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.”
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.
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.
“If I win, it would be a strong statement of Latin America’s power … And even if we don’t win, a strong Latin American vote against the status quo would be a strong signal that we don’t agree with the way things are being done at the IMF. That’s why it is so important to have a region-wide Latin American vote.”
Yesterday the Fund put out a press release declaring that the shortlisted candidates would be Agustín Carstens and Christine Lagarde. Stanley Fischer, who nominated himself at the 11th hour, was blocked by the Fund because of his age. A spokesperson said: “There was insufficient support in the executive board to recommend that the board of governors amend the by-laws”. Fischer, commenting on disqualification said “I think that the age restriction, which was set in the past at 65, is not relevant today”. Hmm, I wonder how many countries have been required to raise their retirement age as a condition of IMF support?
While Lagarde keeps tallying up the votes, adding Qatar to her list, Carstens isn’t pulling any punches. On the weekend he argued that the job would be best done by an economist and that in this regard he has a “far deeper understanding” than Lagarde. Yesterday, in this video from the Peterson Institute in Washington he mocked the presumption that the European crisis necessitates a European head of the Fund. He also highlighted a possible conflict of interest seeing as Europe, likely a main borrower from the Fund in coming years, will dominate their lender.
Pointing a finger at Europe for not playing fair by supporting Lagarde even before she announced her candidacy he said: “I’m not fooling myself, it’s like starting a soccer game with a 5-0 score”.
With nominations in and lobbying winding down we want to know who you’d (dis)like to see as the head of the IMF [see sidebar].
But who will our governments be supporting?
Our friend Tony Fleming over at Global Memo has been keeping a tally of country position statements. Pick a country and see what they say. What’s more, if you’ve info that he hasn’t, why not help him fill in the blanks?
Whilst the US, UK, France, Japan and Germany have their own seats, the remaining 182 members are represented by 19 country directors.
So while Fischer will get the backing of Israel, and Marchenko had the support of the Ukraine and other CIS states, their votes are cast by the Netherlands who early on in the process said “Europe should retain its traditional right to name the IMF chief”.