EconoMatters, Rethinking Globalization

Lagarde’s Failure to Do the Honorable Thing – And Resign

Christine Lagarde’s confirmation as IMF Managing Director further undermines global governance.

Credit: International Monetary Fund www.flickr.com

Takeaways


  • Anyone who is MD of the IMF – one of the most important positions in global governance – must be beyond reproach.
  • Keeping Lagarde can help African kleptocrats argue, in their defense, having committed similar acts of "negligence."
  • Retaining Lagarde in her post as IMF chief further fuels the anti-globalization backlash.

There is no question that Christine Lagarde carries out her assignments with a certain aplomb and effectiveness. She is also extremely bright and has considerable charm and style. Her personal integrity is irreproachable.

This affair is about much more than “negligence”

And yet, the IMF Executive Board’s recent decision to let her stay in office was a mistake. Lagarde was convicted on December 19 by a French court for negligence in her conduct as France’s Finance Minister in 2008.

That in itself is not such a big deal. We all make mistakes. The irresponsible transfer of over €400 million in 2008 to Bernard Tapie, a shady figure in French sports and business, occurred under her watch when she served in the government of Nicolas Sarkozy.

A real double standard at work

The reason why letting her stay on as head of the IMF is a big mistake. The argument offered up in her “defense” — that she was a novice in the murky world of politics and that she was only convicted of negligence – should not apply when you are head of the IMF.

Anyone who serves as the Managing Director of the IMF – one of the most visible and most important positions in global governance – must be beyond reproach. One cannot afford to be “negligent.”

Under those truly murky circumstances, the correct thing for Madame Lagarde to do would have been for her to admit the mistake and resign. There are many other ways in which she can deploy her skills to serve humanity.

Lagarde’s actions must be seen in a broader context, not just the fine points of (Western) courtrooms. There is a massive backlash against globalization.

And there is a justified sense of outrage in the public-at-large that political elites in Western countries are all too eager to serve their business masters (and enriching the latter even more, whether consciously, subconsciously or unconsciously).

The IMF as a symbol

The IMF stands out not only as one of the most critical and influential institutions of globalization, but indeed as its symbol.

Along with other major institutions of global governance, notably the World Bank, the WTO and the UN as well, global governance, the IMF has fallen into disrepute.

Lagarde’s personal likability should not – and cannot – be a factor in that regard.

Even good people have to fall on their sword

Unlike several other leaders of these institutions – like the World Bank’s inept Jim Kim and the weak Ban-Ki-Moon — Christine Lagarde stood out for her qualities rather than defects. She was a good leader.

But she did make a mistake that is heavy with consequences. Maintaining someone in the post of head of the IMF who is accused of negligence over the fraudulent transfer of €400 million not just further undermines the cause of global economic governance. It sets a terrible example.

Keeping Lagarde at the IMF must bring joy to African kleptocrats who can argue, within reason, that the IMF has no standing to rail against them for what they will call, in their self-defense, having committed similar acts of “negligence.”

Retaining Lagarde in her post as IMF chief fuels further the anti-globalization (and anti-establishment) backlash. It strengthens the perception that “justice” being meted out to the elite that is far more tolerant and favorable than it is for ordinary folk.

The right thing to do

The right thing to do would have been to maintain her innocence, underline her handicap as a political novice, to accept that there was an error of negligence, and on those grounds to stand down from her position as head of the IMF.

There are many, many ways in which she can still deploy her skills to improving the condition of humanity,
Had Chrsitine Lagarde done the right thing, she would have set a powerful example in favor of accountability even in circumstances where there was no suggestion of receiving any personal advantages.

The consequences

By failing to do the right thing, this otherwise admirable woman has achieved the very opposite of what she set out to do on two critical accounts:

  1. Christine Lagarde has undermined, not strengthened, global governance.
  2. And she has confirmed the perception that the elites benefit from unfair advantages that effectively render them irresponsible

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About Jean-Pierre Lehmann

Jean-Pierre Lehmann, emeritus professor of international political economy at IMD in Lausanne, Switzerland, is a Contributing Editor at The Globalist. Follow him @jp_lehmann

  • tini

    Neither a French Finance ministry nor the position of an IMF boss can be an apprenticeship. If you fail – out you go. How can anyone question this. Please learn as an underling. But Lagarde’s sin is primarily to repeatedly give preferential treatment to Europe in prolonging and pushing its debt against existing IMF standards. She is a pillar of the global financialization that undermines trust in existing currencies and governance. Realists know that future generations will never repay past debt with real worth as they also must focus on the future. Collusion by current elites to kick the debt can ever further seems ‘without alternative’ hence is understandable but must end in a crisis – likely when an outsider comes to power and asks his people if to honor past debt – the answer must be a resounding ‘no’. With most Western democracies and the EU failing today but kept alive by the horrendous exit cost of pulling the debt plug the outsider in power scenario is coming closer. Lagarde carries heavy responsibility for this.

  • The IMF becoming more multilateralist since 2008 crisis, and its effective replacement by the G20. This change worries some. Apparently Christine Lagarde has strong support from China as financial globalisation evolves, so might be able to act as an essential mediator.

  • Dr J

    As a reader, I find the article devoid of the points that would enable me to reach the author’s conclusion. He starts by saying that the “irresponsible” transfer of over €400 million in 2008 to Bernard Tapie “in itself is not such a big deal. We all make mistakes”. So, firstly he admits that what she did in 2008 is not a big deal. Secondly, he says we all can make mistakes, but that Lagarde cannot given her position in the IMF. I can agree with him on this if Lagarde had indeed made a mistake during her tenure at the IMF. But this is something which happened in 2008. If the author can provide evidence that she has continued to make errors in judgements since 2008, at the IMF and/or elsewhere, then yes I can also agree with his view that the right thing for her to do is step down; in fact, the right thing would be for the IMF to terminate her role. I don’t have much insight into how effective Lagarde has been in her role at the IMF, but if she has indeed been effective, then why fire her for something she did in 2008? If you were a high ranking employee at your firm, should you really step down for something you did in another firm close to 10 years ago that is “not such a big deal”, and you have had a good record since then, and are proving yourself effective in your current firm?