With Dominique Strauss-Kahn (DSK) not even yet resigned, the race to replace him has already begun. The Europeans, despite their rhetoric of “breaking the lock” by the industrialized countries on the top jobs at the World Bank (the United States) and the IMF (Europe) and having a more open international selection process, are backtracking fast when faced with reality. Angela Merkel talked of a continuing need for a European to head the IMF “at this time” while the Eurozone is in crisis. The French have quietly begun to push for its Finance Minister, Christie Lagard, and the normally “open-minded” Swedes have been quick to back her candidacy.
The Belgian Finance Minister Didier Reynders pitched in to say that Europe and the U.S. should maintain the arrangement, dating to the end of World War II, of dividing the IMF and World Bank leadership between them.
So much for the high principles of “opening up” the Brettons Woods sisters’ leadership that they all have espoused so eloquently in the past.
Since the IMF’s inception in 1946, only 10 individuals have held the position of Managing Director. All 10 have been white, male, and European. Four out of the 10 were French. The historical duopoly of the World Bank being headed by an American while the IMF is headed by a European is rooted in convention and precedent rather than any hard and fast rule.
Christine Lagarde, if offered the job, would become the first female to head one of the Bretton Woods institutions (there are rumors of Hillary Clinton coming to the World Bank when Robert Zoellick’s term ends in 2012). While the novelty of a female candidate is exciting, still the calls for an emerging economy leader will likely not be pacified as their voices are still largely excluded.
On the other side of the coin, the developing countries have been vocal. Chile, South Africa, Brazil have staked out their position in favor of a candidate from the developing world. In not-so-subtle hint of China’s aspirations for the job, its Foreign Ministry spokeswoman Jiang Yu would like to see the process “fair, transparent” and aimed at finding the best person for the job.
But beyond the rhetoric, why is now the time to select a new IMF managing director from the developing world?
- The economic landscape is vastly different than in 1946. China can legitimately lay claims as the world’s second-largest economy, India has now overtaken Germany in GDP, and the BRIC countries are leading the pack in terms of forecasted growth rates. Economists forecast that Mexico will soon replace Italy in the top-ten club of world economies. Appointing an emerging economy IMF head is an opportunity for Europe and the IMF to demonstrate that they take their G-20 promise seriously.
- A non-European IMF head could bring greater credibility and transparency to the IMF’s European deal-brokering. In the past three years, Ireland, Greece, and Portugal all received huge bailouts from the IMF, the lender of last resort in the wake of devastating financial crisis impacts on the macroeconomy. There have been issues raised of legitimacy, or a potential bias of the IMF that European countries face kinder lending requirements. Emerging powers also consistently fall back on the argument or excuse that they do not have a seat at the table. A new IMF leader from an emerging economy would quell these doubts of legitimacy for the IMF and also quell the emerging power rhetoric.
- It is time to put the rhetoric of developing countries to test. So far, they have been happy to be throwing stones from the outside, never articulating how exactly they will change the direction of the Brettons Woods institutions. Will China, when put in the position of power, choose to be a more active participant in rescue packages designed by IMF that in the past it has been reluctant to do? Will it be willing to lead from the front in times of crisis and not look to the US and Europe? And how exactly will it influence the design of IMF programs? All these are questions at the moment, but time has come to put them to test.
Let there be a new era in internationalism.