The UK is pushing George Osborne to head the IMF. How did this come about? And will he be successful?

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.

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In the news

• Russia will support the nomination of Kristalina Giorgieva as head of the IMF, Economo.
• Choice of IMF managing director should reflect 75 years of change, Economics One.
• IMF must learn from its mistakes, the Australian.
• Boris Johnson will seek Trump’s backing to put George Osborne in IMF, Bloomberg.
• The Fund after Lagarde, Centre for International Governance Innovation.
• Sajid Javid backs George Osborne as next head of IMF, Bloomberg.

Open letter demanding a fair selection process for the next IMF managing director

To governors and executive directors of the IMF,

The ‘gentleman’s agreement’, which has ensured that the IMF managing director has, for 75 years, been European and the World Bank president a US national, is undemocratic, illegitimate, and rooted in neo-colonial principles.  

International institutions currently face a crisis of legitimacy, as faith in the multilateral system of global governance withers. If the IMF and World Bank want to present themselves as modern institutions capable of tackling today’s challenges, it is imperative that they become democratic and accountable to all of those they represent.

Despite over 150 civil society organisations and individuals calling on the World Bank for an open, transparent and merit-based leadership succession process earlier this year, the US candidate David Malpass was appointed president of the World Bank. This, exacerbated by the fact that the only other nominee cited pressure from “other governments” as the reason for withdrawing, brought global governance into further disrepute.

It is high time to end the ‘gentleman’s agreement’ and replace it with a genuinely open, democratic, merit-based, transparent process, that goes beyond rhetorical commitment, and allows candidates, regardless of nationality, to be put forward on an equal footing. In line with longstanding civil society demands, we believe that no country – or indeed bloc of countries – should wield excessive power in this process. Instead, the winning candidate should gain support of a majority of both voting shares and member states.

The IMF and inclusive growth: achieving SDG8

Under the leadership of Christine Lagarde, the IMF endorsed the Sustainable Development Goals (SDGs) and portrayed itself as a champion of inclusive growth. However, little changed in IMF loan agreements, which continued to push the same harmful austerity and deregulation measures of the past. The next leader of the IMF needs to change the core operations of the institution to promote sustainable economic growth, full employment and decent work.

The IMF has not meaningfully supported the SDGs, and its policies undermine the ability of countries to achieve the 2030 Agenda. To illustrate this point, let’s take a look at SDG 8: “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work.”

In a recent report, the International Labour Organization (ILO) shows that the world is not on track to achieve SDG 8 by 2030. For that to change, a major shift in macroeconomic policies is needed.

Orthodox economic policy models, like those promoted by the IMF, focus on supply-side measures and assume that growth will eventually trickle-down. Reality has shown that this is not the case. Furthermore, these models have failed to bring sustained growth the developing world.

Under the guise of “efficiency” the IMF has worked at odds with a decent work growth agenda,  often undermined labour market institutions, pushing for cuts in public wage bills, deregulation and weakening of workers’ rights. This approach, along with sharp spending cuts, lead to a downwards spiral in which the economy shrinks, unemployment grows, poverty soars, and aggregate demand in the economy collapses. The IMF itself admitted that most loan programmes fail to meet  growth targets.

For the record…

Chronicling the ‘open, merit-based, and transparent process’ thus far

It struck me that in the event Kristalina Georgieva becomes the next IMF managing director (MD) and serves out her two terms, that, ten years from now, when there will once again be calls to end the gentleman’s agreement, we might find ourselves wondering how exactly another European got the job at the time. By what ‘open, merit-based and transparent process’ did the powers-that-be decide that, across their entire membership, the former World Bank CEO from Bulgaria was the most qualified and distinguished candidate (“without taking geographic preferences into account”, of course)?

As most decisions thus far have taken place behind closed doors with only occasional crumbs of information coming through, mostly from a few ardent reporters’ twitter feeds, this is an attempt at establishing a record of the step-by-step ‘open, merit-based, and transparent’ process leading up to Kristalina’s nomination by the European Union, based on public reporting and the, albeit sparse, official information made available (reflecting Brussels’s location in the centre of the known IMF universe, all times are CEST).

• 2 July: Aaaaand we’re off! Lagarde announces her European Central Bank presidency nomination and relinquishes her responsibilities as IMF MD during the nomination period.
• 8 July: Bloomberg reports European finance ministers say it is a “priority” for them to put another European in place, jointly presented by the EU and, in the words of French politician Bruno Le Maire, “without useless rivalries” (erm, should we just stop there?)
• 12 July: The day the Dutch government demonstrates how aggrieved they really feel about being side-lined in the negotiations for top EU positions:
  • Dutch government nominates its former finance minister Jeroen Dijsselbloem and kicks off its lobbying campaign for his candidacy with key governments;
  • Dutch prime minister Rutte softens his stance on US requests to provide military support in the Strait of Hormuz and Syria ahead of his visit to the White House the following week.
• 16 July: Lagarde submits resignation as IMF MD effective from 12 September, after being confirmed as new ECB president.
• 19 July: José Antonio Ocampo, former nominee in 2012 for World Bank president, with “experience in all the areas that might be considered most relevant for the IMF Managing Director post”, publishes his vision for reforming the IMF toward a more effective and inclusive future – to deafening silence from officials…