While I was out having my life yesterday, I got a call from Al Jazeera English asking me to come on and talk about the future of the IMF. At the time I had only really seen the smallest of headlines about Dominique Strauss-Kahn’s arrest in New York on rape charges, and unlike a lot of people on television, I like to know what I’m talking about. So I said no.
But it made me determined to get the required knowledge to speak intelligently about the issue in the future. On the actual charges, I think Americans generally need to stop convicting people through the media. It doesn’t look good for DSK, certainly. He has a promiscuous and even lecherous past. The chambermaid apparently picked her attacker out of a lineup. But there will be forensic evidence and DNA testing and I think we can wait until that evolves to make a determination. DSK hired the best defense lawyer in New York, Ben Brafman, to represent him.
The more interesting questions concern what this means for France, Europe and the IMF itself. DSK was considered the leading candidate for the Socialists for President in the French elections, and had a chance of knocking off Nicolas Sarkozy. Now that race is thrown into total chaos.
As for the IMF, nobody really knows yet. I consulted some experts on the global economy, and they report that the IMF under DSK’s leadership actually veered to the left of many global institutions. I know that the IMF has a reputation synonymous with evil in progressive circles, and the jokes about the IMF now raping people one at a time were legion over the weekend. But they pressed for stimulus measures from the developed world far more consistently than Congress, the White House, the Bank of England, the European Union and the European Center Bank during the Great Recession. DSK led that effort, bringing in Olivier Blanchard as chief economist and actually seeking to fix the real problems in the global economy rather than phantoms. In the near term, his replacement will be John Lipsky, a former banker at JPMorgan.
Many are nervous that, without leadership at the top, the reforms DSK attempted at the IMF will wither. Lots of the subordinates didn’t appreciate the changes anyway, so this will be an opportunity to roll them back. Lipsky will not be a permanent replacement – speculation has focused on French finance minister Christine Lagarde – but I doubt things will remain the same.
And the immediate consequences could be grave. [cont’d.]The IMF was deeply involved in European debt talks with Greece and Portugal. DSK was supposed to meet with Angela Merkel on that very topic when he was pulled from the Air France plane. At best, the arrest will cause delays in talks on Greece, which were set to decide whether to extend the Greek bailout with more aid. The balance of power could shift to Germany, whose citizens are deeply skeptical about adding to the bailout funds. Without the advocacy from the IMF, the dynamic of the Euro bailout becomes far more unpredictable.
So that’s what I’ve been able to dig up. It’s bad news for the world and much, much worse news for the assault victim from the Sofitel. Whether DSK was a strong leader of a global overseer of the economy says absolutely nothing about whether he raped a woman in a New York hotel room.