Punish and Constrain (or not)
Jeremy Harding · France and the IMF
Here is a confusing parable for prospective IMF staffers:
Chapter 1. A wealthy entrepreneur in a large, resource-rich country sees an expensive toy and sets his heart on it. With close ties to the regime and a seat in the dusty lower chamber of the assembly, he swings a loan from the public coffers. A little later he becomes minister for such-and-such, but his toy turns out to be high maintenance. As it threatens to eat into his personal fortune, the big man harrumphs and leans on the state agency that lent him the money in the first place to buy it off him.
Moral: Patronage and corruption: the state as an open goal for plundering elites. Punish and constrain.
Chapter 2. The agency, which now has a controlling interest in the toy, sells it on for roughly twice as much as the big man owes.
Moral: Success! In the murk of public ownership, a dazzling shaft of light, originating from within! Rewards for enterprising dissidents! The big man is history.
Chapter 3. The large sum fetched by the asset rankles the big man and for several years he tries to claw back money from the agency that sold it off. Draped and distinguished lawyers are engaged at great expense, ministers are petitioned and then, 15 years on, the government of the resource-rich country interrupts the judicial process by ruling in the big man’s favour: the procedure is described as ‘arbitration’. He receives hundreds of millions in local currency by way of a settlement and another 40 million in damages. The money is paid out by the state.
Moral: It’s confusing. Where in the script does it say that the big man was meant to be rewarded? With money from the public purse? What happened to punish and constrain? Whoever was responsible should crawl under a pile of that miserable local currency and die.
If candidates for a job with the IMF had been asked to comment on this story they might have noticed that the benighted, resource-rich country looked very much like France; the big man could have been Bernard Tapie, once owner of Olympique de Marseille football club and protégé of François Mitterrand, under whom he served as minister for urban affairs. The toy in that case would be Adidas, which Tapie acquired from its German owners while people were trading souvenir chunks from the Berlin Wall. He bought it on the back of a stupendous loan from Crédit Lyonnais, the biggest bank in France at the time, owned mostly by the state, and well disposed to the French socialist party. Crédit Lyonnais made a very good sale of Adidas in 1993.
Tapie felt some of those proceeds belonged to him and went to the courts. And because Crédit Lyonnais was majority state-owned at the time of the sale, this was a tussle for public money. The arguments dragged on until 2008, when Sarkozy’s people forced a settlement in his favour. Crédit Lyonnais had by then been privatised and Tapie was no longer a ‘socialist’, but a Sarkozy supporter. The official who pushed the settlement – in euros, by the way – was Christine Lagarde, Sarkozy’s finance minister. Last week she was appointed head of the IMF, after her predecessor, Dominique Strauss-Kahn, lost his marbles on the floor of a Sofitel bedroom.
France is not all gloom then. In New York, under immense pressure, DSK’s accuser has given him his get-out-of-jail card and the IMF has been kept in the family. Lagarde is a down-the-line appointment – minimal state-ownership, stripped-back public payrolls – but the Tapie affair is under investigation in France and the findings will probably confirm that neoliberalism is a useless remedy for cronyism and the power of influence.