the. hero or villain a day after supporters of ron come wattage massed in belgrade his lawyers file an appeal against his extradition to the hague claiming he's likely to die before a trial gets underway the former bosnian serb general is accused of ordering the deaths of about eight thousand dollars in muslim men and boys have started in one thousand nine hundred. eighty u.k. stepping up military pressure on the kid on the regime deploying apache helicopters and it concerns the move could lead to nato casualties here national media's wary of stepping off the conflict with calls from the g eight nations for me to stand down and diplomatic efforts from russia and south africa underway. panic buttons

washington wants to send texts warning people of possible extreme weather and terror attacks a move some analysts say will make the population more fearful and not more important a chip could be placed in every u.s. cell phone means users will get the alerts whether they want them or not. coming up debate brewing over who is going to replace dominique strauss kahn at the helm of the international monetary fund cross talk coming your way stay with us. twenty years ago the largest country. seems to. have been trying. to get a job. where did it take. to

keep the story. below him 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. 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 the mixture 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 regarding its effectiveness and commitment to internationalism have continued unabated i expect that the next president of the world bank will be an american in the next major actually i mean for european broadly construed and that's the same time we've had since those institutions were established the 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 obsolete unwritten convention and same 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 in 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 enough programs whether these are reasons enough to dismantle the institution and do away with the economic agenda any 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 crisis the 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 nonetheless the world is changing very quickly and it remains to be seen if i mess in its current form will be able to keep up with the temple of our ever globalizing world chardonnay for across our team. and ok i'd like 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. has i.m.f. has function more like a medieval court than a modern organization danny what do you mean by that. well when i said i enjoyed the article i thought i'd look at it from first principles somebody who really believes in democracy how would i look and understand the i.m.f. . and with some ways in which it's very clearly undemocratic and some ways in which

it's not so clear so on the clearest side i mean the fact that it's western european heads for fifty plus years and the next head is likely to be european as well i mean that's clearly under across the fact that america which has less than five percent of the world's population has a veto over the i.m.f. does is clearly under the across the but also in other ways so for example one reason politicians really like the i.m.f. is that it often enables them to. abdicate 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 take the blame for it they bring in the i.m.f. and they can say what is the i.m.f. it's imposing austerity it's not really my fault i would really like to do it so it's a way of type our thing 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 didn't use 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. or to be completely democratic it will be grand 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 peter 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 did under direct question know the answer to because there are groups of agreement talk about what it was set up to do and that was 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 it's 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 that i think you could certainly try that approach but if you look at most of the democracies in the world 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 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. multiple majorities or double majorities as a way to vote for things that i am out 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 and i looked at the figures i mean if i'm not a mistake in brazil has less of a waiting in 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 institutional allows us to stand so. first off the governance of the i.m.f. like the united nations it's the members of the. 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 are emerging markets do not have adequate weight at the i.m.f. and the world bank and there's been a lot of words and communiques and rhetoric paid to that there have 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 in 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 democracy 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 into 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 as 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 particularly christine legarde so if you're talking about a candidate who was educated at the university of chicago with a ph d. in in orthodox not reckon on that switch 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 and to update its policies into the twenty first century and if you look at all the work that's been done across many countries looking at the development process you can see that there are many development trajectories and many development tracks which can use multiple policies and you talk about things like capital controls financial repression industrial policy all right gentlemen i'm going to jump in here daniel i'd like to. so you earlier we heard not only is it not democratic and this has been debated on this program but what about its entire approach i mean the i.m.f. originate is something very different than what it's trying to do now i mean is it

keeping up with the times and how the global economy is changing. i don't think a sleeping of the time the tool no i mean it 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 see that time and time again as i think all international institutions not just the i.m.f. should really be focusing on strong dynamic long term growth that really should be the main 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 first. 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 i.m.f. is done everything right but i think it is on that helps and i think if you talk to the eastern european countries and others who have been forced to reject religion made me feel it is time now i'm going to break here after a short break we'll continue our discussion of the i.m.f. state party.

there are killing innocents here oh i say. this of course and that's never answered . tom a song from the skull spoke to me i think of it every day. i steal the flies fired from the memories. of so much so a long time in the series trying to tell. i was ashamed. i was ashamed that i didn't. i was ashamed that i hadn't a clue. why. i got marmite the plates on the block. in the mine. where i was going to be out not how i was

a boy to. help believe what i was going on once or i think. that i was a good soul. but you know most older on the other side and i think i'm just as good . a live not only next to the border with gaza and egypt but also on the border of peace and war. they are responsible not only for themselves. but also for their loved one. they are ready to take any. street on our. wealthy british soil.

market. i know what's really happening to the global economy with mike's cancer the no holds barred look at the global financial headlines tune in to the report on our keep. the. welcome at your past are comfortable to remind you we're talking about the i.m.f. and emerging countries. and. we finally went to the break jeffrey made an interesting comment is that we've seen

in one president i know out of an amount of economic growth over the last six years and 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 with the i.m.f. help countries become rich. well i don't agree with the premise of the question and i don't really think it's that the method has got around to 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 the west you can see that economic growth rates have tended to slow and also when they have grown they've grown quite often because of extending huge amounts of credit rather than trying to work out how to have real dynamic organic growth i think that is a fundamental problem and what we've had in recent years is a tendency to try to back away from growth so i mislead is not 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 by a wide range of quality so what happens is that the dynamic 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't what is there an example out there where the i.m.f. can wave the flag and say we did a good job here with this country or this situation. i think there's very few particularly 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 in the countries that have been the slackest to the weakest performers over the course of the last couple of decades and with the ones that have been the strong performers china india brazil are generally the ones who have not followed rigorously the i.m.f. said by the world bank's advice 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 the 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. we're actually 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 the 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 the i.m.f. 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 been in hock to special interests 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 or u.s. china or germany or japan to lead the institution all right jeffrey and cambridge that's pretty but it's a really amazing 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 it's time for what i know eight excellent candidates for emerging markets and so that's and there who are. that's what geoffrey and that's why it is that it's the just like really it's not it's not the who's going to be i think we've gotten past

i mean it's the it is it's the ideology that's coming out of the i.m.f. because we're with peter said is that these countries are going to vary so you have to be very successful but it's hard for the i.m.f. so head to head. let me add to the comment united states over the last decade followed in irresponsible policies of the budget deficits during the bush administration and deregulation and all the rest of it did the i.m.f. say oh that's fine because they were an ad hoc know the i.m.f. article forward consultations the annual reports criticizing us for that nobody paid any attention nobody cares americans are clearly needed out there 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 that you can't blame them on the i.m.f. and by the way sort of this issue of growth this one so i don't want to lend saying they are going to use good deficit go ahead peter the i.m.f. didn't the i.m.f. said very little about the american financial deregulation agenda there 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 group think because they've been you know just wowed 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 you know i'm not completely miss the ball jeffrey you want to do so if i can come in there the i.m.f. and i mean. that was your health care but i don't wish to read you jeffrey so let jeffrey speak and then we'll go back out to daniel go ahead jeffrey. the i.m.f. cannot dictate to the u.s. you go look that back and look at what they have said about housing prices. six years ago it doesn't matter that's not going to have any effect. there are having an effect in europe now we have courts which is a brand new thing or new for the last thirty years but let's talk about the last thirty years among the top in 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. about this like a thought of course you see doctors around sick patients you can't take a correlation and say oh at least doctors are always sea sick patients therefore they cause sickness of course they come in a crisis where you can't charge them by saying they're there is seen in the vicinity of crises ok do you want to jump in there. and well you know if i can come in there. first of all i'd completely welcome 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 and now i agree with the other teacher in london that they'd be much more pragmatic but i disagree with peter in london is

that i think this whole idea that we have. a free economy free market free trade is complete nonsense i mean whether or not you think that's desirable 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 there's very heavy state spending we do not live in a free market economy such a joke is that as if we do is nonsense even if you believe that we should or 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 thousand of course it's going to have either we move a lot farther in that direction but it's much freer and more often than i was fifty years ago peter go ahead. sure but i think that 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 management and how countries can take their own domestic situations which are each unique and then it was in yes you know for example if you look at all the developments except story if you look at career you look at taiwan you look

at china and japan they've all used their trading system to get where they want and 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 talk of 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 floored it doesn't work with the way our real world economic systems work markets don't before it perfectly and. that kind of economic theory and the note is what i believe in a higher call milton friedman you might know but no one is saying that chicago

university does not have a great influence but you give it credit for the people who really influential i really happening is that you've got a greening of the outlook of leaders of international institutions and politicians where they've taken up ideas like 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 two years which are really welcome risks being undermined by that our work and now look is being imposed by the i.m.f. by the world bank i love the multinational institutions it's not the chicago's i think the green school we should be worried about i. mean i don't recognise that that is true again. and i think right now let's take one of the one of the most important issues to die in that he's dealing with right now and that's around the free movement of capital around the world and so you know ten years ago the i.m.f. or rich members of the i.m.f. let's be fair so rich countries that owned the i.m.f. were trying to push the i.m.f. to amend its articles of agreement to men date 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 so 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 let them flow more freely and i think what we're seeing right now is that's 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 you know problem oriented thinking is coming out of brazil and others who are looking at i want to let you know i want to and we're almost out of time gentlemen i want to give geoffrey the last word go ahead. 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 most famously had they taken 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 you know we've run out of time completely out of time many thanks to my guest today in cambridge and london and thanks to our viewers for watching us here at r.g.c. you next time remember rostock.

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