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FINANCE: IMF Chief Resigns, Democracy Deficit Lingers

Emad Mekay

WASHINGTON, Mar 4 2004 (IPS) - International Monetary Fund (IMF) Managing Director Horst Koehler resigned Thursday following his nomination for the German presidency, and groups monitoring the institution say his exit is a chance to highlight the lack of democracy at one of the world’s most influential financial bodies.

IMF First Deputy Managing Director Anne Krueger will be acting managing director until the IMF executive board names a successor to Koehler.

Before joining the IMF in May 2000, Koehler, 61, was president of the European Bank for Reconstruction and Development.

In his resignation statement Koehler spoke of an ”unfinished agenda” at the IMF, something that critics who monitor the institution, born at Bretton Woods in the U.S. State of New Hampshire following the Second World War, say could not be more true.

"His departure will not make that much of a difference in terms of the institution," said Njoki Njehu of the Washington-based 50 Years Is Enough network.

During his three years in office, Koehler did not make major changes to the fund, and the organisation continued to work to try and reshape the Third World and former Soviet bloc in the image of the free-market West.

Austerity programmes went on unabated, and under Koehler’s watch the world witnessed the largest-ever economic meltdown when the economic structure of Argentina, until that time a faithful disciple of the IMF, crashed down in January 2002.

Many other developing countries have had disputes with the Fund over the austerity measures and long-term restructuring it demands in exchange for the aid it provides on behalf of the international community.

But Koehler’s record is also deficient in terms of reforming the institution itself. The IMF is still dominated by rich and powerful western nations, and features a glowing absence of transparency, democracy and accountability.

Rick Rowden, an activist with ActionAid USA, says Koehler’s departure will reopen the issue of the need to select the IMF director in a representative way.

"It will provide excellent fodder for critics of the fund to call for a more democratic selection process," he added in an interview.

Njehu said groups that accuse the fund of locking developing nations into poverty should renew the debate about the meagre representation of those countries at the top levels of the IMF and its sister institution, the World Bank.

No developing nation has placed a leader in either organisation.

"I think that it’s an important moment for reopening the discussion that happened the last time around about transparency, in terms of the choice of leadership of the IMF and the (World) Bank," he said.

During the IMF and World Bank annual meetings last year, grassroots groups and some developing nations renewed a drive to give countries of the developing South more say in running the two agencies. The request netted only promises from rich nations to keep the issue alive for future consideration.

Koehler himself came to the fund amid a major controversy and in-fighting between rich nations as to who should succeed former long-serving IMF director Michel Camdessus, who retired in February 2000.

Representatives of those nations were unable to agree on a successor, hampered in part by their desire to find an aggressive neo-liberal economist and the tradition that the chiefs of the IMF and the bank must come from northern nations.

According to custom, the IMF head is European while the World Bank president comes from the United States, an approach that many critics call too exclusive.

Regardless of how the process is settled, the person who emerges atop the fund will be a loyal defendant of its neo-liberal, pro-corporate programme, the groups say, adding the institution will continue to defend the current global economic system.

At the Washington-based IMF and World Bank, seats and votes are allocated according to member countries’ economic bulk, leaving poor nations defenceless before heavyweights like the United States, Japan and European Union nations.

The Bank and the Fund each have 184 members, including developed and developing countries, and 24 board members who represent countries or groups of nations.

But while the 46 sub-Saharan African countries, for example, are represented by only two executive directors on the boards of each institution, eight rich nations, including Germany, France, Britain and the United States, are represented by their own executive directors.

Directors from rich countries now control more than 60 per cent of the votes at both bodies, while the U.S. administration has veto power over any extraordinary vote requiring a ”super-majority”.