in the world. years of self-sacrifice and heroism look to those who understand fully that you have to live a. real life stories from world six. nineteen forty five gold dot com. hello you're watching r.t. international from moscow these are all top stories so in general rocco not it should peels his extradition to the european war crimes court but made widespread public anger over his arrest crowds rallied in belgrade accusing the government of giving up a national hero the security of membership. british apache helicopters prepared to cruise the libyan skies as the u.k. steps up pressure on congress but it's clear nato personnel could also be put in significantly more danger now. and the u.s.

government's got a system that can send mergence in text and love to everyone but critics say it's just perpetuating a climate of fear in the country. next r.t. debates over who's going to replace don't expose card at the helm of the international monetary fund the i.m.f. what's cross-talk going to find out more just ahead. we'll. bring you the latest in science and technology from. the future coverage. you can. start.

a low in welcome to cross talk i'm peter lavelle issues of relevance and even legitimacy as the jostling continues as to who will succeed the now disgraced dominic strauss kahn at the international monetary fund many still question the usefulness of this global financial institution is the i.m.f. a political tool of the west or an unfortunate necessity. to kick. start. to cross-talk the role of the i.m.f. today i'm joined by peter chola in london he is a program manager at the bretton woods project also in london we have daniel ben-ami he is a journalist and author and in cambridge we cross to jeffrey frankel he's a professor of capital formation and growth at the harvard kennedy school ok gentlemen this is crosstalk that means you can jump in anytime one and i very much encourage it but first let's look at some of the issues surrounding this global financial institution. in the wake of the scandalous departure of its former head

down an extra scan of the international monetary fund has been faced with the tough task of self-examination as the money lending parthenon seeks to find a new managing director those who are guiding its effectiveness and commitment to internationalism have continued unabated and i expect that the next president of the world bank will be an american to the next major of the i never be european broadly construed and that's the same time we've had since those institutions were established a pattern so ingrained in the fabric of the supranational giants and so resented by emerging economies that representatives of brazil russia india china and south africa issued a joint statement calling the process of selection and obsolete britain convention and saying that adequate representation of emerging markets and developing members and the funds management is critical to its legitimacy and effectiveness there are other reasons that should prompt the i.m.f. to revisit its record and possibly revamp some of its policies just ask latin

america which suffered a massive debt crisis in the one nine hundred eighty s. were asia which near the neck anomic meltdown and the one nine hundred ninety s. all while the i.m.f. pushed those governments to adopt structural adjustment programs that consisted of draconian economic reforms we've really been looking at this through our problems in our lives and most of our countries have not been subject to have their programs whether these are reasons enough to dismantle the institution and do away with the economic agenda many of the bretton woods system is still a matter for debate presently the i.m.f. is the only global financial institution with billions of dollars at his disposal that proved quite handy during the recent financial crisis we are one shark away from a full grown gracious and financial crisis taught us that prevention is better than cure. we cannot afford to forget that lesson regional lending institutions can provide an alternative to the dominance of organizations like the i.m.f.

but such spin offs can hardly wield the same political and economic power in the time of crisis when the us the world is changing very quickly and it remains to be seen if the i met from its current form will be able to keep up with the temple of our ever globalizing world chardonnay cross-talk r.t. . ok and i to go to daniel first thing because because you would have a provocative article a few days ago so i'm going to read one of the provocative sentences and i think it's the first sentence the i.m.f. says i.m.f. has functioned more like a medieval court than a modern organisation danny what do you mean by that. well when i said enjoy the article i thought i'd look at it from first principles somebody really believes in democracy how would i look and understand the i.m.f. . and there are some ways in which it's very clearly under cross and some ways in which it's not so clear so on the clearest side i mean if i do this western european heads for fifty plus years and the next ten years likely to be european as

well i mean that's clearly under. the fact that america which has less than five percent of the world's population has a veto while the i.m.f. does is clearly i'm going to critic but also in other ways so for example one reason politicians really like the i.m.f. is that it often enables them to. advocate responsibility for austerity so in other words if they screw up and there are problems with their economy or even if there are problems which are not of their own making rather than trading blame for it they bring in the i.m.f. and they can say well if the i.m.f. is imposing austerity is not really my fault i would really like to do it so it's a way of pie passing democratic debate and a democratic process ok jeffrey in cambridge would you agree with that i mean i mean just from a purely democratic point of view i generally got a pretty good point. well i would probably come out on the bottom line the same the

same place which is i think it's time for a candidate from emerging markets but i disagree completely about the reason if you have governance of the i.m.f. where to be completely democratic it will be run like the united nations and it would be much less effective i think that emerging markets have earned. the right to have one of their own as a magic director of the i.m.f. and it's for a bunch of reasons and none of them are democracy ok people peter in london where do you come down on that is the is the is the i.m.f. practicing the principles that it claims to be to uphold. well i think on your direct question no the answer to. our disagreement talk about what it was set up to do and that was to to create high incomes to promote trade and to reduce unemployment and deal with social problems and it's certainly not what it's done is actually done the opposite but i have to say i do think democracy is important in our institutions and i think there are ways to create democratic institutions in particular accountable institutions which is an important element of democracy

without having a u.n. style one nation one vote though i think you could certainly try that approach but if you look at most of the democracies in the world if you look at the u.s. or even the way the european union is set up they operate on ways to have democratic accountability under multiple metrics of doing that so in the u.s. you have a congress and the senate in europe you have a european council which has multiple metrics of voting so you don't necessarily only have to have one country one vote like you might have at the u.n. you can have other ways of balancing that using you know multiple majorities or double majorities as a way to vote for things that the i.m.f. and that's one of the first things we've asked for in this new selection process for a new managing director because if you go strictly on the voting rights that are currently in place at the at the i.m.f. europeans have are heavily overrepresented and will be able to install their candidate without any real debate about it and instead we need to have a system which gives a double majority of which means to give vote to both economically weighted

countries but also to a one country one vote system so that you can balance the competing interests and have much more accountability for the way the i.m.f. operates i looked at the figures i mean if i'm not a mistake in brazil has less of a list of awaiting voting rights than belgium does i mean how can that be realistic ok a lot of people even say the doldrum isn't even a country anymore it's breaking up and brazil is up there is it it's charging out there economically i mean what kind of institution allows us to stand so. first off the governance of the i.m.f. like the united nations it's the members that do. government so you don't blame it on the institution and its members it has been recognized for a long long time that developing countries emerging markets do not have adequate way that the i.m.f. and the world bank and others are going to a lot of words and communiques and rhetoric paid to that there's been a few steps in the right direction one is a creation of the g. twenty the governance is moving in the right direction the shares of the emerging markets are larger than they were before we still have anomalies like you said but

the progress is on the right direction the important point let's keep our eye on the ball rather than talking a lot about a lot of principles for the very first time the merging market countries do have shot at managing director of the i.m.f. and they won't get it if they don't unify behind a single candidate it's going to be european and it's going to be christine lagarde who's perfectly respectable but if they don't unify behind a single candidate it's just not going to happen for elementary political reasons that aren't the mocker sea or west versus east or anything else ok peter if i can go to you i think the internet it's going to be a good. he poured point here is not actually about which countries have which votes and what do they represent because i think if we look at the reality of the situation is many of the candidates that are mentioned as coming from emerging markets are equally problematic in terms of how they would run the fund as you would think of most of europeans pretty christina guard so if you're talking about

a candidate who was educated at the university of chicago with a ph d. in in orthodox macroeconomics which as we've seen from the last five years based on theories which are completely flawed then we don't want that kind of person running an i.m.f. which needs to update its thinking to update its policies into the twenty first century and if you look at all of the work that's been done across many countries looking at the development process you can see that there are many development trajectories in many development tracks which can use multiple policies and you talk about things like capital controls financial repression and just through a policy or a gentleman i'm going to jump in here daniel i'd like to. well you earlier we heard not only is it not a democratic and this has been debated on this program but what about its entire approach i mean the i.m.f. originated as something very different than what it's trying to do now i mean is he keeping up with the times and how the global economy is changing. i don't think it's keeping of the times at all no i mean he started in a near all fixed exchange rates and clearly we no longer have fixed exchange rates

but i think the more fundamental problem is that it tends to put stability over economic growth so low of course it pays lip service to economic growth. whenever there are problems the kind of immediate response is to try to stabilize things which might sound sensible but what happens in reality often is that fundamental economic problems are under solved and they just come in people coming back and back and back so you can see that happen time and time again as i think all international situations not just the i.m.f. should really be focusing on strong dynamic long term growth that really should be their main aim jeffrey would you want to pick up on that do you agree or disagree with what we just heard here. well i mean to begin with of course choosing a managing director of the i.m.f. is going to is very different depending on whether you think the institution is everything it does is all wrong and you want to tear it down or completely change its aims. the question is different therefore the answer is going to be different i

but i believe that we've had a period of remarkable growth over the last fifty sixty years i think we've had countries that were very poor become rich and i think this is unprecedented in history and i think part of the reason for it is a global system of governance including free trade and other institutions that i think the i.m.f. has been part of that doesn't mean that the enough has done everything right but i think it is on that helps i think if you talk to the eastern european countries and others who have been forced to return freely jump in here will continue with this find out i'm going to break here after a short break we'll continue our discussion of the state party.

they live only next to the border of the gaza. but also on the border of peace and war. they are responsible not only for themselves. but also for their loved ones. they are ready to take any risk. on r g. twenty years ago in the largest country. to. see. what had been. the janitor. where did it take them.

to keep still. welcome after hostile computor lavelle to remind you we're talking about the i.m.f. and emerging countries. can. we finally went to the break jeffrey made an interesting comment is that we have seen in one president i know out of an amount of economic growth over the last six years i guess we all agree minus the great recession but daniel if i can go back to you again what a great examples out there where the i.m.f. help countries become rich. well i don't agree with that the premise of the question i don't really think is that the i.m.f. and its top down just become rich i think it's misleading to look at the past sixty years as a whole i think if you look at the world economy since the early one nine hundred seventy s. i think in the west you can. see that economic growth rates of tended to slow and

also when they have grown they've grown quite often because of extending a huge amount of credit rather than trying to work out how to have real dynamic organic growth i think that is the fundamental problem and what we've had in recent years is a tendency to try to back away from growth so i mislead is now the politicians will say of course i'm in favor of growth but we might damage the environment of course i'm in favor of growth but we want to make people happy of course i'm in favor of growth but what about inequality so what happens is that the dynamics of growth weakens and he's undermined i think that's what's really come to the fore in the last few years and that's something i really worry about peter if i go to you about also in london he can go where is there a good example out there where the i.m.f. can wave the flag and say we did a good job here because country or the situation. i think there's very few particular in the last thirty years or thirty five years and that's the problem

because where the i.m.f. has been the most heavily involved have been the countries that have been the slackers to the weakest performers over the course of the last couple of decades and we're the ones that have been the stronger farmers china india brazil are generally the ones who have not followed rigorously the i.m.f.'s advice of the world bank's advice and the ones who experimented with their own kinds of economic policy in their own kinds of reforms and melded a form of some kinds of capitalism with some kind of state control or state regulation and that's really i think that's the lesson that's the lesson that's been drawn by the commission on growth a number of the institutions that have looked at how developing countries have grown now i want to bring that back to what that means for the i.m.f. leadership right now because we're choosing a leader for the i.m.f. or i should say heads of state of europe are trying to choose their leader on their own and as they're doing that they're not thinking about what we want the i.m.f. to do for the next five or ten years and what we really want to i.m.f. to do and what i think it's added value as an international institution is is that it can be there to serve as

a neutral arbiter or an independent voice on economic policies particularly in rich countries the i.m.f. has spent much too long focusing on developing countries and telling them how to run their fiscal and monetary policies and should be spending more time thinking about what's going wrong in the u.s. or in germany or in china and what's creating global imbalances and singularly failed to do that in the last ten years it should have been out there saying look what's happening on this financial deregulation agenda is really dangerous you shouldn't be doing it and we need to stop these kind of policies otherwise it's going to blow up in our faces in the i'm a failed to do that because it's been in hock to rich countries and it's going to mark a special interest on wall street and instead we need to have an i.m.f. with an independent head who doesn't have any ties to these kind of special interests and who can be out there doing what's called an i.m.f. speak surveillance but can do really rigorously on the most systemically important countries as they call them meaning the u.s. . germany and japan and china and that's where the i.m.f. needs to be focusing its attention and to do that you need somebody who's not from

europe the u.s. tied or germany or japan to lead the institution right jeffrey cambridge that's pretty that's a really you mazing indictment there from peter in london do you want to react to some of those comments well again i actually think we agree on the bottom line that for what there are no eight excellent candidates for emerging markets and so that's and there who are. but if you jeffrey and why is it something just like really something that's not there who's going to be i think we've gotten past i mean it's the it is is it's the ideology that's coming out of the i.m.f. because what we peter said is that these countries are going very sick have been very successful but that's where the argument so head to head. let me answer the comment the united states over the last decade followed an irresponsible policies of a budget deficit storing the bush administration and the regulation and all the rest of it did the i.m.f. say oh that's fine because they were in iraq no the i.m.f. article forward consultation scieno reports criticize the us for that nobody paid

any attention and nobody cares americans don't care the media don't care but that's a matter of power politics has got nothing to do with who's managing director of the i.m.f. they said the right things but nobody cares there are certain power realities in the world and you can't blame them on the i.m.f. by the way sort of this issue of growth so that's untrue i don't want to learn say one thing about her that he is going to fix it go ahead peter. the i.m.f. said very little about the american financial deregulation agenda and it was an independent evaluation conducted earlier this year by the i.m.f. so an independent evaluation office which called the i.m.f. staff is susceptible to groupthink because they've been you know just wild by the american financial system and their deregulation agenda so i think i mean yes you're half right on on the fiscal side but on the financial deregulation side kind of completely missed the ball jeffrey you want to see if i can trade in there the i.m.f. and i mean. that was your help that can i don't wish to read you jeffrey so let jeffrey speak and then we'll go back to daniel go ahead jeffrey. the i.m.f.

cannot dictate to the u.s. you go look back and look at what they are and have said about housing prices five six years ago if it doesn't matter that's not going to have any effect. there are having an effect in europe now we don't course which is a brand new thing or new for the last thirty years but let's talk about the last thirty years with all pink countries it is a miracle in history that asians and some other developing countries have gone from poverty to wealth in the last thirty years and i think that's part of a world trade system like i said free trade multilateral institutions of which the i.m.f. is a part it's completely a loser it's almost comical to say let's look at some country that the i.m.f. was heavily involved in ok not the u.s. because they're not heavily involved some country where they are exercising influence and look for a miracle of growth but i doubt enough is like a doctor of course you see doctors around sick patients you can't make a correlation and say all these doctors are all you see the sick patients therefore they cause sickness of course they come in in a crisis but you can't judge them by saying they're there is seen in the vicinity

of crises ok daniel you want to jump in there. but well yeah if i can come in there . first of all i've completely welcomed the rapid growth of china and india and brazil and other countries i'm all in favor of economic growth i would say the i.m.f. is not all responsible for that growth or not i agree with the other people in london that they'd be much more pragmatic but what i disagree with peter in london is that i think this whole idea that we have. a free economy free market free trade is simply nonsense i mean whether or not you think that's desirable or that does not describe the reality of the world economy for a very long time those things don't exist is very heavily regulated trade is very heavy state spending we do not believe in a free market economy certain because that is if we do is nonsense even if you believe that we should we shouldn't i think this is the wrong way to look at the question peter do you want to reply to that it's all right so it's about the pound

of course it's going to say i don't like that either we move a lot farther in that direction but it's much freer more often than i was fifty years ago peter go ahead. sure but i think i think the porton point that i was trying to make is that it's not about whether it's free you are not free it's about degrees of of management and how countries can take their own domestic situations which are each unique and manage those and yes you know for example if you look at all the developments access stories you look at career you look at taiwan you look at china and japan they've all used a trading system to get where they want but they certainly are not by any means you know free market countries in any sense of the word and i think that's the important lesson is that the advice the i.m.f. was giving and the economic policies that i.m.f. economists top learned themselves at the university of chicago and other orthodox economic schools and then we're putting into that into economic policy advice to developing countries are the wrong kind of policies and advice from most countries

in the world and that you need to have very very very differential situations for each country and they're not going to and as we all now know economic theory as described by new liberal or the docs economic schools is just flawed it doesn't work with the way our real world economic systems work markets still but aren't perfect even though. that kind of economic theory note again if you'd like to believe in a higher call milton friedman you might go but no one is pursuing that chicago university does not have the great influence but you give it credit for the people who really influential i really happening you've got a greening of the outlook of leaders of international institutions and politicians where they've taken up my dislike environmental ism to argue that we shouldn't grow or at least we should be very very careful very cautious about growth so the real growth that we have over the last few years which i really welcome risks being undermined by that our work and the look is being imposed by the i.m.f.

by the world bank i love them you're about to reference to this is not the chicago i think the green school we should be worried about i. mean i don't recognize that that is true at the i am. and i think right now let's take one of the one of the most important issues that i met this dealing with right now and that's around free movement of capital around the world and you know ten years ago the i.m.f. or rich members of the i.m.f. let's be fair to rich countries that owned the i.m.f. were trying to push the i.m.f. to amend its articles of agreement commending free movement of capital around the world and i was rejected at the time and largely because the asian financial crisis hit and everybody said all maybe we should take a break and not think about that right now and now but it's back again and again now the i.m.f. is having to think about what do we do about capital flows and do we manage them more carefully or do we looked him full more freely and i think what we're seeing right now is there is a huge debate at the i.m.f. it's going to be a very important topic for the next managing director to take up and to mediate between the frankly the the orthodox economic thinking in europe and the us which

is pushing the line that we must have free movement of capital and the more practical and you know. problem oriented thinking that's coming out of brazil and others who are looking at i want to give what i want to and we're almost out of time gentlemen i want to give geoffrey the last we're going. well i think the capital flows issue i don't disagree with where it's coming from but that's not that's yesterday's war the i.m.f. now has moved more in a direction which i agree is is that under certain conditions like brazil's controls on inflows are the ones chile must honestly hat they can some controls well targeted can be can be useful but that's really beside the point i want to conclude on the point that there is a chance if the emerging market countries could get together behind a single candidate already jeffrey we're really not you know we've run out of time completely out of time many thanks so my guess would be cambridge and london thanks more viewers for watching us here in r.g.c. you next time remember cross-talk.

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