Lagarde's To-Do List

What should Christine Lagarde do on Day 1 as managing director of the IMF? Five experts weigh in.

Cut Greece loose

It is too late to advise Christine Lagarde to reconsider taking on the job of IMF managing director at what is likely to prove to be the most challenging period in that organization's 65-year history. There's still time, however, for her to avoid taking ownership of the terrible mess her predecessor, Dominique Strauss-Kahn, created for the fund with his ill-considered bailout operations for Greece, Ireland, and Portugal. Indeed, it would appear that Lagarde's interests and those of the global economy would both be served best if she were to take a fresh look at the IMF's failed policy approach to the eurozone sovereign debt crisis.

Not to put a fine point on it, but the IMF-EU's "no default and no exit from the euro" approach for the European periphery is not working. The IMF and the European Union have designed a straitjacket of brutal austerity fiscal measures that are producing deep recessions in those countries, which in turn are undermining their tax bases and sapping their political will to stay the adjustment course.

The current program makes no sense. Although it is patently clear that the austerity medicine is not working in Greece, the IMF and EU are about to double the dose with their latest Greek bailout package. The fund is already applying the same failed recipe to Ireland and Portugal.

The policy options Lagarde faces on assuming office could hardly be less appealing. Continuing the IMF's failed policy prescription of sustained austerity without default or devaluation is all too likely to end in tears for everyone involved. It is also all too likely to compound the European sovereign debt crisis and blacken the IMF's reputation across Europe, in much the same way as occurred in Asia in the late 1990s. Yet initiating a course correction in IMF policy is all too likely to trigger a crisis in Europe's banking system that would make the fund the target of international criticism.

If well-handled, however, the latter approach might at least allow for an orderly restructuring of the European periphery's debt, and an orderly exit of those countries from their use of the euro currency. Risky as that strategy might be for the IMF, it is the one Lagarde should opt for if the world is to be spared a second Lehman Brothers-style banking crisis, this time in the heart of Europe.

Desmond Lachman is a resident fellow at the American Enterprise Institute.

Take an oath of objectivity

"I, Christine Lagarde, solemnly swear that I will neither seek nor accept any public office -- elected or appointed -- in France, or in any European agency or institution, for a period of five years after leaving my post as managing director of the IMF."

Issuing an oath of that nature should be the first order of business for Lagarde. She comes to the International Monetary Fund as the chosen candidate of her fellow European policymakers, just like all of her predecessors, under the selection system that has prevailed since the IMF's establishment. Anachronistic as that system is, it is particularly pernicious in Lagarde's case because of the clear conflict of interest presented by the crisis in the eurozone. The European politicians who anointed her have enormous stakes in seeing the crisis resolved in ways that benefit them politically, whereas the IMF's task is to promote a credible approach that will resolve the crisis sustainably. It is all too easy to imagine how these interests will diverge as the crisis develops; arguably, they already did when Dominique Strauss-Kahn was heading the IMF while simultaneously planning to run for president of France.

The question of whether Greece's debts should be restructured is just one case in point. Europe's power brokers quailed at the prospect that the losses inflicted on their banks would require them to pour more taxpayer money into their financial systems, and they desperately scrambled for solutions that would defer the pain, however inevitable it may be. Is that the best in the long term for Greece, for Europe, for the world? I don't think so, but regardless of the pros and cons of that particular argument, the point is that the IMF needs to show that its policies are as free from short-term political considerations as possible. Its most important asset is not its money but its credibility, and if it is perceived by financial markets as little more than Europe's tool, its effectiveness in restoring confidence will be severely curtailed.

Lagarde should do everything in her power to eliminate doubts about where her loyalties lie. When Europe united behind her candidacy, I argued that her selection would be a travesty. I haven't changed my mind, but at the very least she should forswear the ambition to hold any office for which she would depend on the support of European leaders or voters. She may be morally obliged to take steps that will make her as unpopular in Europe as previous IMF chiefs have been in places like Brazil and South Korea. She must show that she is prepared to do so if necessary.

Paul Blustein is a nonresident fellow with the Brookings Institution and a senior visiting fellow with the Centre for International Governance Innovation.

Let regional organizations do the hard work

Christine Lagarde has a lot on her plate, with Greece as the most pressing point on the agenda. But she should not overlook the issues of political representation that surrounded her own election bid.

Many IMF member states are openly calling for a non-European to lead the fund for the first time in its history. This follows a recent reform to IMF governance in which some vote shares finally shifted from Western Europe to emerging-market countries like China, India, and Brazil. The reform was necessary, as power on the executive board no longer reflected global economic realities.

At the same time, however, Western governments have to think about domestic politics. Consider the United States: If it gives up too much power, isolationist forces in Congress have a good excuse to say "no" the next time the president asks for an increase in IMF contributions. With that in mind, small Western European countries gave up the most votes in the last round of reforms. But these countries, too, have domestic politics to consider. The Swiss, for example, would never have joined the IMF without a seat on the executive board. If they fail to retain their seat, they may be less inclined to support the institution.

Power at the IMF is on a tightrope. It used to make sense for the United States to provide the lion's share of resources and receive commensurate political control. As emerging markets continue to grow, however, they will demand more voting power. Eventually, we will reach an impasse where Western governments will not have the domestic political capital to assent to the changes demanded by the developing world.

That development may be inevitable, but it does not mean that we give up on global cooperation. The power asymmetries that allowed the IMF to function in previous decades -- in which the most powerful actors assumed responsibility for providing the public good -- have diminished on the global level, but they still persist in regions. The IMF should therefore embrace an increasing role for regional financial institutions, recognizing that the political will to provide liquidity in future crises will come from the regional hegemons with the most at stake. For example, the United States led in Mexico's "Tequila Crisis" in the early 1990s, while Japan led in the East Asian financial crisis of the late 1990s, and Germany leads in the current eurozone crisis.

In this multipolar world, the IMF still has an important role to play: namely, that of the bad guy. Regional financial institutions will want to avoid the political backlash of imposing tough conditionality on their neighbors. To escape this, Asia's regional version of the IMF (the Chiang Mai Initiative Multilateralization) has explicitly tied its lending to IMF conditionality, and the IMF's main role in the European debt crisis is to enforce policy conditions.

As U.S. financial power declines, so will the power of the global institutions it set up at the end of World War II. Recognizing the decentralization of power, Lagarde can help the IMF to be more effective by cultivating regional coordination. The locus of global financial power is shifting, and the IMF should adapt.

James Raymond Vreeland is an associate professor of international political economy at Georgetown University. This commentary was adapted from his remarks delivered at the Bank of Korea international conference on May 26 and 27, 2011, in Seoul.

Sharpen the Fund's economic analysis

Christine Lagarde's most pressing concern will no doubt be the release of the next tranche of IMF funding to Greece. But she must not delay in developing a decisive agenda for resolving the long-term issues that threaten the IMF -- issues that went ignored by her predecessors.

First, there is the matter of internal IMF politics. The fund can no longer postpone giving emerging countries a greater role in decision-making. Sooner, rather than later, Europe should relinquish its privileged position in selecting the managing director. Lagarde should set up a credible expert group to devise a transparent and competitive process by which her successor can be chosen. This time, with Mexico's Agustín Carstens challenging Lagarde for the job, the contest for the top post was more competitive than usual, to the benefit of all. But the distribution of power within the IMF is still far too heavily tilted toward the West.

On substantive economic issues, I would stress two in particular.

The IMF's normal function is to provide short-term assistance to member countries in distress. But it has never undertaken true systematic taxonomic analyses of their problems and of the characteristics and objectives these countries have: Is the applicant's payments difficulty temporary or permanent? Is the underlying difficulty monetary or real? Is the country highly indebted, or is the current deficit free from a debt overhang?

Ideally, the IMF would not only be aware of these differences, but the terms of its assistance would be sensitive to them. This is currently not the case. For example, the late-1990s East Asian crisis was in the context of "good fundamentals," while the Latin American crises reflected "bad fundamentals"; and yet the conditionality applied by the IMF to each situation was very similar. Lagarde should develop ways to ensure a better match between the fund's proposed programs for specific countries and the actual economic situations there.

Next, Lagarde should endorse and highlight the important work being done by Olivier Blanchard, the IMF's chief economist, on international capital flows. Many of the world's pending problems, Blanchard has shown, have to do with excess inflows of money into emerging-market economies spurred by the U.S. Federal Reserve's quantitative easing program. This is fundamentally different from the capital flow problems that plagued East Asia a decade earlier. The IMF should be at the forefront of dealing with this new international problem, but it has yet to fully reckon with it.

Padma Desai is the Gladys and Roland Harriman professor of comparative economic systems at Columbia University and the author of Financial Crisis, Contagion, and Containment: From Asia to Argentina and From Financial Crisis to Global Recovery.

Give the developing world a voice

For all the talk of the IMF bailing out the eurozone, let's not forget that there are still many developing countries that depend on its assistance -- and that the conditions the fund attaches to its loans sometimes exacerbate poverty and social inequality in these fragile places. Europe now knows all too well why all recipient countries want to have a say in IMF policies and decisions that so greatly affect them. So, in her new role as managing director, Christine Lagarde should make sure that they do.

First, she will decide what to do with the nearly $3 billion the IMF unexpectedly received from the sale of its gold reserves last year. This money must be directed to where it is most needed and where it will have the most impact. That means channeling the excess profits to poor and vulnerable citizens of developing countries -- meaning, not to Europe or back into savings.

Needless to say, the vulnerable citizens of developing countries don't get a say at the IMF board meetings. Rightly so, there is deep concern that European governments are quietly moving to bury the surplus funds in the IMF's books, so that they can maintain disproportionate power over what is done with it.

This is precisely why Lagarde must accelerate governance reform of the IMF and act to loosen Europe's stranglehold over the IMF board of directors. While the IMF board agreed last year to give emerging and developing economies more of a voice in the institution, the 2.8 percent gain in quota share was simply not good enough. The continued unwillingness of European governments to reduce their overwhelming presence on the IMF board is a problem, and the disappointing process to replace Dominique Strauss-Kahn as managing director has further damaged the IMF's credibility. There was talk of openness, but everyone realized that Mexico's Agustín Carstens was simply a token candidate. The decision to appoint Lagarde was ultimately agreed to in Paris and Washington before the candidates were ever announced.

U.S. President Barack Obama's administration could have stepped up and welcomed emerging powers taking a leadership role in the IMF, as it has done in encouraging the G-20 process, but it chose instead to stay quiet.

Allowing emerging markets a say that accords with their rising global influence will only benefit the institution. If the United States and the European Union continue to hold on to power through structures that reflect an obsolete economic and political world order, rising powers will inevitably turn away toward institutions where they do have a voice.

Raymond C. Offenheiser is the president of Oxfam America.

Jim Watson/AFP


Where Have All the Girls Gone?

It's true: Western money and advice really did help fuel the explosion of sex selection in Asia.

How did more than 160 million women go missing from Asia? The simple answer is sex selection -- typically, an ultrasound scan followed by an abortion if the fetus turns out to be female -- but beyond that, the reasons for a gap half the size of the U.S. population are not widely understood. And when I started researching a book on the topic, I didn't understand them myself.

I thought I would focus on how gender discrimination has persisted as countries develop. The reasons couples gave for wanting boys varies: Sons stayed in the family and took care of their parents in old age, or they performed ancestor and funeral rites important in some cultures. Or it was that daughters were a burden, made expensive by skyrocketing dowries.

But that didn't account for why sex selection was spreading across cultural and religious lines. Once found only in East and South Asia, imbalanced sex ratios at birth have recently reached countries as varied as Vietnam, Albania, and Azerbaijan. The problem has fanned out across these countries, moreover, at a time when women are driving many developing economies. In India, where women have achieved political firsts still not reached in the United States, sex selection has become so intense that by 2020 an estimated 15 to 20 percent of men in northwest India will lack female counterparts. I could only explain that epidemic as the cruel sum of technological advances and lingering sexism. I did not think the story of sex selection's spread would lead, in part, to the United States.

Then I looked into it, and discovered that what I thought were right-wing conspiracy theories about the nexus of Western feminism and population control actually had some, if very distant and entirely historical, basis in truth. As it turns out, Western advisors and researchers, and Western money, were among the forces that contributed to a serious reduction in the number of women and girls in the developing world. And today feminist and reproductive-rights groups are still reeling from that legacy.

The story begins in the mid-20th century, when several factors converged to make Western demographers worried about global population growth. Thanks to advances in public health, people were living longer than ever before. Projections released by the U.N. Population Division in 1951 suggested what the sum of all those extra years of life could be: Rapid population growth was on the horizon, particularly in the developing world. As pundits forecast a global "population explosion," anxiety mounted in policy circles, and the population control movement that coalesced brought together everyone from environmentalists to McCarthyites. Viewed through a 1960s Beltway lens, mounting numbers of people meant higher rates of poverty, which in turn made countries more vulnerable to communism.

The U.S. Agency for International Development (USAID), the World Bank, and the Rockefeller Foundation were among the organizations that poured money into stanching the birth rate abroad, while the International Planned Parenthood Federation (IPPF) and the Population Council helped coordinate efforts on the ground. As these organizations backed research into barriers to couples accepting contraception, one of the obstacles quickly identified was that in most parts of the world, but particularly in fast-growing Asia, people continued to have children until they got a boy. As demographer S.N. Agarwala explained in a paper on India he presented at a 1963 IPPF conference in Singapore: "[S]ome religious rites, especially those connected with the death of the parents, can be performed only by the male child.... [T]hose who have only daughters try their best to have at least one male child." Even in the United States, surveys suggested a preference for sons.

That raised the question: What if couples could be guaranteed a son from the start? Elsewhere, scientists were working to perfect fetal sex determination tests for women carrying sex-linked disorders like hemophilia, which only manifests itself in males. (The first sex-selective abortions, performed in 1955 by Danish doctors in Copenhagen, were actually done on women carrying male fetuses.) But the technology was still incipient and required a late-term abortion. Proponents of population control began talking about nudging sex selection along. In 1967, for example, when Planned Parenthood Federation of America President Alan Guttmacher received a proposal from an Indian scientist interested in finding a way to "control SEX in human reproduction," he scrawled a note across the top in hasty red pencil, asking the organization's medical director to consider whether the research was in fact "worth encouraging."

Planned Parenthood didn't fund the research in the end, but on the technicality that the U.S. government had recently cut funding for fellowships to foreigners. Six months later Steven Polgar, the organization's head of research, went public with the notion that sex selection was an effective population control method. Taking the podium before an audience of scholars and policymakers at a conference sponsored by the National Institute of Child Health and Human Development (NICHD), Polgar "urged," according to the meeting's minutes, "that sociologists stimulate biologists to find a method of sex determination, since some parents have additional children in order to get one of specified sex."

At first the language was gender-neutral. But before long the descriptions grew more blunt, and some proponents talked frankly about selecting for sons. In the years that followed, Population Council President Bernard Berelson endorsed sex selection in the pages of Science, while Paul Ehrlich advocated giving couples the sons they desired in his blockbuster The Population Bomb. "[I]f a simple method could be found to guarantee that first-born children were males," he wrote, "then population control problems in many areas would be somewhat eased." In many countries, he wrote, "couples with only female children 'keep trying' in hope of a son." A wide range of population control strategies were on the table at the time, but by the end of the decade, when the NICHD held another workshop on reducing birth rates, sex selection had emerged as an approach that participants deemed "particularly desirable."

Other spokesmen -- for they were mostly men -- included Arno G. Motulsky, a geneticist at the University of Washington-Seattle, William D. McElroy, then head of the biology department at Johns Hopkins University, and British microbiologist John Postgate. Postgate was particularly resolute. He extolled sex selection in an article for the New Scientist, explaining that population growth was so great a threat that the drawbacks of a skewed sex ratio would have to be tolerated, grim as they were. "A form of purdah" might be necessary, he predicted, while "Women's right to work, even to travel alone freely, would probably be forgotten transiently." A handful of women got on board as well. In 1978, former ambassador and former U.S. Congresswoman Clare Boothe Luce wrote an article for the Washington Star in which she clamored for the development of a "manchild pill" -- a drug a woman could take before sex to ensure any children that resulted would be male.

Before long, sex selection emerged as a favored solution. In the context of '60s and '70s population politics, it had the appeal of being a voluntary strategy that played to individual behavior. In his paper for Science, Berelson ranked sex selection's ethical value as "high." Postgate pointed out, "Countless millions of people would leap at the opportunity to breed male." And other strategies being tried in Asia at the time entailed coercion, not choice.

In South Korea, Western money enabled the creation of a fleet of mobile clinics -- reconditioned U.S. Army ambulances donated by USAID and staffed by poorly trained workers and volunteers. Fieldworkers employed by the health ministry's Bureau of Public Health were paid based on how many people they brought in for sterilizations and intrauterine device insertions, and some allege Korea's mobile clinics later became the site of abortions as well. By the 1970s, recalls gynecologist Cho Young-youl, who was a medical student at the time, "there were agents going around the countryside to small towns and bringing women into the [mobile] clinics. That counted toward their pay. They brought the women regardless of whether they were pregnant." Non-pregnant women were sterilized. A pregnant woman met a worse fate, Cho says: "The agent would have her abort and then undergo tubal ligation." As Korea's abortion rate skyrocketed, Sung-bong Hong and Christopher Tietze detailed its rise in the Population Council journal Studies in Family Planning. By 1977, they determined, doctors in Seoul were performing 2.75 abortions for every birth -- the highest documented abortion rate in human history. Were it not for this history, Korean sociologist Heeran Chun recently told me, "I don't think sex-selective abortion would have become so popular."

In India, meanwhile, advisors from the World Bank and other organizations pressured the government into adopting a paradigm, as public-health activist Sabu George put it to me, "where the entire problem was population." The Rockefeller Foundation granted $1.5 million to the All India Institute of Medical Sciences (AIIMS), the country's top medical school, and the Ford Foundation chipped in $63,563 for "research into reproductive biology." And sometime in the mid-1960s, Population Council medical director Sheldon Segal showed the institute's doctors how to test human cells for the sex chromatins that indicated a person was female -- a method that was the precursor to fetal sex determination.

Soon after, the technology matured, and second-trimester fetal sex determination became possible using amniocentesis. In 1975, AIIMS doctors inaugurated sex-selective abortion trials at a government hospital, offering amniocentesis to poor women free of charge and then helping them, should they so choose, to abort on the basis of sex. An estimated 1,000 women carrying female fetuses underwent abortions. The doctors touted the study as a population control experiment, and sex-selective abortion spread throughout India. In his autobiography, Segal professed to being shocked to learn that doctors at AIIMS were using a variation on his instructions to perform sex-selective abortions. But he neglected to mention that shortly after his stay in India he stood before an audience at the National Institute of Child Health and Human Development and described sex selection as a method of population control. (The minutes from the meeting describe "sex determination at conception" -- now finally available today through advances in assisted reproductive technology -- but in-utero sex determination was the form of sex selection furthest along at that point.)

Sex selection hit China the same year the AIIMS experiments began. The country accepted Western aid belatedly, in 1979. But after years of being kept out of the Middle Kingdom, the U.N. Population Fund (UNFPA) and IPPF jumped at the opportunity to play a role in the world's most populous country, with UNFPA chipping in $50 million for computers, training, and publicity on the eve of the one-child policy's unveiling. Publicly, officers at both UNFPA and IPPF claimed China's new policy relied on the Chinese people's exceptional knack for communalism. But, according to Columbia University historian Matthew Connelly's account of the population control movement, Fatal Misconception, in January 1980 IPPF information officer Penny Kane privately fretted about local officials' evident interest in meeting the new birth quotas through forced abortions. Accounts of those eventually leaked out, as did reports of sex-selective abortions. In 1982, Associated Press correspondent Victoria Graham warned that those augured a spreading trend. "These are not isolated cases," she wrote, adding: "Demographers are warning that if the balance between the sexes is altered by abortion and infanticide, it could have dire consequences."

Today, some of those dire consequences have become alarmingly apparent. Part of that is the extent to which organizations like UNFPA have found themselves unable to perform legitimate services in the developing world because of their historic connection to population control. For it was news of sex-selective and forced abortions that helped fuel a budding anti-abortion movement in the United States. Protesters showed up at the 1984 World Population Conference in Mexico City, wielding evidence of abuses in China. The next year, President Ronald Reagan unveiled what would become known as the "global gag rule," cutting off $46 million in funds to UNFPA -- money that might have gone toward maternal and child health as well as population control. The struggle to fund reproductive health continued over the next two decades, with subsequent U.S. presidents withdrawing or reinstating the gag rule along partisan lines.

Nowadays, of course, UNFPA and Planned Parenthood are led by a new wave of feminist bureaucrats who are keen on ensuring reproductive rights, and they no longer finance global population control. Thanks to a thriving anti-abortion movement, Planned Parenthood can barely make contraceptives and safe abortion available to the American women who actually want them. But contentious American politics has these and other groups on the left stuck in what Joseph Chamie, former head of the U.N. Population Division, calls "the abortion bind." The United Nations issued an interagency statement condemning sex selection and outlining recommendations for action last week, and UNFPA was among the agencies that helped draft it. The organization has also funded research on sex selection and sex ratio imbalance at the local level. But its legacy in the developing world continues to haunt its leaders, to the detriment of women worldwide. Lingering anxiety over taking on issues involving abortion, activists and demographers have told me, now has UNFPA reluctant to address sex selection head-on at the international level -- a reluctance that has left the organization's enemies to twist the issue to fit their own agenda. (Anti-abortion groups and pundits have proven all too eager to to take on the issue, though they seem far more interested in driving home restrictions on abortion than they do in increasing the number of women in the world and protecting the rights of women at risk.)

Meanwhile, as American politicians argue over whether to cut Planned Parenthood's U.S. funding and the Christian right drives through bans on sex-selective abortion at the state level, the effects of three decades of sex selection elsewhere in the world are becoming alarmingly apparent. In China, India, Korea, and Taiwan, the first generation shaped by sex selection has grown up, and men are scrambling to find women, yielding the ugly sideblows of increased sex trafficking and bride buying. In a Chinese boomtown, I watched soap operas with a slight, defeated woman from the poor mountains of the west who had been brought east by a trafficker and sold into marriage. (Her favorite show: Women Don't Cry.) In the Mekong Delta, I visited an island commune where local women are hawked by their parents for a few thousand dollars to "surplus" Taiwanese men. While the purdah forecasted by John Postgate has not yet come to pass, feminists in Asia worry that as women become scarce, they will be pressured into taking on domestic roles and becoming housewives and mothers rather than scientists and entrepreneurs.

But what happens to women is only part of the story. Demographically speaking, women matter less and less. By 2013, an estimated one in 10 men in China will lack a female counterpart. By the late 2020s, that figure could jump to one in five. There are many possible scenarios for how these men will cope without women -- and not all, of course, want women -- but several of them involve rising rates of unrest. Already Columbia University economist Lena Edlund and colleagues at Chinese University of Hong Kong have found a link between a large share of males in the young adult population and an increase in crime in China. Doomsday analysts need look no further than America's history: Murder rates soared in the male-dominated Wild West.

Four decades ago, Western advocacy of sex selection yielded tragic results. But if we continue to ignore that legacy and remain paralyzed by heated U.S. abortion politics, we're compounding that mistake. Indian public health activist George, indeed, says waiting to act is no longer an option: If the world does "not see ten years ahead to where we're headed, we're lost."

Update: Since this article was posted, UNFPA has added a prominent page on sex selection to its website.

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