HONG KONG — With the popularity of Nicolas Sarkozy plummeting in French opinion polls and with Dominique Strauss-Kahn (DSK) winning a good reputation as head of the International Monetary Fund, speculation is already swirling about when Strauss-Kahn will formally quit the fund to seek glory as president of France. Demands are being made for Strauss-Kahn’s successor to break Europe’s hegemony over the IMF.
Let the best candidate be chosen irrespective of nationality, professor Barry Eichengreen wrote in this newspaper last month. Ah, naive academics: The demand is both redundant — because leaders of the Group of 20 promised that the next managing director of the IMF and president of the World Bank would be freely chosen regardless of nationality — and pointless, because everyone knows that international “realeconomik” will intrude.
Unless academics, think tanks and senior staff of the IMF can mount a brave, clever and cunning campaign, the prospects are that the big powers, this time including China, will huddle and name some second-rank politician or faceless apparatchik, someone who will recognize the way the world works and won’t make waves.
Such a candidate would be bad for the IMF and bad for the world. At a time as tempestuous as this, the IMF needs a head who can understand the perils the global economy faces, has the guts to speak truth to power and the strength of character to believe that running the IMF is the best job he or she can do — and not to be tempted to run off in pursuit of 21-gun salutes as head of a small state.
Strauss-Kahn has signally failed the first battle to protect the IMF from his successor and from political machinations by appointing a Japanese No. 3 to his team and naming a Chinese, Zhu Min, to the nebulous but powerful post of “special adviser.” Some insiders are already suggesting that that Zhu might be a successor to DSK. Whatever Zhu’s qualifications and personal strengths, even a rumor of contemplation of such an appointment would send a disastrous message of big power stitch-up.
The campaign for the best managing director needs to be conducted on simultaneous tracks. A job description should be drawn up with demanding qualifications. For anyone even to be nominated, they should be able to tick at least eight of 10 boxes, such as academic achievement, experience of senior government posts and of dealing with the United States, used to the treacherous Washington political arena, experience working at the IMF, a top job in a central bank or financial supervisory body, good management skills in a multinational, multicultural environment, and a winning sense of humor even when the rest of the world is against him or her.
Candidates from the U.S., China or the veto-wielding powers at the United Nations should be disqualified. Candidates whose countries have taken an IMF loan with “conditionality” should get five extra points; anyone with personal experience of implementing the conditions of an IMF loan should get 10 bonus points.
Clear protocols need to be set out, listing the terms of the competition, referees, candidates’ manifestos, short-listing procedures, selection panel and how the choice will be made. Finally, some names of highly qualified potential candidates should be floated, so that anyone entering the lists will at least be as good as these.
But there needs to be another track — reform of the IMF itself. Whoever succeeds Strauss-Kahn should preside over an institution in which Washington has lost its effective veto power.
This is potentially dangerous territory. So far, there is a lot of pussyfooting around common agreement that the Europeans are over-represented both in shareholdings and board seats, but no one has presented a sensible radical plan which would see the U.S. reduced to, say, 13-14 percent (from almost 17 percent, above the 15 percent veto for important issues), China climb to 6-7 percent from below 4 percent and be at least level with Japan, India begin to make a showing and the Europeans fade in accordance with their economic power in the world.
The worry would be that any big changes in the shareholdings would set off a struggle to control the IMF. International financial institutions only work if they are international-minded and globally professional in outlook, as IMF staff are, however often they have been rightly criticized for not appreciating the devastating social and human damage that the conditions attached to their loans can cause.
Hitherto, the U.S. has sometimes exercised a proprietary attitude to the IMF and World Bank, but it has done this at board level under global principles of fostering “free markets” or favoring privatization or insisting on conditions for loans to curb corruption and make sure money is used effectively. There is no suggestion that Washington has tried to control the IMF directly through its first deputy managing director.
Other countries, especially boosted by bigger shareholdings, may try to put their appointees in the IMF staff. Japan set an unfortunate precedent by insisting that former senior finance ministry officials take the No. 3 IMF job, even though those officials have not tried to push Tokyo’s agenda.
But will China or other emerging powers show the same respect for the integrity of international institutions? The indications so far are that Beijing expects its nationals in international jobs to hew to the party line, witness World Bank chief economist Justin Lin Yifu arguing that the yuan’s value is correct even though the World Bank and IMF have argued for revaluation.
All the more reason then to make sure that the IMF gets a leader who is prepared to stand up to shareholders. There are plenty of good candidates: more than a handful from Brazil and Argentina, who have been on the rough end of IMF conditionality; Eduardo Aninat, Chile’s former finance minister and former top IMF official; Angel Gurria of Mexico, currently head of the OECD; Ngozi Okonjo-Iweala, former finance minister of Nigeria and now No. 2 at the World Bank; and Montek Singh Ahluwalia, a former IMF and World Bank official heading India’s planning commission.
Let the arguments be over the best qualified candidates, not the political interests of the economic powers — for the sake of the world economy.
Kevin Rafferty was managing editor at the World Bank.