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DSK: The inconvenient resignation

By K.C. Boey - posted Tuesday, 31 May 2011

Dominique Strauss-Kahn's confinement to quarters in New York City, tracking device on his ankle, presents more than a minor inconvenience. And not just for the man lauded for the central role that he played in tackling the global financial crisis of 2007-09, and for expectations of what he might do to lift the euro zone from its debt crisis; and rescue France from a lame president.

The former managing director of the International Monetary Fund is entitled to be presumed innocent until his day in court over allegations of rape and sexual assault that a New York hotel chambermaid accused him of.

But the severity of the charges is such that Strauss-Kahn felt compelled to resign as head of the global lender IMF, to concentrate on proving his innocence. And the drag of the judicial process in New York has ruled Strauss-Kahn out of the race to replace French President Nicolas Sarkozy in elections set for next April, for which Strauss-Kahn had hitherto been favoured to win.


The travesty of this unexpected turn of events is that it likely will perpetuate with indecent haste the disingenuous characterisation of ownership of IMF leadership to Europe as "tradition", and outcome of a "gentleman's agreement."

Whose tradition? Gentleman's agreement between whom?

The IMF, with the International Bank for Reconstruction and Development (IBRD) - now incorporated into the World Bank - came out of the Bretton Woods system of monetary management to rebuild the international economic system even as World War II was still raging.

Delegates from the 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, in the US. The delegates signed the Bretton Woods Agreements in July 1944, and the IMF and IBRD set to work the following year.

Bretton Woods established the rules for commercial and financial relations among the world's major industrial states of the time. It acknowledged the US as the dominant power in global monetary affairs.

Currencies of member-nations were tied to the US dollar. The job of the IMF was to bridge temporary imbalances of payments. The US, in effect, became the lender of last resort.


The "gentleman's agreement" was that the US would nominate the head of the IBRD - now the World Bank - and Europe, head of the IMF. That was the extent of the tradition.

The financial and economic landscape today is somewhat changed. A mark of the tenure of Strauss-Kahn - affectionately known by his initials DSK, now extended beyond the financial world - was his rigour to acknowledge the shift in economic centre of gravity to the emerging BRICS economies, China in particular (the others being Brazil, Russia, India, and lately South Africa).

DSK's sudden departure from office put paid to any gradual transition to reflect today's reality. In its stead is a scramble to find a replacement to fill the vacuum in the face of the debit crisis in Europe.

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This article was first published in The Malaysian Insider on May 27, 2011.

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About the Author

K.C. Boey is a former editor of Malaysian Business and The Malay Mail. He now writes for The Malaysian Insider out of Melbourne.

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