Africa
The article was written for PRIN
After a major leadership crisis that further degrades the Bretton Woods Institutions’ number-crunching credibility by revealing a pro-corporate bias – one that in 2017 was aimed at pleasing Beijing’s “Communist” government – yet another discredited managing director rules the International Monetary Fund. But Kristalina Georgieva was nearly fired, saved only with her board’s grudging, divided affirmation on October 11, in spite of two imperialist powers – the U.S. and Japan – threatening to swing the axe.
Georgieva is a Bulgarian neoliberal economist who climbed the ranks at the World Bank and was chosen by the European bloc to lead the International Monetary Fund in 2019. In her prior job as Bank operations chief, she was a capitalist spin-doctor on behalf of China, with the permission of Bank president Jim Yong Kim, an ex-leftist who in his days as a public health advocate had favoured the Bank’s “abolition” due to its staff’s relentless harm-doing.
Georgieva’s travails – including The Economist’s call for her resignation – reflect an ongoing curse personified by IMF leadership. The toxicity at 18th and H Sts, NW Washington DC emanates not just downwards from its diseased research brain and lending division, but upwards to the very top: the Managing Director post.
Recall the unbroken record of IMF degeneracy since 2004, initially featuring the criminally-charged MD Rodrigo de Rato who was later jailed for financial fraud, his successor Dominique Strauss-Kahn who resigned in disgrace after rape prosecution began in 2011 (the civil claim by a New York hotel cleaner was later settled out of court), and his successor Christine LaGarde who was convicted in a French political bribery case in 2016.
Georgieva’s crime was more mundane: working with colleagues to manipulate the Bank’s annual Doing Business rating report – a poverty-amplifying project that ranks countries on how well they have deregulated local capitalism for global corporates and local businesses alike. Labour movement watchdog Peter Bakvis has provided the strongest critiques of Doing Business over the years, and celebrated its demise last month due to the scandal.
At the Bank presidency, Trump appointee David Malpass just responded to the data-credibility crisis by making chief economist Carmen Reinhart – until last year a Harvard professor – a member of the senior management team, so as to give the impression he was elevating the tradition of unbiased scholarly honesty. Perhaps Malpass believes the world has forgotten Reinhart’s own reactionary role in “torturing the data until they confess,” when writing alongside former IMF chief economist Kenneth Rogoff. That 2013 episode of foisting neoliberal debt-trap dogma on the world – unveiled as a data-distorting sham by a U.Massachusetts PhD student – reminds of the lax quality control process at the apex of the Bretton Woods Institutions.
In Doing Business 2018, Georgieva injected such blatant data dishonesty that two former Bank chief economists – Anne Krueger and Paul Romer – condemned her, although another – Joe Stiglitz – gave high-profile backing to Georgieva, but for what appear to be opportunistic reasons, not well justified by reality. As Stiglitz put it,
“This is the same Georgieva whose excellent response to the pandemic quickly provided funds to keep countries afloat and to address the health crisis, and who successfully advocated for a $650 billion issuance of IMF “money” (special drawing rights, or SDRs), so essential for low- and middle-income countries’ recovery. Moreover, she has positioned the Fund to take a global leadership role in responding to the existential crisis of climate change.” (emphasis added)
The fallout from Georgieva’s Doing Business indecency was reinterpreted by Stiglitz as a right-wing “coup attempt.” To be sure, the Washington and Tokyo regimes hate Beijing with irrational zeal, so her flattering of Chinese capitalist policy-makers – to make them appear more pro-business than they are (especially in the wake of exchange control tightening following two major stock market crashes in 2015-16 for which Xi Jinping should have been applauded) – and the U.S.-Japanese desire to harass China together represent yet more childish geopolitricks.
Meanwhile, the Europeans were desperate to keep Georgieva in place, fearing this latest scandal could derail their traditional control of the IMF – having borrowed pre-1994 South African signage for the MD door, i.e. the old “Europeans Only” plaque. In exchange, U.S. leaders bully everyone so as to keep the World Bank presidency to themselves, no matter the fools they continue to impose on the institution.
But even if Stiglitz is effusive, the rest of us must never forget: if you run the IMF, by definition you have to be one of the world’s most brutal people. So if you “provide funds to keep countries afloat and to address the health crisis,” as Stiglitz claimed the IMF has done, that didn’t help South Africans who received a controversial $4.3 billion loan from Georgieva in August 2020, featuring these stereotypical IMF albatrosses:
- the loan was denominated in US$ even though the hard currency was not needed for basic fiscal-stimulation support (such as income grants);
- there was an in-built South African Treasury promise of unprecedented austerity that became IMF loan conditionality, with budget cuts then made last October and again in February 2021 to vital programmes including healthcare (they were harsher than any witnessed since the apartheid era ended); and
- no oversight was included and indeed the IMF nudged-nudged winked-winked when it came to South Africa’s notorious Public Private Plundering by a world-leading corrupt corporate sector and middlingly-corrupt state, conducted in this case with such carelessness that several top politicians including the health minister and his top officials were recently sacked.
Stiglitz’s other claims are just as dubious. Issuing $650 billion in Special Drawing Rights – the IMF’s version of central-bank Quantitative Easing – is biased to rich economies and offers merely tokenistic aid to the majority of poor countries (they received only $33 billion). SDR expansion fuels the kinds of speculative-financialised trickle-up economics that Strauss-Kahn accomplished when creating $750 billion worth of new SDRs in 2009.
Likewise, the IMF’s climate politics are unjust: their documents – including the latest Finance&Development house journal – refuse to countenance the most basic principle of environmental economics: “polluter pays.” If they did, the IMF’s Western and BRICS shareholders would be furious at the vast climate reparations that they owe. (If the “Social Cost of Carbon” is $3000/ton as new research suggests, even South Africa’s government would owe – each year – more than three times as much as the economy’s annual GDP.)
It’s also quite silly of Stiglitz to make this easily-checked claim: “A quarter-century ago, when I was chief economist of the World Bank and Doing Business was published by a separate division, the International Finance Corporation, I thought it was a terrible product.” Yet in the same 2002 book in which he thoroughly nailed the IMF for its neoliberal dogmatism, Globalization and its Discontents, Stiglitz offers nary a word about Doing Business.
Indeed, it’s quite revealing that the very origins of Doing Business can be found in a Bank World Development Report that was under the control of Stiglitz – then Bank chief economist – just before he was fired in late 2001 by James Wolfensohn (on grounds he was promoting a woolly, passive-aggressive Post-Washington Consensus ideology slightly to the left of the WashCon). The origin-story controversy was covered at length in the Journal of Economic Perspectives, and in this brief report locating the seeds of Doing Business with Georgieva compatriot Simeon Djankov, Hernando de Soto (the Peruvian business-deregulation huckster) and corruption-scandaled Andrei Schleifer from Harvard.
The outside observers to the Georgieva scandal now seem to fall into three categories:
- First, in the spirit of Stiglitz, some globo-gov reformers tried to counter the anti-Georgieva coup attempt, e.g. when the brilliant Third Worldist economist Mark Weisbrot at the Center for Economic and Policy Research (CEPR) stretches way too generously in defending her climate politics and SDR expansion against the sleazy Malpass, ironically just after CEPR issued another report condemning the “loan shark” role she’s played by imposing financing surcharges on poor countries, fees that are “inappropriate and unjustifiable, particularly during a pandemic.”
- Second, there are conservative critics of Georgieva like The Economist magazine – which sees multilateral credibility as sacrosanct and hence called for her resignation late last month – as well as the inside-the-Washington-Beltway, unabashed-U.S.-imperialist perspective, well argued by Member of Congress Andy Barr, whose deep gripes include disgust at Chinese exchange controls – which were tightened up in mid-2015 and early 2016 during stock market crashes, to Xi’s credit – and also his well-practiced posturing on minority democratic rights.
- Third, there’s the durable concern about the Bretton Woods Institutions from civil and uncivil society, exemplified by this critique of not just Doing Business but of the Bank’s pro-corporate mentality in general.
Nevertheless, I see all this as generally positive:
- Two weaker, less credible institutions result, with questions raised about a petty World Bank v IMF leadership rivalry for the first time I can remember, far transcending the standard Good Cop-Bad Cop division of labour they’d mastered by the time the joint Wash Con ideology ascended in the early 1980s.
- Internecine frictions within the Western bloc may reduce the coherence of top-down neoliberal dictates, which were also so common in 2017-20 under Trump and contributed to the much-needed deglobalisation process, especially given all the fiscal and monetary stimuli these hypocritical regimes have enjoyed in 2020, while their IMF functionaries continue to advise governments like mine to impose austerity and make that a conditionality for massive, corrupt Covid loans.
- Mistrust has spiked between Congress and the White House on what was a common imperial-economic project, with the Trump me-first protectionist wing having just gained the high ground, given how badly Washington’s Old Guard corporate liberals botched this.
- From Brasilia-Moscow-Delhi-Beijing-Pretoria’s vantagepoint within the BRICS bloc – possessing just short of 15% of the IMF voting shares after a massive 2015 investment (that left Venezuela and Nigeria with 41% fewer votes) – there is apparently still support for Georgieva. This is reminiscent of the BRICS delegates’ cringe-worthy behaviour in 2019 when she was appointed with no opposition, and at the point where other controversial U.S./European BWI leadership choices were made by imperialists with subimperial acquiescence: Malpass in 2019, Kim’s reappointment in 2017, Lagarde for reappointment in 2016 and reconfirmation even after her corruption conviction later that year, Kim’s appointment in 2012, Lagarde’s in 2011, Zoellick’s in 2007, Wolfowitz’s in 2005, etc. – essentially confirming BRICS’ assimilation into global corporate-power managerialism (as leftwing critics have long alleged, against ongoing bogus BRICS rhetoric about wanting to reform the two neocolonial institutions – a topic for discussion at the online BRICS People’s Forum next week).
- The old question of whether anyone can trust World Bank “research” is only slightly muffled after its dreadful Doing Business will be either abolished or perhaps rebooted as old wine in a new bottle. But the distaste from these race-to-the-bottom ratings won’t quickly be forgotten.
- Oh, and as a trivial yet revealing bonus on October 11, there was news in The Intercept of the near-appointment in early 2019 of another corrupt leader: charity scammer Ivanka Trump, who was her dad’s first choice over Malpass, though The Donald was talked out of it by Steven Mnuchin.
Gossip and this personality battle aside, the bigger questions of whether the IMF and World Bank do more harm than good to society, ecology and economies can surely be raised, at the same time? Beyond the whimsical matter of imperialist multilateral institution leadership, most importantly, this affair offers an opportunity to question the BWIs’ credibility, legitimacy and right to exist. Indeed this elite stumbling reminds that a more profound idea – “Defund the Bank and IMF!” – was a common slogan twenty years ago, one even Stiglitz was then sympathetic to, in relation to the IMF.
(Patrick Bond is professor of sociology at the University of Johannesburg in South Africa.)
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