Please select the Director, IEO, IMF solely on merit

(Dt. July 29, 2009)

Note: The following is an open request that I had sent out to economics professors at top schools for writing reference letters on my behalf.

The Director of the Independent Evaluation Office (IEO) at the International Monetary Fund (IMF) is finishing his term at the end of this month. I have applied for to be his successor. I do not have any patrons working their connections on my behalf. I am proud to say that I am applying for this position solely on my merit. Over the course of the last 18 months, I have demonstrated outstanding abilities in analyzing the current global economic crisis thoroughly and proposing far-reaching solutions for it. I have written over 25 articles on the crisis. Among these, the major articles have been e-mailed to renowned economists. An annotated list of the original contributions I have made for this economic crisis is given below.

I had written to the following four renowned economists on July 13, 2009 requesting reference letters for my job application: Professor Edmund Phelps, Professor Edward Prescott, Professor Kenneth Rogoff and Professor Joseph Stiglitz. I had heard from Professors Phelps and Prescott before, in response to my articles that I had e-mailed to them. And I had commented several times on the articles written by Professors Rogoff and Stiglitz on Project Syndicate. So I had assumed that these four Professors would be willing to write letters on my behalf. But I have not heard from any of them so far. The deadline for the job application has passed on July 24, and the applications are probably being processed now. So, I am left with no option but to make an open request for reference letters from the other economists at top schools to whom I have been sending my articles.

With the onset of the current financial crisis, the IMF has once again found itself to be struggling with questions about its external credibility, its institutional governance and the co-operation from its member countries. However, the fundamental problem that the IMF faces is the challenge of dealing with rapidly unfolding emergencies. The other problems about its credibility, governance and co-operation are consequences of this fundamental problem of conceptually understanding a rapidly changing world. It is for this main reason, that the Director of the Independent Evaluation Office (IEO) at the IMF needs to have outstanding abilities to analyze and cope with the current crisis. I have attached a 2-page "Statement of Purpose" explaining why it would be in the best interests of the IMF to appoint me as Director, IEO. I would be grateful for any recommendation that the Professors would write on my behalf. The e-mail address to write a letter to is imf-ieo@russellreynolds.com. Thank you.

Sincerely,
T V Selvakumaran

Original contributions I have made for addressing the current global economic crisis

1. Proposal for de-centralizing the American financial system. De-centralizing would enable the local processing of price information about mortgage markets. This would make the system more stable and avoid the unnecessary accumulation of trillions of dollars in New York. This proposal was made in this article: http://selvasblog.blogspot.com/2009/06/new-perspective-on-global-economic.html

2. Re-interpretation of Adam Smith's universal opulence in terms of the universal civilization of Rome. Interpret the legal foundations of the Chinese political economy in terms of Confucian principles. Then study the developments in the current global economic crisis as the confluence of two ancient traditions of law. More generally, the implications that other legal systems around the world have on the global economy can also be considered. I have also made a proposal to consider pre-mature and ill-prepared attempts at Pax Americana to be the initial cause of depression-like scenarios. Examples: (i) efforts at resurrecting the gold standard by America was an initial cause for the Great Depression, (ii) President George W. Bush's Pax Americana policies lead to current economic crisis. These above proposals were made in this article: http://selvasblog.blogspot.com/2009/07/twist-in-tale-proposal-to-reconsider.html

3. I have proposed a theory of reverse-colonization in this article: http://selvasblog.blogspot.com/2009/07/new-perspective-on-global-economic.html. This theory subsumes the two main theories on global imbalances -- savings glut theory and de-coupling theory. This theory also finds a creative outlet for the fears of Western intellectuals by re-examining mercantilism. Reverse-colonization theory retains great explanatory power for predicting and anticipating the policy recommendations in the global arena, that would be proposed by Western economists in the next few years.

4. A partial solution for the unemployment problem: use the good offices of the new President to make the world a safer place for Americans to work. Make the arrangements for 10 - 12 million Americans to live and work abroad in the next 10 years. http://selvasblog.blogspot.com/2009/07/whatever-happened-to-liberal-agenda.html

5. A New Perspective on the Global Economic Crisis: Proposed a new price adjustment mechanism that would remove the massive arbitrage opportunity that the Fed and the Treasury have created on behalf of the Wall Street banks during the current crisis. This price adjustment mechanism demonstrates that the American financial system is capable of solving the crisis on its own. It is not necessary to transmit trillions of dollars of losses to the rest of the world by engineering a dollar devaluation (http://selvasblog.blogspot.com/2009/06/new-perspective-on-global-economic.html). Please note that my price adjustment mechanism was first e-mailed to Professors in September 2008 when Congress was discussing the $700-billion TARP bill (http://selvasblog.blogspot.com/2008/10/dt_3325.html).

6. Exchange rate stability versus global imbalances. Analyzed existing theories on global imbalances, including the savings glut theory and the de-coupling theory. Explained why they are seriously wrong. Recommended focusing instead on exchange rate stability during the next decade with the goal of re-gaining America's credibility in the geo-political scene. (http://selvasblog.blogspot.com/2009/06/new-perspective-on-global-economic.html and http://selvasblog.blogspot.com/2009/07/new-perspective-on-global-economic.html)

7. Durability approach to growth projections. Divide the global economy into two parts, based on the durability of economic theories. In those parts of the global economy that function based on securely founded economic theories (e.g., factory-based manufacturing, agriculture, emerging market economies, small & medium business that deal with low-tech activities), the prospects for growth can be estimated using the rational expectations model. Besides, studying the production process from a historical perspective, enables one to measure trends for productivity, trade and consumption. For the other part of the global economy, (i.e., the more advanced parts of the modern economy), a re-examination of what constitutes economic wealth is called for. Here, again durability is a crucial factor. Durability also has relevance for the interactions of the two parts of the global economy, and thus has implications for exchange rates. Using this durability approach, I was able to provide reliable estimates for China's growth, after hearing Premier Wen Jiabao at Davos in January. I was among the earliest to warn that China's stimulus spending alone would ensure 8% annual growth in real GDP for the next two years, without counting the exports sector at all (http://selvasblog.blogspot.com/2009/02/in-response-to-professor-kenneth.html). This prediction has now come true for the first year. See #9 below for further applications of the durability approach.

8. I warned against adopting Keynesian economic theory point-blank by the liberals in the following articles:
(a) Explained the links between Keynesian policies and colonial exploitation (http://selvasblog.blogspot.com/2009/04/in-response-to-professor-kenneth.html).
(b) Explained that not even Keynesian theory would justify the adoption of a massive one-time stimulus (http://selvasblog.blogspot.com/2009/03/comment-on-professor-bradford-delongs.html and http://selvasblog.blogspot.com/2009/03/comment-on-professor-joseph-stiglitzs.html)
(c) "Some perspectives on the relevance of John Maynard Keynes to the modern economy" (http://selvasblog.blogspot.com/2008/12/some-perspectives-on-relevance-of-john.html). This article elicited a response from Professor Edward Prescott, who is now trying to politely ignore me :- It was in this article that I first identified that not even Keynesian theory would justify a massive one-time stimulus.

9. Contributed to debunking the bond traders on Wall Street who appear regularly in the media to promote their own self-interested projections for the future. The topics of their propagandizing have included "Credit crunch", "De-leveraging", "New normal for growth". Already in my FAQ on the Financial Crisis (http://selvasblog.blogspot.com/2008/10/faq-on-current-financial-crisis-q1.html) which I wrote in October 2008, I had suggested to economists that focusing on the credit crunch would not be the wise thing to do. In view of the massive accumulations of capital in private hands, credit would flow sooner or later. All the government needs to do was to provide adequate liquidity, and then furnish the markets with clear guidelines about its intentions and plans. Unfortunately, the Fed and the Treasury chose to spend trillions of dollars by way of averting a credit crunch. Even worse, these institutions took it upon themselves to prop up the securitization markets and the secondary markets. The securitization markets and the secondary markets are like mushrooms on a rainy day. In a dynamic market economy, these markets spring up when needed. This unnecessary propping up of these secondary markets has cost the Fed trillions of dollars of spending, and now the funding for fiscal spending is severely constrained. Here lies the roots of the predicament of dwindling public support that the liberals find themselves today. They can't afford to be spending too much for propping up the financial system lest they have to make compromises on their priorities like health care and alternative energy. On the other hand, they don't want to recognize that there must be some negotiated settlement between the security owners and the property owners for the markets to function well. This is because dwelling on property rights is seen to be a give-away to conservatives (See the last paragraph below about Mr. Hernando DeSoto).

10. In March 2008, I had proposed to study the market mechanism by focusing on the duration of interaction between the buyer and the seller. This resulted in three articles:
(a) A New Perspective on the Role of Markets in an Economy (http://selvasblog.blogspot.com/2008/10/dt_9352.html)
(b) Update 1: Housing Example in Role of Markets (http://selvasblog.blogspot.com/2008/10/dt_4707.html)
(c) Update 2: A Marginalistic Interpretation of the GARCH model (http://selvasblog.blogspot.com/2008/10/dt_1704.html)
Article 10(a) elicited a response from Professor Kenneth Arrow, and article 10(c) from Professor Edmund Phelps. I have not heard from them since. Alas, they have declined to engage my ideas and proposals on the global economic crisis, just when the game has begun to warm up.


Finally, as somebody who has thought seriously about the global economic crisis, I would advise professional economists that Professor Joseph Stiglitz is perhaps the one Western intellectual that has a serious and deep grasp of the global economic crisis. For a long time, Professor Stiglitz's insights into the crisis were deadly accurate. Unfortunately, on October 20, 2008, Professor Stiglitz ran into this idiot, Hernado DeSoto in a Town Hall meeting at CUNY, New York. Mr. DeSoto managed to confuse Professor Stiglitz thoroughly. Ever since, Professor Stiglitz has not been the same at all. The video recording of this Town Hall meeting is widely available on FORA.tv. Mr. DeSoto, who claimed to be speaking as someone from a developing country, said that the root of the current crisis was that the financial system in the advanced countries has foregone the security of property rights. He said that the world's financial system was functioning simply based on paper-contracts. The gullible audience was lapping up his populist utterances and rewarding Mr. DeSoto with loud and frequent applause. The moderator, Professor David Harvey, a wise man, asked Mr. DeSoto if his proposal implied that all the trading in financial derivatives should simply be abandoned because they are not based on property contracts. Mr. DeSoto confidently says yes, they should all be abandoned!!@!$ Professor Stiglitz is the only economist who could understand the delicate and subtle arguments that are necessary to negotiate through the current crisis. Unfortunately, since he was confused by Mr. DeSoto's shenanigans, the liberal movement has become rudderless, sorely missing a wise leader like Professor Stiglitz.

Statement of Purpose
(attached with my application for Director, IEO, IMF)

The International Monetary Fund (IMF) is entrusted with the difficult task of overseeing the global financial architecture. This task is even more difficult for the reason that the IMF lacks political and judicial authority. We note that, in contrast, similar organizations at the national level -- the central bank, the finance ministry and the law courts -- are collectively vested with such authority. In addition, unlike issues concerning development and global trade which play out slowly and steadily in the international arena, the management of global financial issues requires skills in dealing with rapidly unfolding emergencies. It requires being prepared for highly uncertain situations where the information available is only partial and not too reliable. It is mainly for these reasons that the IMF needs to "conduct independent and objective evaluations of its policies and activities" through its Independent Evaluation Office (IEO).

With the onset of the current financial crisis, the IMF has once again found itself to be struggling with questions about its external credibility, its institutional governance and the co-operation from its member countries. However, as explained above, the fundamental problem that the IMF faces is the challenge of keeping up the skills and knowledge of its personnel amidst fast-paced economic developments. The other problems about its credibility, governance and co-operation are consequences of this fundamental problem of conceptually understanding a rapidly changing world.

The IMF has had some appreciation for this fundamental requirement all along. As a result, it has made intelligent choices in the past, to be prepared in advance for unforeseen crises situations, by arriving at broad consensuses among policy makers beforehand. However, with the current severe crisis in the American financial system spreading unchecked around the world, we see that while such a-priori policy consensuses are necessary, they are not sufficient.

The first major test of the IMF's performance came at the end of the Cold War. The republics of the Soviet Union broke away to form their own independent nations, as did the communist satellite countries in Eastern Europe. With American-style capitalism triumphant, these countries looked towards America for guiding them out of communism. They started by adopting market-oriented economic models, along with de-regulation of private enterprise, and privatization of assets owned by the former communist states. Moreover, with the end of Cold War, the world was taking to economic and financial globalization with unprecedented vigor.

The IMF consulted with policy makers and arrived at the Washington Consensus in 1989. It was an intelligent move on the part of IMF to develop such a theoretical platform, in advance, to deal with the upcoming challenge of transforming the former Soviet Union and the East-bloc countries into market economies. However, in a rapidly changing environment, it is only a matter-of-time before any rigid theory or method, constructed a-priori, comes up short. There is no substitute for having highly qualified experts, who can think quickly on their feet, at the forefront of the crisis prevention effort.

It is here that the IMF failed. The Washington Consensus arose from a focus on supply-side economics and disciplined monetary policy, a policy framework that had rescued America from the stagflation of the 70s. However, after the Cold War, the ground-reality was that a different world was beset by two major phenomena simultaneously, namely globalization and the waning of communism. The shortcomings of the Washington Consensus to deal with this new world were clearly articulated by Professor Joseph Stiglitz when he was the Chief Economist at the World Bank during 1997 -- 2000.

Unfortunately, instead of reviewing the Washington Consensus to adapt it to a rapidly evolving post-communist globalizing world, the IMF meted out a heavy-handed treatment to Professor Stiglitz. After he left his job at the World Bank in 2000, he wrote a detailed critic of the policies of the IMF in his book, "Globalization and its Discontents". As a result, the IMF encountered wide-spread criticism of its credibility and its governance.

It was in this background that the Independent Evaluation Office (IEO) was established in 2001 -- as an effort to address the criticism on IMF. To its credit, the functioning of the IMF appears to have improved significantly in the last eight years. The IMF has become more receptive to the concerns of its member countries, particularly those in the developing world. The IMF has shown more responsibility to promote trade and development around the world. In recent years, there have been moves to enhance the representation of the emerging market economies in the IMF. With improved public relations, the IMF has been able to get better co-operation from its member countries. The IEO has been closely involved in these developments at the IMF.

However, the coming of the financial crisis has made it important for the IMF to continue to make efforts to keep up with a rapidly changing world. I believe that my qualifications are specially suited for this fundamental requirement that the IMF faces. Over the last two years, I have studied the various developments that led to the global economic crisis. I have closely followed the research work of eminent economists, especially Professor Edmund Phelps, Professor Edward Prescott, Professor Kenneth Rogoff and Professor Joseph Stiglitz. I have conducted further investigations, starting from the proposals in their writings. I have also pursued my own ideas about the solutions to the current crisis. I have written 25 articles on various aspects of the crisis. These articles are available at http://selvasblog.blogspot.com.

With my training as a professional mathematician, and my studies in economic theory, I feel especially qualified for quickly bringing a conceptual understanding to the rapid developments in the crisis. It is only with such clarity of understanding, that one could guide the regular staff and the consultants at the IEO to adapt to a post-crisis world. Thus I feel that appointing me as the Director of IEO, would help the IMF improve its functioning and adapt to the requirements of the current global economic crisis.