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In the news: Yes, but what will they do? Did you hear the one about the economist and the lawyer?

Sunday’s Financial Times Editorial offered some thoughts on what the next IMF recruitment process should look like and what should be expected of future candidates. The focus, it argues, should be on what the prospective candidate would do as managing director, not their support base or geographical origins, i.e. their plans and policy positions should be made clear. It claims “a better recruitment process for the top IMF leadership will be one of the many things the next managing director will owe to poor and middle-income countries, especially if it is Ms Lagarde.” Amongst others is the deputy managing director position, which by convention is held by the US; and a reform of the Fund’s governance structure.

Hinting throughout at the conflict of interest that would meet a European head given the current eurozone crisis it asks that the next MD “devise a gradual exit strategy from the eurozone” and that the Fund be reinvented “so it can do its part in managing the shift of economic power to the emerging world.” It ends by stating: “Its next boss should make clear that the IMF will be more useful to all its members the less beholden it is to any one of them.”

The New York Times too opines that “we need to know more to decide who would make the best IMF leader at this critical juncture.”

Continue reading “In the news: Yes, but what will they do? Did you hear the one about the economist and the lawyer?”

Is IMF choosing the right boss?

By John Jacobs, program officer for the Halifax Initiative. A coalition of development, environment, faith-based, human rights and labour groups, and the Canadian presence for public interest work and education on the IFIs.

Originally published in the Chronicle Herald

The candidates being considered for International Monetary Fund’s new boss do not inspire much hope for an institution in need of credibility. Much of the media’s focus has been on the nationality of the candidates rather than on which capabilities are needed to address the IMF’s major challenges: shifting to a more flexible policy orientation and adapting to a changed global economy.

According to a recent report by the IMF’s Independent Evaluation Office, the Fund’s effectiveness has been hindered by a “high degree of groupthink, intellectual capture and inadequate intellectual approaches.” The groupthink was founded on the belief that “market discipline and self-regulation [are] sufficient to stave off serious problems in financial institutions.”

Put another way, the IMF believed that the global financial markets should be left to their own devices to chart the contours of economic globalization. As a result, mere months before the financial crisis, the “IMF’s banner message was one of continued optimism and … pointed to a positive near-term outlook and fundamentally sound financial market conditions.” The Fund continued to endorse “light-touch regulation and supervision policies” — policies that we now know contributed to the crisis.

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Carstens in Brazil, Lagarde heads for China

Angela Merkel continues to bat back question on the leadership battle. She feels that in the long-run, of course it does not make sense for the US to automatically head the World Bank and the Euro-zone the Fund. How long is a piece of string?*

Former IMF chief economist Simon Johnson continues to stir things up. After giving Ms Lagarde a less than favourable review last week, he shares some thoughts on why exactly it is so important for Europe to hold onto the IMF. Curious given that a few years ago the EU attitude risked pushing the IMF into insignificance.

Away from the press cameras and microphones, what did Ms Lagarde and Brazilian Finance Minister Guido Mantega talk about? Rumour is that Mantega is willing to back her in exchange for “a strategic position” at the Fund, perhaps that of deputy managing director, traditionally held by the US…

Continue reading “Carstens in Brazil, Lagarde heads for China”

Emerging markets play their cards close to their chest whilst Lagarde courts Latin America

Alan Beattie who last week took to twitter with “Dear Emerging Markets: Please stop wittering about open merit-based system for choosing new IMF MD and *nominate someone*. Love, The Media.” Continued to poke at what he sees as the emerging nations apparent lack of conviction and unity, evident in their inability to pick a candidate.

Patience Alan, they’re working on it.

The South African Finance Minister Pravin Gordhan, speaking on behalf of emerging nations reminded reporters that they had until June 10 to name a candidates and that “there’s lots of consultations going on. It’s work in progress.”

This may be the case but with Lagarde’s promotional tour in full swing their chosen candidate may find themselves playing catch up. She started the week in Brazil where she met with the Finance Minister Guido Mantega who early on was oft misreported as being happy with a European head. Brazil’s current stance is more reasoned, stating that they will examine all candidates before lending support although some suggest otherwise.  The Brazilians want reform and greater representation for emerging markets.  In Brasilia, Lagarde was certainly talking the talk, declaring “if I was elected, I’d make sure that the diversity of members is represented at all levels.”

Continue reading “Emerging markets play their cards close to their chest whilst Lagarde courts Latin America”