Manuel may be the man for the job
INTERNATIONAL Monetary Fund (IMF) MD Dominique Strauss-Kahn must be presumed innocent of the allegation of sexual assault levelled at him in New York until he has been proven guilty.
But that is unlikely to be a quick or easy process, and he will not be practically capable of performing his duties with such serious charges hanging over his head. His term is as good as over as of the weekend, whether he is guilty as charged or completely innocent.
Mr Strauss-Kahn’s departure is unlikely to mark any serious shifts in the work of the IMF, which was due to appoint a replacement for him when his five-year term ends next year. It would be unwise for the IMF board to wait too long to appoint a replacement given its importance at this juncture of world history.
The organisation’s relevance was questionable before 2008, when its "Washington consensus" prescription of fiscal austerity combined with free market reforms had proven less than successful in many emerging economies. But since the global credit crisis, the IMF has played a crucial role in stabilising the international financial system and preventing vulnerable economies from succumbing to the liquidity shortage.
Mr Strauss-Kahn’s arrest coincides with renewed global market volatility prompted by doubts over the European Union’s ability to cope with the sovereign debt and banking crises of the so-called Pigs countries — Portugal, Ireland, Greece and Spain. Under his guidance, the IMF provided emergency assistance to the euro zone and remains an important cog in the sensitive machinery that has so far kept the union from falling apart.
Europe is likely to receive less attention from any successor to Mr Strauss-Kahn, as his focus on the region was criticised by the US, Canada and even some emerging economies among the IMF’s 187 member countries. The IMF so far has contributed a third of the huge bail-out packages pumped into troubled euro-zone economies, and their currency wobbled yesterday on the news of its MD’s arrest.
A sudden enforced change of personnel at the top could not have been worse timed, especially since deputy MD John Lipsky announced just days ago that he would be stepping down when his term of office ends in August. Mr Lipsky has now been appointed acting MD, but although his is an experienced hand to have on the tiller of international finance, it is unclear for how long he will be able to do the job. He is unlikely to push through any major new initiatives in that capacity.
The established informal arrangement in the IMF is that the MD is European and his or her deputy American, although pressure has been building for this archaic practice to change. Mr Strauss-Kahn lobbied hard and successfully to give emerging economies a bigger voice in the IMF. The talk in IMF circles has been that he would be succeeded by an Asian as a nod to the region’s rise as a world economic power, but no obvious candidate has emerged.
Former UK prime minister and finance minister Gordon Brown has been touted as a possible contender, but he is unlikely to even be in the running as he doesn’t have the backing of his own government. Enter Trevor Manuel . Speculation has swirled for years that he could be a potential IMF MD, and the timing would certainly be right. SA’s former finance minister has in effect been sidelined in his job as head of the National Planning Commission and his profile within the ruling party has been tarnished further by a bitter political row after he spoke out against what he saw as racism within the administration.
Mr Manuel has the right credentials for the job as he has chaired the IMF’s development committee and its governance reform committee. His departure would be another step up for SA’s global role following its inclusion in the Group of 20 and the Brics — the emerging market bloc that groups Brazil, Russia, India and China.
Reasons to be cheerful
AS THE local government election campaign winds down today, ahead of the voting tomorrow, we South Africans should count our blessings. In the north, Africa has been burning. In the west and the centre, elections are held with bated breath and, often, violence. The result of a disputed election in Cote d’Ivoire led to hundreds, if not thousands, of deaths.
But here our election has been largely good humoured and well fought. This is even more remarkable given the hint of the beginning of real change in the air — there’s a prospect of the Democratic Alliance (DA) getting more than 20% of the vote, and of the ruling and dominant African National Congress (ANC) slipping below 60%.
A hint, though, that’s all. But apart from the deliberately violent rhetoric of Julius Malema, the country is strong, and appears even to be enjoying itself.
This is obviously all good. South Africans have a much clearer understanding by now of the power of their vote and of the power of political competition to force parties to serve them better. Cape Town is well run because the ANC is on the ruling DA’s tail. Port Elizabeth, we bet, will be better run by the ANC (if it holds on there tomorrow) because the DA will be such a close second.
Equally, our politics appears to be maturing. The point has been made a number of times that delivery of services (albeit toilets) has at times crowded racial issues off the stage. That will grow as fewer voters have a personal memory of apartheid. The effect will be to force politicians and parties out of their comfort zones much more quickly than they would like. SA in 10 years’ time promises to be a much more thoughtful, considered place if only because rash promises, swirling language and constantly reaching for the past will mean less and less to more and more of us.
That is not to say leadership will not matter. It will be everything. Sooner rather than later the ANC will shed the collective way it makes decisions. It is too slow and too easily manipulated. People respond best to politics they can follow. Much of what happens in the big parties is too murky to decipher.
That said, we hope the country has a good day tomorrow. There are more than enough reasons to be cheerful as, together, we vote.
FINANCIAL TIMES: Not a victimless crime
RAJ Rajaratnam’s conviction for insider trading is an important victory against financial crime. It must be hoped that the trial marks a step towards a tougher prosecutorial regime.
RAJ Rajaratnam’s conviction for insider trading is an important victory against financial crime. It must be hoped that the trial marks a step towards a tougher prosecutorial regime.
Impunity is not the only danger. Just as perilous is a widespread impression that even if insider trading is illegal, there is nothing clearly wrong about it — that it is a victimless crime. The more market participants find Mr Rajaratnam’s behaviour in line with acceptable market practice — "everyone does it" — the less finance companies can be counted on to do their part in preventing it.
So it is necessary to state the wrong that insider trading does: it abuses access to information to take illegitimate advantage of other investors with no such access. Beyond cheating others out of gains, insider traders harm everyone by undermining trust in, and thus the efficiency of, financial markets.
Yet reactions to the verdict have been mixed: some think the effort demonstrated by prosecutors reassures wrongdoers that the chance of being caught is small. Not so: Rajaratnam’s case — especially the use of wiretaps — raises the cost of hiding insider trading from investigators as well as the expected cost of being caught.
More of this good work is needed. A wider use of wiretapping and, in the UK, longer sentences would both be welcome. London, March 16
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