By Taimur Ahmad and Anthony Rowley
For some, he symbolized the dark side of the Washington Consensus. For others, as IMF chief, he diverted the institution from its core mission. Whatever the final verdict, Michel Camdessus, like few others, shaped the final years of the 20th Century.
As managing director of the IMF for 13 years, Michel Camdessus enjoyed a global sway that often appeared to reach above the heads of many government leaders. Along the way, critics argue, this influence claimed the scalps of a handful of developing world finance chiefs and occasionally their bosses, as one or other emerging economy fell prey to the turmoil that characterized much of that era.
It is some testament to the Fund’s authority during Camdessus’ 1987–2000 tenure that this unassuming civil servant managed to become one of the most divisive figures of his day – and this, at a time of rapid global change and the onset of financial globalization. To a substantial degree, the thoughts and actions of this refined and introspective Frenchman have helped shape today’s world.
“Looking back, I have no regrets,” Camdessus tells Emerging Markets. “I believe we were right to do what we tried to do.”
But in hindsight, he says that “too much burden” was placed on the shoulders of international financial institutions during that time. The biggest challenge was to navigate the Fund through “the international culture of the 90s” and the constraints it imposed.
High aspirations
What was that culture? “A belief that this was time for establishing a new international order rooted on market economy and democracy, which would make the world a much better place.”
While correct in spirit, Camdessus says this almost messianic mindset had its natural drawbacks. “What we didn’t see was that you don’t change the world that rapidly,” he says. “The expectations of the countries on which we were called to work were not exactly those that we had in mind.”
This was made all the more complicated by G7 shareholders bearing down on the Fund in the hope of rapid results. “I remember a very important leader of the United States telling me to ‘do what we did in Japan in 1945 – enter [developing countries] with an army of technical assistance, take the power, invade the ministry of finance and the central bank, and then the job will be done.’ All these illusions made the job very difficult.”
His supporters will remember him as an essentially compassionate man who turned the IMF during his residence into an instrument for aiding the developing world – not least by his introduction of poverty reduction as a major focus. Fund purists will charge that in doing so he diverted the Fund from its core mission of watching over the stability of global finances.
“Camdessus really did a great job on Africa, but I think he moved the Fund a bit too far in the direction of poorer countries,” a former European senior official who was once in line to become IMF managing director himself told Emerging Markets. “The central core of IMF activities in surveillance and short-term stability were too much affected by that,” added this official, who declined to be identified by name.
Others were equally reticent in commenting openly on Camdessus’ tenure in office, torn between their loyalty to the man and their reservations about the direction in which he steered the IMF during his long period at the helm. Japan’s former “Mr Yen”, Eisuke Sakakibara suggests that Camdessus probably pushed the IMF toward poverty issues “in order for it to survive” at a time when it was being sidelined on more global issues.
Camdessus, though, remains adamant that “we had to bring the IMF from a culture too narrowly concentrated on monetary stability and current account positions” to an understanding of “high quality growth” or what is now more popularly known as sustainable development.
“This is not to say I wanted to invade the field of development – this was not our task. But my belief is that you don’t achieve solid and sustainable monetary stability if you are not strongly active in the field of poverty reduction.”
Turbulent 1997
Reviews, though, are more ambiguous on how Camdessus tackled the 1997 crises in Asia and elsewhere. The IMF stands indicted by some as having “lost Asia” by its allegedly inept handling of the currency crisis there 10 years ago. While his former lieutenants claim that the IMF moved quickly into crisis mode, others say that it was slow to respond and applied inappropriate remedies once it did respond.
A photograph of Camdessus with his arms folded, standing over a seated Indonesian president Suharto, the latter – turfed out of office a year later – signing a $43 billion Fund bail-out package, is often cited as one of the most enduring symbols of Fund austerity and its grave consequences. But Camdessus has since explained that he had no choice but to stand – there was no other chair available.
Former Japanese executive director at the IMF Shigeo Kashiwagi believes that the former MD made the right moves in coping with the Asian crisis but was not sufficiently aware of the changing aspirations of Asian nations with regard to their representation at the Fund in the shape of quota allocation, board membership and staffing of the institution.
“If the Fund does not address these concerns, then more Asian countries will become alienated from the IMF,” says Kashiwagi. “That is why they have a lot of sympathy with the Asian Monetary Fund proposal, and why they are trying to develop the Asian Development Bank into a stronger institution and to make an Asian version of the OECD. It all reflects the deep frustration on the part of Asian countries.”
If Camdessus is criticized in Asia on some fronts, a former senior official leaps to his defence on the issue of whether, under his watch, the IMF helped trigger emerging market crises through liberalizing global capital flows. “Michel pushed for an amendment of the Articles of the IMF on capital account liberalization, but this was misunderstood as the IMF pushing capital account liberalization to emerging countries without any conditions,” this official says.
For Camdessus, the events of the past decade are vindication enough. “When I see that the Asia crisis has been solved in a matter of very few years – if not months – when I see the progress among many of the poorest countries, when I see the progress universally in a better macroeconomic management, I believe we didn’t waste our time.”