The UK has indicated that it will back former Chancellor of the Exchequer George Osborne as the next managing director of the International Monetary Fund (IMF). What were the political dynamics between key figures in the run up to this decision? And what is the likelihood of George Osborne becoming to next IMF managing director? Below are some developments that may be considered noteworthy:
- In December 2015, when Osborne was Chancellor, the UK became the first G7 country outside Asia to ratify the articles of agreement of the Asian Infrastructure Investment Bank (AIIB).
- On 5 February 2016, Osborne’s former chief secretary to the Treasury Danny Alexander was confirmed as a senior executive at the AIIB after losing his seat in the 2015 general election, making him, as described in the Financial Times, “the leading British figure at the body.”
- On 14 July 2016, Osborne was sacked as Chancellor by Theresa May, who was appointed as Prime Minister on 13 July 2016 following David Cameron’s resignation after the European Union referendum.
- On 17 March 2017, prior to his resignation as MP later in 2017, Osborne was appointed as the editor of the Evening Standard in what the Financial Times described as “an abrupt career shift by the former UK chancellor that has startled both Fleet Street and Westminster.” He was estimated to earn over £200,000 on top of his MP salary for the editor post despite having never worked as a full-time journalist before.
- On January 9 2019, the Daily Record reported that, “A former minister has admitted he lobbied in government for the UK to join a controversial Chinese investment bank. Danny Alexander was chief secretary to the Treasury in David Cameron’s coalition government while a Highland MP for the Lib Dems.” The article added: “At the time of Alexander’s appointment, Cameron’s Advisory Committee on Business Appointments (ACBA) waived the ban on former ministers lobbying the Government on the grounds that “the UK Government actively supports the AIIB”. But in a TV interview…, Alexander, 46, has admitted he was the one “championing” that support while working as a minister.”
- On 20 June 2019, the Evening Standard backed Boris Johnson’s campaign to become UK Prime Minister. The Evening Standard noted: “…Mr Johnson is the candidate who might just get Britain feeling good about itself again.”
- On 2 July, Christine Lagarde announced her European Central Bank presidency nomination and relinquishes her responsibilities as IMF managing director during the nomination period. Speculation runs wild as to which European – in line with a historic ‘gentleman’s agreement’ – will take the helm. Among the names floated is Bank of England Governor Mark Carney, who is a Canadian, UK and Irish passport holder.
- On 4 July, Osborne was reported to be considering putting his name forward to replace Lagarde at the IMF, according to reports published in the Guardian.
- Also on 4 July, John McDonnell, the UK’s shadow chancellor, told the Guardian: “Before the decision is made on any IMF appointment, consideration should be made to the fact that George Osborne was the architect of the slowest recovery from a recession since Napoleonic times… That’s hardly the record or qualification for someone to steer the ship of the global economy.” Moreover, Paul Krugman, the Nobel-prize winning economist, said if “Trump is nominating people who got everything wrong about monetary policy for the Fed, why not someone who insisted that austerity is expansionary for the IMF?”
- On 11 July, Carney was reported to position himself as a contender to be the next head of the IMF after refusing to rule out joining the race.
- On 16 July, Lagarde submitted her formal resignation as IMF managing director effective from 12 September, after being confirmed as new European Central Bank president.
- On 17 July, it was reported in the Financial Times that one European diplomat said Carney, despite his impeccable credentials for the job, was “not European enough for the Europeans”.
- On 23 July, Boris Johnson was elected as leader of the Conservative and Unionist Party and became UK prime minister.
- On 1 August, ahead of the European vote on their IMF managing director nominee, the UK requested more time to consider whether they wanted to propose a candidate, but subsequently missed the extended deadline to nominate a candidate for the European finance minister vote.
- On 2 August, the UK told France that it did not approve of a vote taking place with not enough time to consider merits of candidates, and chose to abstain on the all-important vote. Kristalina Georgieva, World Bank Group chief executive officer, was selected as Europe’s nominee for IMF managing director, following a discordant 14-hour round of voting from a bitterly fragmented Europe.
- On 17 August, newly-appointed UK Chancellor Sajid Javid backed Osborne to become the next IMF managing director, stating, “George would make an excellent, absolutely superb head of the IMF… As you know, these processes are never straightforward. But there’s still some time to play out.’’ Bloomberg reported that, “Johnson wants to nominate Osborne if he can attract the support of the U.S. and China against the EU-backed candidate. He will use his bilateral meetings at the G-7 to push that plan, according to a person familiar with the matter.” It is yet to be seen whether Boris Johnson has approached China and what influence, if any, Danny Alexander and the AIIB would have were he to do so, and whether the UK’s role in accelerating its relationship with AIIB would be a factor in this decision.
- On 21 August, Johnson was reported in Bloomberg to be seeking to rally support for Osborne to become the next head of the IMF. The UK Prime Minister was reportedly planning to use the Group of Seven meetings in Biarritz, France, “to urge other world leaders including U.S. President Donald Trump to support a U.K. bid for Osborne to replace Christine Lagarde as IMF managing director.”
- On 21 August, the Guardian also reported that Johnson used a phone call with the US president, Donald Trump, to recommend Osborne as IMF managing director. David Blanchflower, an economist and former member of the Bank of England’s monetary policy committee, was quoted in the Guardian saying: “I would prefer a random person picked on Oxford Street than slasher Osborne, who was the worst chancellor ever, who produced the slowest recovery in 300 years and third slowest in 600 after the South Sea Bubble and the Black Death.”
Moving forward, the period for receiving nominations runs until September 6, 2019 and the Board has stated its objective to complete the selection process by October 4. The rest is yet to be seen…
For more information on the process the selection process for the next IMF managing director, please click here. To read the letter signed by over 100 civil society organisations and prominent academics, calling for an end to the ‘gentleman’s agreement’ in favour of an open, democratic, merit-based selection process, click here.