Monday, July 9, 2007

Stiglitz on the IMF

With all the talk about DSK heading the IMF, it is odd that, to my knowledge, the man himself has as yet had nothing to say. I've already given reasons why I think he should take the job. Now Joseph Stiglitz, reflecting on the Asian financial crisis on its tenth anniversary, offers another: important lessons of that collapse have not been learned. The IMF needs a leader with a firm grasp of clear and present dangers in the global economy. Listen to Stiglitz:

The second lesson is that in a highly integrated world, there is a need for a credible international financial institution to design the rules of the road in ways that enhance global stability and promote economic growth in developing countries. With the IMF so dominated by the US (it is the only country with a veto) and Europe (which, by custom, appoints its head), the Fund was long seen as representing the interests of international creditors. Its failures in the 1997 crisis further undermined its credibility, and its failure to do anything about the massive global financial imbalances that represent the main threat to global financial stability today, have underscored its limitations.

Here is a challenge to which Strauss-Kahn could rise, demonstrating his stature and ability to lead. Sarkozy has opened a path for him. Whether or not Sarko's intention was to sow further discord among Socialists and decapitate the party, the fact remains that he has propelled DSK into a formidable position. Although there is resistance from certain quarters, the signs are on the whole favorable for DSK's candidacy, but he's going to have to seize the opportunity soon.

Of course joining the IMF would leave DSK vulnerable to criticism from the anti-globalization left. He will be obliged to embrace the beast firmly and demonstrate that an avowed "social democrat" can be an effective lion-tamer. If he can do that, he will advance himself toward the presidency more effectively than by any other means available to him. If he can't, he will have demonstrated that social democracy is not a winning formula for the PS. Either outcome would be preferable to several years of inconclusive dithering. Action is the order of the day, and DSK should break his silence and act.

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