The Dominique Strauss-Kahn debacle has brought significant attention to the International Monetary Fund (IMF) and who might head it as next managing director. The discussion is a vast improvement over the past, when the Europeans could simply pick their own head of the IMF, with US approval. That said, the debate has become “who is better than Christine Lagarde?” the French Finance minister. A handful of names have popped up, which is welcome. Columbia University’s Joe Stiglitz has said we should just go with Lagarde, Paul Krugman has endorsed Stanley Fischer, the former MIT economist and current head of the Israeli central bank.
What is shockingly missing from these and other commentaries is a discussion regarding what a new IMF needs to do and then who is up to that task. We know that the IMF is knee-deep in the European debt crisis with billions in commitments (whether that was the right thing to do is hardly questioned), so why don’t Stiglitz and others discuss the fact that Lagarde has been at the center of the botched bailouts there?
The IMF has made some significant steps toward reform as of late. One key development has been their recognition that the free flow of capital is not always beneficial in terms of financial stability. So it comes as a bit of a shock that someone like Paul Krugman would endorse Stanley Fischer. Fischer was behind the capital account liberalization push at the IMF in the 1990s that brought down Asian governments.
The debate has brought up the valid idea that the IMF top job shouldn’t go to someone in the West given that the West it largely responsibile for the financial crisis. The leading emerging market candidate is Augustin Carstens from Mexico. In the following piece I argue he would be just as bad or worse than many of the advanced country picks. His economics and record have been right out of the Fischer et al., playbook.
Read Kevin Gallagher’s full post in The Guardian, Why Agustín Carstens should not be the next head of the IMF.
The discussion about the appointment of a new IMF Director should not so much be a question of “names”, but of objectives and roles. What should IMF’s role be with respect to the Greek / Eurozone “crisis”, and how should it complement UE’s and BCE’s role, who are the 2 other major supranational organizations currently involved.
Is the Eurozone the “United States of the Euro” or, in the absence of political power and tax and welfare harmonization among its17 member countries, is it a commercial union with a single currency ?
Should the IMF Director come out of one of those 17 countries, where each has different approaches and policies, and as is said in Europe is a” 2 speed area” ( Germany, prime, and France being the relatively fast movers), which has not been successfull in auto controlling ( UE – Brussels Commission) itself since the creation of this Euroland.
Should not this be an opportunity to have as Director a top “official” executive from one of the strong and successfull “emerging countries”, one which has not a stiil too authoritative way of governing ?
Both Europe and even the US to some extent have and are demonstrating lack of flexibility towards change in adapting to a new world economy, driven by different forces in terms of job creation (major”example”) than those historically known.
I am not a trained economist ,but an experienced (and unknown) international businessman who has decided some months ago to create a non political and say “apatride” blog – macrovolatility.com- for self expression on matters which interest us all, trying to be as objective as possible and expressing myself as a layman, which I am. Sorry for the in built promotion…, but hoping to receive comments on posts written on these subjects which I cannot develop futher in this space.