Crisis – What Crisis? Learn Spanish not French or Greek.

Does any one remember the UN millennium goals from a few years ago? One of the suggestions for easing child poverty and disease in the 3rd world was to relax or forgive some of the more disadvantageous debts held by third world nations. How did that go? If your answer was ‘it didn’t’ then you would be right.

And yet here we are in 2011 and a ‘developed’ nation is now demanding (not pleading, but finger pointing) that the rest of Europe forgive 50% of its sovereign debt.

I don’t know if anyone has traveled to Athens recently, but I have heard that it is no Darfur or Tripoli. Instead of hearing regret for years of living beyond their means, the Greek finance minister, Evangelos Venizelos, extraordinarily demands remission of Greek debt, or else.

Christine Lagarde, chairman of the IMF didn’t exactly take Greece to task. Why could this be? Could it be that, having just left the role of French finance minister, her credibility on economic reform and fiscal discipline aren’t quite that robust?

President Obama recently felt empowered to criticize EU members for not implementing ‘tough reforms’. You have to admire the man’s gall.

So there we have it. Europe with its head in the sand, and the US with its head lodged somewhere else dark. What is missing from this picture. How about the entire rest of the world?

Lagarde was appointed as the head of the IMF in June this year. She gained the numbers when the US shifted support to her from Agustín Carstens (head of Mexico’s central bank). Why did the US support a French candidate (with a fairly average record) against an exceptional candidate from its next door neighbour?

Well, it may have something to do with the long held tradition of the head of the IMF being a European, and the number 2 being from the Americas. Actually, to be more specific, from the USA. If tradition was to be broken by not appointing a European as chief, surely it could be broken a little further and take away the sinecure from the US.

Whereas Lagarde is pro-intervention and pro-monetary policy, Carstens favours free trade, rates set by market forces and central bank autonomy. His record within the IMF and in Mexico is much stronger than Lagarde. This is the man who reduced Mexican inflation from the teens to something around 4%.

Carstens represents the new-new-world. A range of countries that embrace growth, free trade and national pride. Nations like Brazil and Mexico have demonstrated that free trade enhances prosperity, reduces poverty and reduces sensitivity to international financial shocks.

The IMF continues to reflect ‘old-world’ protectionism and entitlement as reflected by Venizelos and Obama.

Australia has a proud record of economic reform and pro-free trade policies. The time has more than come for Australia to increasingly connect and look to our developing neighbours in Asia and South America rather than to the decaying old world living, in denial in the Northern Hemisphere.

Perhaps the time has come to aprender español.

Author: Andrew G T Kirby