On 4 July, IMF chief Horst Köhler came to London to give evidence to the Treasury Select Committee of the UK parliament. The Bretton Woods Project, Oxfam, and representatives from Warwick and Oxford universities briefed the Committee as expert witnesses. The exchange was lively and far-ranging including discussion on:
A world government?
Michael Fallon, MP: The IMF was not intended to be a world government. Does the Fund have a well-targeted role?
Horst Köhler: We do not have the ambition to be the world government. But if something goes wrong the IMF is the scapegoat.
Governance of the IMF
George Mudie, MP: When are you going to stop being a rich man’s club lecturing to poor countries?
Köhler: We are trying to listen. It is a democratic system because the UK ED [Executive Director] is appointed by government. We have a culture of consensus-building. Still we are a financial institution and so we need capital. There is a healthy element in the fact that the provision of capital and voting rights is being combined. The existing representation in the IMF did work but it can be improved.
Mudie: We threw out that system in 1832 – votes tied to property and money and what we called “rotten boroughs” representation. I’m surprised that a European individual can be so complacent about the lack of democracy in representation.
Poverty and Social Impact Analysis
Köhler: It is mainly the World Bank in charge. We have started six to eight assessments. It is a process of learning by doing We are doing it in Tanzania. We are doing it, I think, in Mozambique. But I am not in detail now informed about the countries.
Responsibility for the Malawi famine
(see “IMF role in Malawi famine”, p7)
David Laws: Was the IMF‘s advice to the Malawian government on grain reserves a mistake?
Köhler: The advice for this maize stock was given and is given by the World Bank and the European Union Commission, so it is just plain wrong to accuse the Fund that it advised and made even a conditionality out of this. I am able to give you better in depth information about this in a note.
The IMF was part of, the kind of international advice and the IMF may not have been attentive enough how they exercised how to run this maize stock, but it was not the responsibility of the Fund to implement the advice.
Free markets and trade
Jim Cousins, MP: Do not the poor of the world look at you and say, “Well, here are these guys lecturing us about free markets and telling us of the value of free trade, but what can they do to prevent the United States raising trade barriers and pouring untold sums of money into subsidies for American farmers?”
Köhler: Since my time the IMF has not been lecturing about free markets.
James Plaskitt, MP: You made a very strong statement to the US Catholic Bishops Conference in January saying that ‘It is unconscionable for the United States, Japan, and the European Union to spend hundreds of billions of dollars on agricultural subsidies … But where is your leverage as an organisation [with richer countries]?
Köhler: It is certainly a difficult task but politics in the 21st century is about public debate and communication. I participate in the public debate and create awareness. I am taking risks because the big powers don’t like it. We are in discussions with the WTO to make the Doha round really a development round. I am going to discuss with my shareholders, the UK ED and the other EDs – that within our Article IV process of surveillance and dialogue we should also have a window about market access and trade distorting subsidies. I hope that we will come to a conclusion which enables us, on the basis of a more systematic approach, to discuss in a transparent way market access and trade distorting subsidies for all our membership.
On quotas and geopolitics
Andrew Tyrie, MP: You used to have a fairly clear and understandable set of rules about what limits there would be to draw in IMF resources. In the light of the bail-outs now of Turkey and Pakistan, I do not think any reasonable man could say that you have stuck to those principles. Do you think that it would be right to conclude that some of this lending has been driven largely by pressure from the US Administration rather than based on IMF rules?
Köhler: I would guess that all G7 members had been involved in the Russia policy. It is too early to say that the IMF was wrong in Russia. In the case of Turkey and Pakistan, programmes were discussed before 11 September. There will be a Board discussion on lending limits.
The Committee plans to issue a report on the IMF later this year. A new section of the Bretton Woods Project’s web site on UK decision-making in the World Bank and IMF will be launched in September.
Uncorrected Evidence presented by Mr Horst Köhler on 4 July 2002
Reforming the IMF, The Guardian, 8 July
On Her Majesty’s slightly-less-secret service, Bretton Woods Update 28
