FIFA and the IMF sure know how to walk on water — or still think they do.
Faced with similar reputational meltdowns, the shock would have at very least unseated entire boards at most private sector institutions, or sent many spiralling into protective bankruptcy.
Yet on the 100th anniversary of the launch of the Titanic, both institutions appear to be sailing serenely onward, oblivious to long-term weakening of their power. FIFA may not (like the IMF) have been conceived in Bretton Woods, but it plays a strikingly similar role to that of the developed world’s global financial gatekeeper.
Look below the waterline at these stately liners: the reputational double-whammy endured during May by these two bodies, is loosening the plates from which both are built. Dominique Strauss Kahn’s abrupt fall from the IMF and FIFA’s Asian football chief Mohamed Bin Hammam’s ouster will show “be you never so high, you are never above the markets.”
Just how long can Sepp Blatter continue to believe the only votes that matter are those of the 200 odd members of FIFA’s governing body – and not billions of soccer fans? As for any private sector business, the answer lies with markets – in this case through the agency of FIFAs core financial sponsors, Coca Cola and Adidas.
FIFA may be unaffected by the mounting derision of ordinary fans – but a single EVP at Coca Cola can still plant an iceberg in its “business as usual” course by pulling the financial plug. After all, Coca Cola still remembers the decade long damage to its own reputation from persisting in its 1985 “New Coke” branding disaster.
Likewise the IMF, although nominally immune to market-driven sanctions, could soon be facing its toughest-ever challenge. The test-case is whether Europe’s finance ministers manage to put another of their own, in the shape of Christine Lagarde, in the IMF driving-seat.
The bulk of votes may rest with the EU and US, but the rest of the world now wants to play at being financial policeman. Right now, the IMF needs the BRICS more than vice-versa. Last year expatriate workers from developing nations remitted US$350 billion, in a stunning transfer of wealth that far exceeds the combined lending power of both the World Bank and the IMF.
The IMF’s plan to haughtily ignore the world’s workers and their governments in Mexico, Brazil or China by selecting a European to supervise the cleanup of Europe’s tattered finances, is every bit as risky as FIFA ignoring the world’s football fans.
As a consequence of the coming changeover at the corner suite at its HQ on Washington’s 19th Street, the Fund’s future reputation could be shaped by how Spain reacts to handling by the IMF.
Under DSK, the IMF successfully imposed upon a luckless trio of Europe’s “new poor” – Portugal, Greece and Ireland – a set of economic sanctions that are astonishingly similar to the medicine dished out in the 1980s to Spain’s former colonies in the New World.
Exactly 30 years ago Argentina, Mexico, Peru, Colombia all broke and buckled under during the debt crisis, accepting the IMF’s tough love. But will Madrid, as the fourth member of the PIGS group, actually bow the knee and take its medication from Christine Lagarde?
Spain is a patrician country which by European terms is not just “too big to fail” but also “too proud to be humiliated” in the same way as Greece, Portugal and Ireland. Already, legions of young Spanish are turning city squares into a passable copy of Cairo’s Tahrir Square. Perhaps they’ll recycle some of the old demo posters from 1980s-era Brazil. Then, protesters charged that IMF really stood for “Fome, Miséria, e Inflação” (Hunger, Misery and Inflation).
And now that the European Champion Clubs Cup again sits in Barcelona, nobody should underestimate the power of football to shape economic policy. For both the IMF or FIFA, mounting cracks to the smooth reputational façade, provide an opportunity for new players to wrest control of these old and creaking structures.
Netnet: Reputation matters.
By Richard House