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It’s former French Finance Minister Christine Lagarde first week as the Managing Director of the International Monetary Fund (IMF). She is replacing the former IMF chief Dominique Strauss-Kahn (DSK) who recently resigned after being arrested in New York City for an alleged rape. Shortly after DSK was formally indicted, the IMF began its month-long politicized selection process behind closed doors. In choosing Christine Lagarde to fill the vacant leadership spot, the IMF is merely replacing one French socialist with another. The country has become a hegemon with now five out of the eleven appointed IMF chiefs from France. Was Christine Lagarde the right choice?
Christine Lagarde may have a cleaner record compared to her predecessor. But all signs point to the fact that Christine Lagarde will likely be more of the same. She’s the typical “eurocrat.” Lagarde has instigated for stricter regulations on hedge funds and favors the expansion of the European Union. As Cato Institute scholar Doug Bandow writes, “Christine Lagarde appears to be a standard French statist and has been deeply involved in organizing the succession of European bailouts.” In other words, don’t expect the bailout mission of the IMF to change with Lagarde in charge.
The real question is why does the IMF exist anymore? Following the resignation of DSK, the international bureaucracy should have finally shut its doors. For decades, the IMF has propped up shaky governments and politically connected banks. As Ron Holland explains,"the IMF and the World Bank have worked together to advance the monetary and political interests of the power elite for decades. They use a good cop and bad cop strategy. Basically the World Bank loans money to corrupt governments and politicians that loot and squander the funds. Then this is followed by the IMF to the rescue by insisting on an ‘austerity program’ of higher taxes and lower government spending to ensure the loans are paid."
The IMF is a fundamentally flawed institution. Whoever happens to be the Fund chief makes little difference in terms of the big picture. The IMF bailouts of European welfare states will almost undoubtedly continue under Lagarde’s watch. The most recent IMF bailouts include Greece, Ireland and Portugal. It has been reported that Spain and Belgium may be next in line to be bailed out followed by Greece—again.
U.S. taxpayers are financing the bailouts of spendthrift European governments. According to Cato Institute scholar Doug Bandow, “If the IMF was only spending other people's money, then the U.S. might remain an amused bystander. But as the largest single contributor (16.67 percent, to be exact) to the Fund, American taxpayers are on the hook for a share of that organization's lending, which ran more than $90 billion last year.” Why, again, are U.S. taxpayers are the hook for the bad economic policies of foreign countries?
The IMF is an unconstitutional and outdated international bureaucracy. The media coverage of the DSK scandal has brought much-needed attention to the Fund. But we don’t need another leader of the IMF. We’d be better off if the IMF closed down—for good.