« | Home | »

Punish and Constrain (or not)

Tags: |

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.

Comments on “Punish and Constrain (or not)”

  1. outofdate says:

    Yes, I can see how it would be disappointing, but really I don’t think (for the sake of psychic hygiene if nothing else) that we ought to take it with quite such abysmally bad grace.

Comment on this post

Log in or register to post a comment.

  • Recent Posts

    RSS – posts

  • Contributors

  • Recent Comments

    • mideastzebra on Swedish-Israeli Tensions: Avigdor Liberman was not foreign minister November 2015.
    • lars hakanson on Exit Cameron: Europe will for good reason rejoice when the UK elects to leave. The country has over the years provided nothing but obstacles to European integration...
    • Michael Schuller on Immigration Scandals: The Home Office is keen to be seen to be acting tough on immigration, although I'm not sure that the wider project has anything to do with real number...
    • Geoff Roberts on What happened in Cologne?: The most surprising thing about the events in Cologne (and the most disturbing) is that some 600 incidents of theft, harrasment and rape were reported...
    • EmilyEmily on What happened in Cologne?: The author's argument is straightforward: Sexual violence is one beast; fears about migrants is another - let's not confuse the two. Alfalfa's poin...

    RSS – comments

  • Contact

  • Blog Archive

  • From the LRB Archive

    Chris Lehmann: The Candidates
    18 June 2015

    ‘Every one of the Republican candidates can be described as a full-blown adult failure. These are people who, in most cases, have been granted virtually every imaginable advantage on the road to success, and managed nevertheless to foul things up along the way.’

    Hugh Pennington:
    The Problem with Biodiversity
    10 May 2007

    ‘As a medical microbiologist, for example, I have spent my career fighting biodiversity: my ultimate aim has been to cause the extinction of harmful microbes, an objective shared by veterinary and plant pathologists. But despite more than a hundred years of concentrated effort, supported by solid science, smallpox has been the only success.’

    Jeremy Harding: At the Mexican Border
    20 October 2011

    ‘The battle against illegal migration is a domestic version of America’s interventions overseas, with many of the same trappings: big manpower commitments, militarisation, pursuit, detection, rendition, loss of life. The Mexican border was already the focus of attention before 9/11; it is now a fixation that shows no signs of abating.’

    James Meek: When the Floods Came
    31 July 2008

    ‘Last July, a few days after the floods arrived, with 350,000 people still cut off from the first necessity of life, Severn Trent held its annual general meeting. It announced profits of £325 million, and confirmed a dividend for shareholders of £143 million. Not long afterwards the company, with the consent of the water regulator Ofwat, announced that it wouldn’t be compensating customers: all would be charged as if they had had running water, even when they hadn’t.’

Advertisement Advertisement