The following post was originally published by the World Policy Institute’s blog, a Triple Crisis partner, by Martin S. Edwards. Edwards argues that the selection of a new IMF leader needs to take all members’ interests into account.
With the recent resignation of IMF managing director Dominique Strauss-Kahn, the issue of IMF governance is on the front burner of international policy. At a time in which there are crucial issues at stake in the global economy, one of the most important international organizations has a very large “HELP WANTED” sign in the window. There’s already been a great deal of talk about the selection process, and one can even place wagers on who is going to be named as the next Managing Director. The concern, however, should be less with who gets the job than with how they get it.
At the time that these organizations were founded, the unwritten rule was simple – the IMF was to be run by a European, and the World Bank was to be run by an American. Today, it seems that Europe is speaking with one voice in favor of Christine Lagarde, the French finance minister. With a decisive level of support and a large bloc of votes, Lagarde’s candidacy for the next Managing Director looks hard to stop.
The problem for Lagarde is that the world of 2010 is very different than the world of 2000. The IMF’s most important borrowers are now in the Eurozone, rather than in the developing world. The IMF’s message of fiscal consolidation and cutting government spending is not being heard across Europe and the U.S. as these countries struggle to produce vigorous growth. Meanwhile, many developing countries have gone from borrowing from the IMF to lending to it. Brazil, Russia, India, and China have invested a total of $80 billion into the Fund in recent years. This expansion of the IMF’s coffers—which has only come about because of rapid growth in the BRIC countries—has given it more flexibility in dealing with the economic crisis in Europe.
Read the full post at the World Policy Blog.