Yet again the elites are closing ranks. On Monday, Christine Lagarde was found guilty by the French courts of misusing public funds when she was France’s finance minister, almost 10 years ago. Yet the banker, today no less than the leader of the International Monetary Fund, was spared any penalty at all: no prison, no fine, no slap on the wrist.
Lagarde has been heading the IMF since 2011, when its previous chieftain, Dominic Strauss-Kahn, had to step down over suspicions of sexual assault. Not that they were the first leaders of finance to be brought down by scandal – note Rodrigo Rato, a Spanish politician accused of abusing public funds when he was a banker, and Paul Wolfowitz, an American former president of the World Bank, who quit in 2007 after a cronyism ethics scandal (or, in English, he gave his girlfriend a sweetheart job).
Anyway, on Monday, the 24 members of the IMF management board, representing 189 nations, chose the easy road and left Lagarde in place.
The IMF’s role is to advise and lend money to nations in monetary dutch. It has taken arrows for decades over the rigidity of its plans to help the nations overcome their problems, which tend not to factor in the nations’ basic needs and abilities. For instance, when bailing out Greece, the IMF collaborated with other creditors of that beleaguered nation in enforcing austerity – in a manner that did not solve the crisis and only made the difficulties of the nations groaning under debt all that much worse.
Theoretically, it’s not business as usual
Many explanations are being proffered for keeping Lagarde on the job, but there’s only one real conclusion: The economic and political elites have learned nothing. They have not understood the unexpected results in voting booths and referendums in the last year.
The incumbent establishment is still helping itself to privileges and cream and thinks it’s business as usual – the rich have access to politicians, politicians have access to the rich, and everybody else can go settle for the theoretical crumbs of wealth that are supposed to theoretically filter down.
It seems entirely thinkable that the elites and establishment will pay, in spades, in elections to come. We can pretty much bet on a decade of political upheaval, to the shock and horror of anybody who thought business would stay as usual.
Negligent, not criminal
Lagarde specifically was accused of negligence by an office holder, in her case in 2007, when as finance minister she approved a payout of more than €400 million by the French government to Bernard Tapie, a French businessman and crony of the president Nicolas Sarkozy, to settle a dispute with Credit Lyonnais, a bank partially owned by the state, over his forced sale of his stake in the sportswear company Adidas when serving as sports minister in 1993, a sale effected for him by Bank Lyonnais – which went on to sell it on a year later for double the amount.
The prosecution charged that Tapie in exchange agreed to lend his support to Sarkozy, and Legarde found herself charged with “negligence by a person in a position of public authority.” She was found guilty of negligence, but not fraud.
The most amazing thing about her story isn’t her conviction, the lightness of her penalty or the fact that she gets to keep her job at the IMF. It’s the line of defense she chose. Lagarde, one of the most powerful women in the world, arguing that the charges were politically motivated and claiming that she wasn’t cognizant enough of French politics to have handled the matter with proper discretion.
Her conviction seems to be the only appropriate element of the entire story.
In an op-ed published on Tuesday, the Financial Times wrote that the IMF should indeed keep Lagarde, who had proven that her personal integrity hadn’t been compromised; the court’s decision was out of left field and was designed to deter politicians in the future.
The last thing the IMF needs now is a managerial vacuum, the FT finger-wagged; the rescue of Greece has reached its most delicate point, and the election of Donald Trump begs a great many questions about the future of the international financial institutions. While Lagarde suffered a humiliation, it summed up, she should stay.
The Guardian wrote much the same: The court intended to injure and embarrass her, not to depose her, the British newspaper concluded. It has made her job harder because she will have more difficulty garnering support for her decisions; and it makes her vulnerable to accusations that she is a member of the global elite, immune from the rules that govern the little people.
Yet another party to that opinion is the influential Egyptian-American businessman Mohamed A. El-Erian, who told Bloomberg that the IMF board was correct to support her, saying she did good work as the IMF chief. He admits that the scandal could stain the fund’s good name and suggests that the way its chiefs are chosen be changed. At present the IMF is constrained to picking its leadership from the developed European nations and doesn’t base its search on skills; and it does involve back-room horse trading.
Under other conditions, if unemployment in Europe among the young hadn’t been so bad (47% in Greece, 44% in Spain, 13% in Britain and at the bottom of the ladder, 7% in Germany); if Greece hadn’t been so dysfunctional as a state; if tens of millions of Americans weren’t afraid they have no future; if the emerging economies hadn’t been building terrible social gaps – El-Erian’s proposals might seem apt, and enlightened.
But other forces are at work in the world today, and his obliviousness, and that of the IMF board and the other luminaries applauding the decision to leave Lagarde in place, will cost them all a heavy price.
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now