last Frenchman to lead IMF sounds the warning of the next
What troubles you most about the
There is something I must tell you that makes me angry
and that is, exactly what we are living through
now: the crisis we have with the sub-prime issue is exactly a
crisis that should not have occurred. If we the IMF
membership had implemented what we had discussed and
agreed at the end of the 90s concerning transparency
the so-called golden rule of transparency, about an enhanced
surveillance, about the instruments of the market, about the
transmission mechanisms between national and international
phenomena; if we had paid closer attention to the social
risks entailed by financial sophistication and more, then
this crisis wouldnt have occurred.
But here we are, confronted by the unbearable lightness of
being of the financial institutions and people. And I hope
that we will draw once again the lesson of this crisis
a useless crisis unless it finally brings leaders and
countries and our financial institutions around to being more
mindful of the risks of our actions.
In light of what youre saying, should the IMF be given
a greater new role in monitoring the global financial system
precisely so that crises like sub-prime or distortions
like the yen carry trade can be spotted before they become
I believe this is an agenda for the IMF today as it was
before, and Im sure that the new leadership of the IMF
will focus on that. I would repeat today what I said in my
Per Jacobsson lecture two years ago: the world can
trust the IMF and World Bank to respond to the problems of
today as it was able to respond to the problems of the 90s,
but the institutions cannot do anything real if they are not
working in a team manner with the membership and in
particular the G7.
How useful do you think the
multilateral economic surveillance initiatives being pushed
by Rodrigo de Rato are?
I believe Rodrigo has been very well inspired in doing that,
but I am anxious to see that initiative developing its
effects. Its important that the concerted effort which
has begun, continues the ability given to the IMF to
follow up with each of the interested countries, the way they
implement their pledges, the programmes they have adopted
together are of a crucial importance. Its only that way
that progressively we will see the global imbalances
controlled and reduced. Only then will the world be reassured
that it no longer has this Damocles sword above its
The 2007 surveillance decision has proved bitterly divisive
for the Fund itself. The board is completely split on this.
Possibly, possibly. But you know, when you have debates of
this kind, you must act and persevere acting and then
youll see the problems being more progressively
addressed, using intensity and consensus to appear. But we
have stopped and debated for too long now its
time for action.
Coming to another issue
what advice would you give the next managing director of the
Fund. What should the priorities be for the incoming managing
Well, the priorities are those I made in my speech at Per
Jacobsson: trust and work with your magnificent staff.
Is this a message you have advised
Well, he does not need my advice, but in my conversation with
him, I will certainly tell him that, if he attaches any
importance to what I think.
Concerns have been raised about
the prospect of another high-flying politician at the helm of
the Fund. De Rato has come under fire for not being
sufficiently engaged with the institution. Theres
concern this may also apply to Mr Strauss-Kahn coming
as he does from the world of politics, as opposed to sober
technocracy. Whats your sense?
I wouldnt comment on what you say about Rodrigo de
Rato, but what I can tell you is that I trust very much that
Mr Strauss-Kahn will not correspond to the kind of
dichotomous vision that you convey between the cold
technocrat or the flamboyant politician. When I was at the
IMF, I observed all of the ministers around the table of the
interim committee and of the G7, and I saw that Strauss-Kahn
was a remarkable economist he is primarily an
academic, dont forget and that he has a vision
of the international problems that none of his colleagues had
and, indeed, an interest in these issues that is constant. So
I believe he can be not only a very good managing director
but something which is even more important: an MD happy to do
that job a wonderful job, as a matter of fact
of devoting his intelligence, his thoughts and his energy to
addressing these issues.
With the benefit of hindsight, how
do you assess your tenure at the Fund?
It was a time of huge challenges for the entire membership.
It was a time of globalization, a time of transition in
Europe, a time of emerging countries starting an
extraordinary process, which has brought them to where they
For the international financial institutions at that time,
possibly too much burden was put on their shoulders. Leading
one of them was indeed a challenge for me, but I was
fortunate enough to lead a really extraordinary institution
with the fabulous support of what people now call a
Many people have asked for my reflections on my achievements
and my mistakes. Of course, now I see these challenges
clearly, but at that time we only identified them partially.
An obvious one was how dependent the action of the IMF was on
the international culture of the 1990s and the
constraints this imposed on its actions.
What was the culture of the 1990s? It was the belief that
this was the time for establishing a new international order
rooted on market economy and democracy, which would make the
world a much better place. Market economy has prevailed on
state economies, and democracy, of course, was a dream for so
many of our countries. We thought that this was the way to go
and, of course, it was right. But what we didnt
see was that you dont change the world that rapidly.
The expectations of the countries on which we were called to
work were not exactly those we had in mind.
I spent over a decade to establish this vision of market
economy, where market economy was not simply a function of
the invisible hand of the market. The invisible hand can only
perform its marvels if you have two other hands working with
that hand, namely, the hand of good governance the
hand of state which we might also call the hand of
justice. The other is the hand of solidarity.
We were dealing with countries where you had ethnic tensions,
where you had crooks, where the cultural consequences of
decades of poor governance had had tremendously deleterious
effects on their ability to change rapidly.
Many in the [IMF] membership, including the US, had this
vision that simply by throwing money, by showing up with
armies of technical assistance, the job could be done in a
few years. All these illusions were there and made our job
very difficult. Finally, we were able to provide them only
with a truncated version of the market economy and of
Looking back, I have no regrets. I believe we were right to
do what we tried to do; we were able in many circumstances to
prevent major crises, and I hope that the world and the new
management of the IMF will continue adapting themselves to
the crises of the 21st century.
you accept that, under your leadership, the IMF moved too far
in the direction of quasi-development issues and allowed
itself to be sidelined from economic surveillance?
When I arrived at the IMF, a few of my colleagues and members
of the board said I had a kind of hidden agenda. It was not
hidden at all. Six weeks after my arrival, I made a big
speech on the mission I saw for the IMF. I explained very
clearly that we had to bring the IMF from a culture too
narrowly concentrated on monetary stability and current
account positions to what I called at that time
high-quality growth what we call now
I wanted to place emphasis on a longer-term perspective and
to develop that through the high-quality growth concept
in particular, a stronger effort for poverty reduction
in the world. This is not to say I wanted the Fund to invade
the field of development this was not our task. But my
belief is that you dont achieve solid and sustainable
monetary stability if you are not strongly active in the
field of poverty reduction. I believe this was right. I still
believe that there is no other way for us to achieve
stability in this world.
This led me to undertake several major initiatives: the
creation of a zero interest rate window for the poorest
countries in the IMF, debt reduction and the poverty and
growth facility. All of that was clearly an agenda whose
validity has been confirmed by the present. The problem was
that the culture of the central banks around which
were the major shareholders of the IMF and the culture
of a great number of the members of the staff of the IMF
was not that one. It was difficult to bring them to
share it at the time, and there were many hesitations
certainly. But at the end of the day, Im happy that the
Funds culture has been progressively changed in that
direction, and I believe this can serve well the world today
How would you evaluate the
Funds success in implementing your vision of the
Funds work in poor countries?
We did what we could with enthusiasm, with commitment, with
all the human resources we had, in a world whose culture was
the one I have described. And here we are. But when I see
that the Asian crisis has been solved in a matter of very few
years if not months when I see the progress
among many of the poorest countries, when I see the progress
universally in a better macroeconomic management I
believe we didnt waste our time.
Interview by Taimur Ahmad