One thing Dominique Strauss-Kahn has done for the IMF is put it on the front pages. Until the French economist and politician became managing director nearly four years ago, turning it into a powerhouse of geo-finance before ending up on rape charges in New York City in May, few outside central-banking circles knew much about the organisation and even fewer cared.
The appointment of Christine Lagarde, another former French minister of finance, as his $468,000-a-year replacement showed how much things have changed. Her courtship of the job and subsequent appointment turned into a media circus, with journalists asking Lagarde at her opening press conference if there was “too much testosterone” at the organisation.
However the headlines have tended to obscure the real story. It wasn’t so long ago that the IMF was an expensive irrelevancy and the despair of national central bankers. Before he shot himself in the foot, Strauss-Kahn had used the crisis to drag the IMF up by its boot-straps from an ineffectual bureaucracy that was part of the problem to a dynamic institution that helped save the day. He did so by harnessing the organisation’s largely neglected but formidable intellectual firepower.
The question now is what can the 55 year-old, fluent English-speaking, French lawyer do for the IMF in her five-year term? The organisation has three main jobs: multi-lateral economic surveillance that doesn’t mind treading on toes; what might be called last-ditch lending to nations in difficulties; and the virtual enforcement of solutions on recalcitrant nations because they will otherwise be denied funds.
For a start, Lagarde is unlikely to land the IMF in sexual scandal. Divorced with two sons in their twenties, she has a partner who stays out of the news. And her hobby of making jam back in her Normandy farmhouse is much more likely to land the new IMF chief’s personal life in the cookery section than the front pages.
In her big jobs so far, she’s shown herself to be tough-minded and unapologetically proud of her legal rather than economic background. For years she was the Chicago-based head of the international law firm Baker & McKenzie, and Lagarde regards her lawyer’s ability to cut to the chase as extremely important at a time when economists have, for the most part, confined themselves to wringing their hands at the parlous state of affairs without producing solutions. For her, formal qualifications in economics are not essential – “not all conductors know how to play piano, harp, violin or cello.”
Although Lagarde has barely got her feet under the table, she’s made a good start. She’s already announced that she will broaden the remit of the IMF’s trouble-shooting research squads – the ones that produce voluminous reports on 187 member nations – to take account of not just bald economic data but employment and social issues as well. Lagarde puts a high value on what she calls “stable, social chemistry,” and given continuing riots in Greece and elsewhere, she’s right to.
And while her predecessor was a high-profile socialist, it would be a mistake to pigeonhole Lagarde politically.
Her career so far suggests she’s highly pragmatic, a solutions-oriented operator who adjusts her stance to the problem in hand at any one time. That’s also how she happens to see herself – “very practical and down to earth.”
She will need all the practicality she can muster to help fix the problems in a globally interconnected economy that is only just out of its sick bed. The IMF’s job, she said, is “to restore stability where there’s instability, and there’s plenty of that around…”
Right now the biggest source of instability is the eurozone and its embattled national economies – Greece, Portugal, Ireland, Spain and, latterly, Italy. Lagarde’s immediate job is to find a solution to the endless onslaughts on weak sovereign debt and to restore calm to the financial markets. How she does so will define her tenure at the IMF.