Canada’s warning shot to France via the IMF

Why Ottawa’s decision to flout convention says a lot about its ties to the Old World

Photo by Flickr user danorbit

U.S. treasury secretary Tim Geithner announced today that the United States will back French Finance Minister Christine Lagarde to head the International Monetary Fund, effectively sealing the race for the organization’s top job.

The race seemed tilted towards Lagarde’s candidacy from the beginning. When former Fund chief Dominique Strauss-Kahn resigned in May to defend himself against sex assault charges, Europe immediately rallied behind Lagarde, eager to substitute a European national with another one. And although the U.S. has been cagey about its stance in the race, few doubted it would eventually also nod at the French minister, continuing the unspoken convention of having a European heading the IMF and an American the World Bank.

So why did Canada opt instead to back Agustín Carstens, Mexico’s central bank chief and Lagarde’s rival in the race? Even with Canuck and Australian endorsements, he stood no real chance of winning against a French political celebrity who, besides the expected backing of the West, also quickly pocketed the support of an IMF heavyweight like Egypt, francophone Africa, and South Korea. Notably, even Latin American giants Argentina and Brazil avoided publicly supporting Mexico’s candidate.

Activists and policy experts have long been advocating the need for more non-Western leaders, like Carstens, to head international organizations in a global economy increasingly dominated by the BRICS. But in the IMF’s case there was a solid argument to be made in favour of having a European lead the world’s lender of last resort. It’s the Old Continent, in fact, that’s currently the epicenter of financial instability, while developing countries generally weathered the global economic crisis quite well. In any case, Ottawa never showed a particular concern with propelling a developing world candidate to the top of the IMF.

Admittedly, Canada shares some important economic interests with Mexico, a big trade partner and fellow NAFTA member. But Canada’s endorsement is mostly likely an anti-France statement. In the aftermath of the global economic meltdown, France and Canada have taken opposite views of how to run the world’s economy, with Paris championing more financial sector regulation and a global bank tax, and Ottawa vigorously rallying against anything that could tie down its healthy financial institutions. Canada’s vote stands a warning shot to Lagarde.




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Canada’s warning shot to France via the IMF

  1. France to Canada….yawn…flick.

    • OriginalEmily1; your most reliable go-to source for anti-Canada spite.  

      • Spite is what Harper lives for….he’d do something as pointless as this even though we’re trying to negotiate a trade deal with the EU.

        • No, EO1 has a turnip stuck in her craw about Steven.

          • He lives for spite, and isn’t doing anything useful for the country.

            Deal with it.

  2. This cannot be true, as everyone knows that Harper blindly follows whatever the States does. Everyone knows that Canada has no foreign policy, save for parroting what the States does.

    This has to be a false report, because everyone knows that these things are true. Right?

    • No, you’re quite right–unless whatever it is hasn’t got a hope of making any difference whatsoever.  Like, say, a filibuster for example.  When whatever we say is guaranteed to be completely ignored, like in this example, it is good to do something other than the U.S.–just to show we don’t blindly follow the U.S. in everything (that doesn’t matter one whit).

      • Are you suggesting that the Canadian gov’t picks items that mean nothing, and does opposite to what the states does, just to look like it doesn’t follow what the states does in other matters? That is quite a stretch, especially when you consider, like @OriginalEmily1:disqus pointed out, this action probably doesn’t help us with our EU trade negotiations. It would seem to be a pretty silly thing to do, with pretty much no benefit, if that was the reason it was done.

        I can’t say that I know why we supported the other fellow, as I don’t follow it that much. However, to say that we do or don’t do things only to show that we don’t or do follow the states pretty much seems like some real conspiracy theory kind of stuff.

        • Oh, nuts, and I have been trying to keep conspiracy theories to a minimum.  They just seem to pop up when I don’t understand the reasons behind a particular issue.  But we didn’t have a chance in hell of persuading anybody to do anything, so why we even bothered to express our opinion is a mystery to me.  Then why we chose to buck the established trend, in spite of my thinking that bucking the established trend is oftentimes a worthy thing to do, just makes us look, I don’t know, sullen and petty or something.  I mean, if we had a chance to succeed that’s a different thing (which I still wouldn’t understand, but at least I could assume there was a logical reason behind it)

          • Yes, the reason is a mystery to you (and me), but you are the one that assumes that it was done for the sole purpose of appearing to not follow the US. Again, as Emily pointed out, our stand did make a difference, so I would hope there was a reason much better than your guess.

            Could it be that Canada just wanted to be on record of opposing her, so that we could say ‘I told you so’ in the future? It could more likely be that we want to remove the status quo, with an American at the head of the world bank, and a European at the head of the IMF. This was just the start of a push to see those ‘standards’ removed. In case you weren’t aware, there were people who were saying Canada’s own Mark Carney would be good for the job. This could very well have been strategic.

          • Our stand made no difference at all….except for maybe creating enemies where there were none.

          • Notwithstanding sour Emily above, this does make sense as a move to distribute those appointments away from the usual. 

  3. “Ottawa vigorously rallying against anything that could tie down its
    healthy financial institutions. Canada’s vote stands a warning shot to
    Lagarde.”

    Excuse me but Canadians banks are strong because they were not allowed to participate (too much) in the crap shoot that was the sub-prime fiasco of the grossly unregulated American and British banks. 

    • They are also strong because of prudent policies set in place almost 100 years ago when they also were still standing, mostly after the Great Depression. Our branch banking system,, (i.e a few strong banks ratjher than a plethora as in the States.

  4. Alini writes: Canada’s vote stands a warning shot to Lagarde.

    Alternately, maybe Lagarde’s election signals Canada’s irrelevance to France and Europe.

    Or maybe Harper’s pointless insult to the French was just part of his strategy to, ah, get a trade deal with the EU?

    Though it does seem more like the strategy he used to secure Canada’s place on the UN security council.

  5. well unfortunately canuck’s opinion doesn’t really matter in the end. 

  6. i think due to the eurozone crisis, the world let europeans lead one more round, the developing world is most vulnerable to the instability of the world economy afterall. but the next term BRIC got to find a new head for IMF, and by then the europeans as they said themselves, have to hand it over. 

  7. By this act and others, Canada shows a degree of independence in its global financial policies. It’s sort of saying you guys screwed up so don’t screw us up: we’ll manage our global financial affairs to support the interests of Canadians. Anyway, that’s the way I see it. 

    • Weren’t most of the guys who screwed up major bankers in heavily de-regulated America, as opposed to heavily regulated France?  I was under the impression that the recent economic meltdown started primarily on Wall Street, not the Champs-Elysees.

      • The financial district in Paris is La Defense, not the Champs-Elysees.

        • Thanks.

          I still think I’d have left my line the same though, as it works better rhetorically (since no one knows what “La Defense” is, lol).

          • I see your point.  I certainly wouldn’t want to get a reputation as a stickler. 

          • “I still think I’d have left my line the same though, as it works better rhetorically (since no one knows what “La Defense” is, lol).”

            La Defense?!?! 

            Accuracy is over-rated when it comes to rhetoric and argument, I agree. 

            If I was writing screed it would have included Versailles, Marie Antoinette, Champs-Elysees and maybe some guillotine for effect. I like adding a little torque to my comments. 

            Also, Champs-Elysees works well because you could argue financial crisis was caused by greed and Champs-Elysees is all about conspicuous consumption.

          • I didn’t make up the name.  That is the region that the financial services sector is located in.  NY had Wall St., Paris has La Defence, and London has The City, but it is really Canary Wharf . 

            You’ve got to update your cultural touchstones, TA.  You’re using some that are over 200 years old!

      • Seems the United States government created the conditions influencing the banks’ path to financial morass. That’s a kind of Frankensteinian regulation. Your use of the expression “heavily de-regulated” would work for me were it not for the American government’s push to provide mortgages to the indigent.

        • Yes, that would explain Greece, I’m sure.

  8. I know we confuse “Western” with “wealthy” all the time, but come on now.  “Non-Western leaders, like Carstens”???

    Last time I checked, Mexico was still to the WEST of France.

    • Dang!  Beat me to it. Maybe Carstens is more south western.  Kind of a close but not quite thingy.  

      And thanks for going back to the full spelling of “Lord”.  It had been annoying me for months.  

      • Thank Disqus for the name adjustment, the old system didn’t give me enough characters for the fuller handle.

        Now, if only I could get the (pretty important) apostrophe back.

      • The ‘west’ also means Japan….it’s not a geographic location.

        • Not to be contrary for the sake of simply being contrary, but, no Japan is not a western nation.  It is a nation with strong alliances with the west and it has obviously adopted the industrial program developed in the west, but it is culturally an eastern nation.   Where as Mexico with its colonial history and strong ties to the RCC , is culturally western (with a tip of the hat to aboriginal cultures).  

          Everything is west of something.  I realize that that is not your point, but is seems that calling Japan a Western Nation dilutes the concept to the point of meaninglessness.  Naturally I mean from a western perspective.  I have no idea how Japanese conceive of themselves using the points of a compass.  

          Would it make sense to call Western Europe and it’s cultural littoral an Eastern nation as a good portion of the early technology that fostered the industrial program had it’s origin in Imperial China?

          • Yes, Japan is considered part of ‘the west.’

            All developed nations are

            It has to do with economics…not geography or culture.

          • Yes, you consider Japan as “part of ‘the west.’”
            No, I do not.  
            It matters not a fig to me if that is the way you are compelled to organize your concepts.  For me, elevating economics over culture is the death of the worthwhile life.   

          • yesitisnotisntyesitisnoitisntyesitisnoitisntyesitisnoitisntyesitisnoitisnyesitisnoitisntyesitisnoitisntyesitisnoitisntyesitisnoitisntyesitisnotitisntyesitisnoitisntyesitisnoitisnt

            Your usual degree of nonsense and repetition

          • @ColdStanding:disqus 

            For someone who is so big on culture, you know nothing about losing gracefully

            There is no ‘yesitisnotisntyesitis’ about it

            You were given a source

            http://en.wikipedia.org/wiki/W

          • Oh, really?  I followed your link and found this:

            This page has been deleted. The deletion and move log for the page are provided below for reference.
            10:26, 14 May 2008 Allen3 (talk | contribs) deleted “W…” ‎ (G1: Patent nonsense, meaningless, or incomprehensible)
            Additionally, I followed link G1 on the page to their definition of patent nonsense:
            G1. Patent nonsense.Pages consisting entirely of incoherent text or gibberish with no meaningful content or history. This excludes poor writing, partisan screeds, obscene remarks, implausible theories, vandalism and hoaxes, fictional material, coherent non-English material, and poorly translated material. This excludes the sandbox and pages in the user namespace. In short, if you can understand it, G1 does not apply.

            To which I will append a correction: the above is what I found when following the second link you posted. The first one worked & linked to an article The West.

          • OK, the first one of the links worked but not the other.  I would suggest you delete your second posting. 

            And having read the article in question, it is still patent nonsense of the most modern kind to suggest that Japan is a western nation.  

          • @ColdStanding:disqus 

            *I* am not confusing anything hon…Japan is part of ‘the west’

            Like it or not.

            Have a lie-down with a cold cloth on your forehead.

          • “Japan = Western = patent nonsense. ”

            ColdStanding

            Read interesting article other day.

            “The problem of the twentieth century may have been, as W. E. B. Du Bois put it so eloquently, the color line; the twenty-first century is on course to witness the death of race as a significant political and cultural concept.

            Whether one looks at the United States or at the wider world, the diminishing salience of race – in politics, culture and economics – is one of the most important though little remarked on facts of our time.

            Both abroad and in the US, the key factor weakening race and racism has been the success of non-whites.  China, Korea, India, Brazil and Japan are the biggest success stories but there are many others.  

            Non-white success is both eroding the sense of a global pecking order with white countries at the top, and undermining the belief that whites have created an economic system which depends on the exploitation of everyone else.”

            http://blogs.the-american-interest.com/wrm/2011/06/22/racial-sunset/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+WalterRussellMead+%28Walter+Russell+Mead%27s+Blog%29

          • @Tony_Adams:disqus 

            That’s because there is only one race….human.

        • Referring to Japan as part of “the west” is different from calling a Mexican leader a “non-western” leader though, particularly in relation to France.  To my mind, one just seems more incorrect than the other. 

          Where’s Conan?

          Also,  I see the East-West archetype being much more political/strategic than economic (the economic archetype would be north-south in my thinking) so in that context I’m not sure Mexico would relish being referred to as “non Western”.  Then again, I suppose the greatest security threats for Mexico are INSIDE MEXICO, so they may be less concerned about the traditional kinds of international military alliances.

          • As I said…somewhere on here…it’s mostly a synonym for ‘first world country’…..which Mexico definitely is not

            But countries get upset at being called ‘third word countries’….so they become a ‘developing country’

            But that’s all semantics…nowt to do with geography.

            It’s a cinch that Mexico, while in the west geographically…is a firefight….while Japan has maglev trains…something the US and Canada aren’t even close to having…so they are ‘the west’ or ‘first world’

  9. I suppose, in comparing banking institutions of the same model, one would prefer the “healthy” to “unhealthy” banks.  However, I am inclined to ask at what cost we are blessed with these healthy banks in our fair country.  On a per capita basis, their profit rate is at or in excess of Exxon’s quarterly take.  Remember, quarterly means 4 times a year.  The banking cartel in this country is having success, in terms as their business model defines success, over the short to mid-term, but individual Canadians, their families and the businesses they run really need to ask if this arrangement benefits their personal circumstances. 

    I hold that it does not.  How could it, when at the 10 year review of the Banking Act, it is the banks that are the primary advisers on how the act should be written? 

    An interesting book: Disciplined Minds, by Jeff Schmidt

    • This is a bit off topic, but it is nice that this info is getting out. For too long people in Canada have been under the impression that the gov’t ‘runs’ the banks, and that they do their services for free. (hard to believe, but it is partly true). At the end of Sept (?), the banks in Canada will have to disclose their fees to investors. It has taken the SEC’s in Canada 10 years to get this. Who do you think was fighting it – the banks of course?

      • Yes, people can usually find common ground in concern over the state of the money system.  Those that make an attempt to inform themselves, anyways.  

        • “However, I am inclined to ask at what cost we are blessed with these healthy banks in our fair country.”

          Banks are most vexatious, agreed. 

          Banks nickel and dime people to death and make enormous profits but they also provide invaluable services. 

          Banks are almost utility now, like water or electricity. 

          I would like better regulation of banks but I don’t trust pols or experts to do adequate job.

          • You are right in noting that the banks have worked themselves into an “almost utility” position, but it is, to me, inadmissible for a privately held company to ever arrogate to itself the title of “utility”.  A utility should be in publicly held and defended against private encroachment.  

            I’m in a fussy mood, so I also can not agree that their services are “invaluable”.  We know exactly what we pay, individually and as a greater society (even if we do not have command of the exact figures), for the services of private banking.  I for one, am not prepared to say that I can’t live without private banking to the extent of calling it invaluable. 

            Greatly expanded public banking under an the aegis of the BoC, as it was originally chartered would be true utility banking.  The savings at all levels of government would be enough to wipe out any deficit and the national debt, to boot.  

            Full points in noting the inadequacy of the current cream of the crop of experts and pols.

  10. _How to run the “wrold’s” economy_  A lost book by Dr. Seuss?

  11. What Canada wants, Lola gets. Canada on the international scene — yawn!

  12. This debate will never get anywhere when people use overly broad terms like “regulation” and “deregulation”. Its really more about the type of regulation. In some respects, Canada has historically had less government involvement in banking. For instance, we have never had the kind of restrictions on bank branching, or a wall between investment and commercial banks. We also do not have reserve ratio requirements and were latecomers to FDIC.

    On the other hand, our banks are well-monitored. Oversight is easier because we have only a few banking firms, and a less developed shadow banking sector. It may have also helped that with so few actors in the banking sector, collective action by banks to reduce systemic risks is indeed possible. And we have good prudential regulations at the end of the day. 

    In contrast, America’s decentralized* banking system performed poorly. Yes, deregulation enabled firms to generate financial innovations that were harmful (eg. credit default swaps). Deregulation also ensured that what would have been a problem for investment banks circa 1979, also hit commercial banks hard. However, it is impossible to view the decisions of American firms without considering the impact of decentralization, which is a legacy of Glass-Steagall. With many small banks, it is difficult to monitor effectively, and indeed, difficult to furnish sufficient capital to markets (equity markets are the more important intermediary in the US) – increasing the role of shadow banking. Moreover, the expectation of bailouts was demonstrably influential in the decision of investment banks to take on the kind of risks they did. 

    The crisis of 2008 did not vindicate regulation, rather it vindicated big bank regulatory traditions. Increased regulation in some areas (eg. branching restrictions) would actually weaken our banking system. 

    *My own thinking about the concentration of the banking sector, and stability levels is that there is a non-linear relationship. Decentralized systems may be stable, where banks are strictly limited in size and scope. Modest increases in banking concentration (such as those produced by the bank merger wave of the 90s) may produce firms that are “too big to fail”, but still too small and numerous to care about systemic risks or to be effectively monitored. It is only when you get to very high levels of banking concentration that, once again, you have a recipe for stability. 

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