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A Bigger, Bolder Role Is Imagined For the IMF
There is even talk that the next managing director -- traditionally a European, while an American ran its sister organization, the World Bank -- may come from the developing world. "Why not?" Strauss-Kahn said.
For an organization long demonized by the developing world, such changes were once unthinkable. "I spent 20 years of my life carrying posters that said 'IMF out,' " Brazilian President Luiz Inácio Lula da Silva, a former union leader, said last week in Rio de Janeiro. "Now the minister of finance says we are going to lend money to the IMF."
The IMF is also moving toward taking the lead role as the global economic watchdog. An intense debate, however, remains over the scope of the edicts it may issue as well as the power it will be granted to enforce them.
Along with the Switzerland-based Financial Stability Board, the IMF is set to develop benchmarks for financial governance, from guidelines on executive pay to methods to prevent the spread of toxic assets through global banks. But no one is talking seriously about allowing the IMF to impose sanctions to force compliance as the United Nations does. There is even a strong reluctance to grant the IMF powers such as those held by the World Trade Organization in Geneva, which issues binding rulings on violations of global trade law.
Instead, the IMF is likely to wield what Strauss-Kahn called "the strength of truth telling." Put another way, the organization's public pronouncements would carry the force of the nations seated at its table, including the world's most powerful industrialized and developing economies.
Some critics, however, say that may not be enough. A case in point: An internal IMF document recently called for Eastern European nations to adopt the euro as their currency to stabilize their economies, even without the approval of euro-zone nations. But stiff opposition from Western Europe has thus far prevented that document from being made public.
Additionally, some smaller European and low-income nations remain skeptical about the creation of a financial security council, arguing they would not be well represented. Even within the IMF, there is a debate over the council's purview and makeup. Some see the council turning into a venue to hash out major economic disputes, such as U.S. and European charges that China is keeping its currency artificially weak.
Others say it should steer away from country-specific rulings. Another camp argues the fund should not exist at all. Even Strauss-Kahn has sought to dispel the notion of too grand a role for the IMF, saying its primary mission should remain monitoring and surveillance rather than enforcement.
"The fund is supposed to take on a more regulatory role, holding accountable even wealthy countries," said Moshin Khan, the IMF's former Middle East and Central Asia director. "But I will have to see that happen to believe it. Whenever I've seen them going after the bigger countries, if the countries don't like what the fund has to say, the fund doesn't say it."