IMF Survey:What do you see as the most important achievements of your nearly three terms of office?
Camdessus: It would be presumptuous of me to put my name on any achievement of the IMF during that period. The sense of pride I feel is the same as any member of the staff or the Executive Board must feel at the end of their careers here. It is the pride and gratitude for having been called to serve the IMF throughout an eventful 13 years.
I believe that the IMF has contributed substantially to the present favorable economic climate. Most important, inflation—which rose in the 1970s and 1980s—is now as low as at any other time in the postwar period. Containing inflation—which I have called the most cruel tax on the poorest countries—is a solid achievement, and the advice and program support provided by the IMF have helped bring this about.
Fiscal balances, which deteriorated during the 1970s and 1980s, have now—owing very often to IMF advice—improved in many countries.
The IMF also played its part in resolving the debt crisis of the 1980s. Although all debt problems are far from resolved, it has been satisfying to be able to help a large number of countries bring their debt to a more sustainable level.
In the meantime, I have also been happy to see a consensus emerging that we should no longer consider growth as a purely quantitative concept but rather as embodying qualitative elements and goals, all of which are encapsulated in the code words “high-quality growth” that we have tried to popularize. We have progressively taken steps forward to establish these objectives.
The globalization of financial markets—while it has benefited global growth, especially in the longer term—has contributed in recent years to several crises that the IMF has helped countries to tackle. While the crisis countries are now recovering, work on the challenge of actually preventing crises is still very much in progress.
After the collapse of the Berlin Wall 10 years ago, the IMF was privileged to play a role in helping the countries of Eastern Europe and the former Soviet Union make the difficult transition to a market economy, with the increased freedoms and responsibilities that this move entailed. This was an immense challenge, but there has now been progress in many countries.
Much has been achieved, although much still remains to be done. Above all, a solution to the problem of poverty in developing countries has eluded us. Success has been only limited, despite a major expansion of the IMF’s work in this area during my tenure. We now look forward to seeing the results of the new approach adopted at the 1999 Annual Meetings, and I welcome the growing global consensus that the issue of poverty alleviation—a pressing human concern—should be brought into the heart of our policies.
We know all too well about the risks, but globalization also holds the promise of improved living standards for all the peoples of the world.
IMF Survey:Since you came to the IMF in 1987, a number of far-reaching events have affected the global economy. Among the more conspicuous examples are the breakup of the former Soviet Union and the crises in Mexico and East Asia. How would you assess these events and their impact?
Camdessus:The breakup of the former Soviet Union, followed by the membership of the successor states in the IMF, may well be the most momentous event of our time. For the IMF, it has meant that, for the first time, we have achieved the goal of our founding fathers of a truly universal institution. At the same time, the IMF had to face the great challenges of helping to guide these countries in the transition to a market economy—that is, to an economy of freedom and responsibility. Of course, there have been many problems along the way, but we should not fail to take account of the remarkable progress that has been made by these new democracies. President Vaclav Havel of the Czech Republic expressed that admirably recently when he said, “Myriad difficulties emerged as we reconstituted and developed political pluralism, engaged in the pursuit of a genuine rule of law, built up democratic institutions, and proceeded to transform a wholly nationalized economy into a free-market economy.”
The Mexican crisis and, more recently, the Asian crisis were unlike any previous crises. They exploded on the international capital markets and quickly took on systemic proportions, which could only be checked by the immediate mobilization of massive financing. Dealing with them meant dealing with a threefold problem: macroeconomic imbalances, coupled with massive capital outflows; an acute crisis in the financial sector stemming from weak institutional and banking practices; and a more fundamental crisis in the economic management model—relations among corporations, banks, and governments—that conflicted with the demands of the new, globalized economy.
What are the lessons of these crises? First, a crisis in any country, large or small, can quickly become systemic through contagion on the global markets; for this reason, domestic policy must take account of its potential worldwide impact. Second, all governments should follow the precepts of excellence in managing their economies. This means rigor and transparency in overall economic management; growth that is centered on human development; and the necessary reforms of state institutions to improve efficiency, introduce appropriate regulations, emphasize the rule of law, and fight corruption.
IMF Survey:In recent years, the concept of globalization has come to the fore. How would you respond to critics who assert that globalization has failed to alleviate the problems ofthe poorest countries?
Camdessus: As is the case with all human realities, globalization brings with it both risks and opportunities. We know all too well about the risks, but globalization also holds the promise of improved living standards for all the peoples of the world. To build an effective globalized system, it is necessary, first, to correct many of the flaws of the present system. These include inadequate financial information, weak financial and banking institutions, poorly managed capital markets, inadequate involvement of the private sector, a lack of governance, and a global system that allows extreme poverty and inequality to persist. But it is true that our record so far in alleviating poverty is far from acceptable.
There is no single more important challenge than to humanize globalization, which means, first and foremost, to succeed in the fight against extreme poverty. There are two dimensions to this fight: one national, the other international. Domestically, the poor will need to generate high-quality growth, and that must be the dominant concern. There is, however, a vital relationship between growth and social development. Strong social policies that attack poverty at its roots lay the foundation for sustained economic growth.
IMF Survey:Did you not speak recently about a “circular relationship” in this area?
Camdessus: Yes. We have known for a long time that sound monetary and macroeconomic policies can promote poverty reduction. But it is now also much better understood and acknowledged that the effect also runs in the other direction—in a true circular way. For the discipline of a strong monetary policy to be maintained long enough to eradicate inflation and to contribute to sustainable growth, it must be implemented in a context in which government policies include three objectives: the fight against poverty, the adoption of appropriate safety nets, and a recognized effort to reduce severe inequalities in income distribution over time.
By giving legitimacy to and fostering broad-based support for sustained reform, these social policies can contribute decisively to creating the political environment in which sound monetary policy can and must develop its beneficial effects. In a word, it is clear that no poverty reduction can be achieved in a sustained way without sound monetary policy. But we can see also that no sound monetary policy can be sustained if, as Nobel prize winner Amartya Sen put it, “patent injustice” is left unaddressed.
This is why the fight against poverty has gained center stage in our programs, is being developed hand in hand with our work on the international monetary and financial architecture, and has justified recent major changes in our strategies.
IMF Survey:The IMF has recently taken a number of steps to alleviate the condition ofthe poorest countries, through the establishment of the Poverty Reduction and Growth Facility and the enhanced HIPC Initiative. How would you assess the progress that has been made so far? What major challenges remain to be tackled?
Camdessus: The transformation of the Enhanced Structural Adjustment Facility into the new Poverty Reduction and Growth Facility is central to our involvement in the fight against poverty. It incorporates our more than ten years of experience in this area, a new level of cooperation with the World Bank, new steps for debt reduction, and an explicit link for poverty reduction.
A key feature of the new facility will be for countries to formulate their own comprehensive growth-oriented policies to reduce poverty. After open discussions with civil society (and this, I must stress, is a new element in our approach), these policies will be articulated in the form of Poverty Reduction Strategy Papers [PRSPs], with support from both the IMF and the World Bank. Since the Bank will base its IDA [International Development Association] operations on the same policies as are set out in these papers, we will be able to create a far greater degree of synergy between the operations of the IMF and the Bank.
Another element in this new focus on social objectives at the heart of our programs is the deeper, faster, and broader debt relief that is being provided by the enhanced Initiative for the Heavily Indebted Poor Countries (HIPCs). A stronger framework has been established that makes HIPC debt relief an integral part of broader efforts to reduce poverty, which are articulated in a country’s PRSP. I am delighted that agreement has been reached to move forward with this and hope that the necessary financing will soon be in place.
IMF Survey:Some critics have questioned why the IMF has made poverty reduction one ofits objectives and claim that the institution is becoming overextended and is impinging on the concerns of the World Bank. Are there dual roles for the IMF and the Bank in this area?
Camdessus: Far from there being conflict between the IMF and the World Bank in the area of poverty reduction, as I have just explained, this has been an outstanding example of cooperation between the two institutions. In both the Poverty Reduction and Growth Facility and the HIPC Initiative, we have established new levels of cooperation with the Bank, and each institution brings its unique expertise to this work. In both these areas, we look forward to a continuing deepening of cooperation with the Bank and with the regional development banks, as well as with donors, official agencies, and civil society. This strong cooperation is the best way to allow each of the two institutions to concentrate on its areas of comparative advantage.
Why should the fight against poverty be a concern of the IMF? First, I would note that Article I of the IMF’s Articles of Agreement calls for the IMF to “contribute...to the promotion and maintenance of high levels of employment and real income.” Poverty is the antithesis of this objective. Second, it is increasingly being recognized that, just as poverty hampers growth, reducing poverty contributes to sustainable growth.
We have tried to be a little more outspoken recently, explaining more and more what we are doing.
IMF Survey:The growing number of activities that are the concern of the IMF have at times severely strained resources. Do you see any resolution to this dilemma in the way the IMF operates?
Photo Credits: Denio Zara, Padraic Hughes, and Pedro Marquez for the IMF, pages 385,387,391, and 393; Rick Wilking for Reuters, page 390; photos on pages 391-93 provided by the participants.
Camdessus: In recent years, the IMF has been asked to undertake an increasing number of tasks at the behest of our members. I have been proud of the way in which the staff has responded to these new demands. At the same time, I must stress that, in responding to these calls, the IMF is not deviating from its mandate. I would say that it is only obeying its original purposes, spelled out in Article I of the Articles of Agreement. This Article implies a distinct expansion of the range of the tasks we must perform. The membership trusts us to do this. We must respond and adapt ourselves and our methods accordingly.
The IMF has always prided itself on being a relatively small and lean organization, with a short chain of command. In recent years, as the membership has increased and our responsibilities have expanded, we have added staff to undertake these new responsibilities. I and my colleagues in senior management monitor carefully the workload facing the staff to ensure that this increased workload does not become unmanageable.
This said, I know that there is, here and there, some nostalgia for a mythical “good old Fund,” limited to a narrow scope of concerns, concentrating on monetary aggregates and the current account of the balance of payments. This would obviously be a recipe for irrelevance in today’s world.
IMF Survey:What has been the impact on the operations of the IMF of European Economic and Monetary Union [EMU] and the establishment of a European Central Bank?
Camdessus: European Economic and Monetary Union is one of the most important and promising developments in the international monetary system in recent decades. For its members and prospective members, EMU provides the incentives to strengthen domestic economic policies and to begin addressing deep-rooted structural problems. For the European Union, EMU reinforces monetary stability and cements economic integration. And for the world as a whole, EMU provides a strong new pillar for the monetary system. With the euro joining the dollar and the yen as important reserve currencies, we are now operating in what may be called a tripolar world. The introduction of the euro as a common currency, together with the establishment of the European Central Bank, brings immediate economic benefits (such as lower transaction costs and increased competition) that are already becoming evident.
The IMF welcomes the advent of EMU and has certainly not been marginalized as a result of its creation. The European Central Bank participates as an observer in all our major meetings, and we will continue to exercise our surveillance responsibilities through our annual consultations with our European members as well as through such regional bodies as the European Central Bank and the European Commission. I am confident that we will also continue to enjoy the full cooperation of the European authorities in a constructive dialogue in tackling any problems that we jointly face.
IMF Survey:One major change during the past 13 years has been the progressively higher profile that the IMF has assumed in the mind and eye of the general public. Do you think the increasing visibility of the IMF is a good development, and how can the institution best meet the challenge of publicity—both good and bad?
Camdessus: I have complained for some time about how the IMF has assumed the role of scapegoat. We have discovered that this role has hampered our ability to discharge our responsibilities and has obscured our members’ perception of the good things we could do for and with them. So, we have tried to be a little more outspoken recently, explaining more and more what we are doing.
But this did not at first lead to our developing a modern communication policy—that is, a strategy of proactive actions to disseminate our message. It is only very recently that we realized that the conventional interpretation of our purposes might not be serving us well. It was then that we decided to develop a different communication policy—a step that I view with enormous satisfaction. And, of course, we are applying to ourselves the same golden rule of transparency that we have been preaching to the world.
This being said, we will never be seen as a very popular institution. Why? Fundamentally, because, in general, we work on behalf of economic rationality, and rationality is not the most attractive of qualities in human and social life. But on a deeper level, we will never be very popular because we are serious about country ownership of policies and programs. When a country adopts a policy and implements it with determination and succeeds, it is the country that declares victory—not the IMF, even though we may have played some part in this success. So the rule is, others claim success, while we must recognize our mistakes. This is not a recipe for popularity. I think the staff and the institution have learned to live with this fact of life, but I believe we still have everything to gain from a more proactive communication strategy.
IMF Board issues statement on selection process
In a press release issued on November 23, the IMF Executive Board announced that it had met to begin the process of selecting the next Managing Director.
“This is still an early stage in what will be a very important decision,” according to the release. “The Board discussed the exceptional qualities the next Managing Director will require. The process of choosing the best person for the job from the possible candidates will, through the Board, involve all the members of the IMF.”
The text of Press Release No. 99/56 is available on the IMF’s website: http://www.imf.org.