Will Strauss-Kahn pull a Hammarskjold?
Currency tensions pervaded this year’s IMF and World Bank annual meetings, and there was frequent talk of new international mechanisms to help rebalance exchange rates without provoking confrontation. Both the United States and the IMF leadership seem to support a role for the Fund in this capacity. Again and again during the annual meetings, IMF ...
Currency tensions pervaded this year's IMF and World Bank annual meetings, and there was frequent talk of new international mechanisms to help rebalance exchange rates without provoking confrontation. Both the United States and the IMF leadership seem to support a role for the Fund in this capacity. Again and again during the annual meetings, IMF chief Dominique Strauss-Kahn made clear his view that with new economic power comes responsibility. "You cannot be at the center and be a free rider, so the more you are at the center, the more you need to take your part in stabilizing the whole system," he said during a press conference on Saturday.
Currency tensions pervaded this year’s IMF and World Bank annual meetings, and there was frequent talk of new international mechanisms to help rebalance exchange rates without provoking confrontation. Both the United States and the IMF leadership seem to support a role for the Fund in this capacity. Again and again during the annual meetings, IMF chief Dominique Strauss-Kahn made clear his view that with new economic power comes responsibility. "You cannot be at the center and be a free rider, so the more you are at the center, the more you need to take your part in stabilizing the whole system," he said during a press conference on Saturday.
China has been reticent, but an IMF role might ultimately be attractive to Beijing as well; a multilateral solution that leads to a significant devaluation would reduce the perception that China has backed down in the face of American pressure, particularly if it is coupled with broader governance reforms that increase China’s influence.
This could be a key moment for the institution, and Strauss-Kahn may want to look to another international institution for a role model. In the midst of the 1956 Suez Crisis, UN Secretary-General Dag Hammarskjold (along with several national diplomats) helped craft the basics of UN peacekeeping. It was developed on the fly, in response to a particular crisis, but it had elements that would be useful during subsequent clashes. It succeeded because Hammarskjold and his collaborators did not simply wait for the major players to come to agreement but instead devised a creative solution and then sold it to the key actors. For this to work, the IMF itself may have to do much of the drafting and fine-tuning, not least because China will be skeptical of any plan that emerges fully formed from the Treasury Department.
The Fund has attempted similar conceptual leadership in the past. In the wake of the Russia and Argentine defaults, the IMF’s Anne Krueger worked hard to promote the idea of a global bankruptcy mechanism for states, the so-called Sovereign Debt Restructuring Mechanism. It never took off, in part because the United States wasn’t keen and in part because of ferocious industry lobbying. But on the currency issue, Washington appears eager. The stars could be aligned for a significant expansion of the IMF’s role in economic governance, but dogged leadership will be required.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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