Economist Moises Naim on why Europe’s stranglehold on the IMF’s top job must end
A stench of colonialism is wafting around 19th and H streets in Northwest Washington, site of the headquarters of the International Monetary Fund. These foul fumes do not originate in the fact that the powerful, wealthy 62-year-old Frenchman who until this week ran that institution stands accused of sexually assaulting a young and poor African maid in a posh New York hotel. They’re emanating instead from the strong colonial legacy that is already tainting the selection of Dominique Strauss-Kahn’s successor.
This legacy — a product of an antiquated, post-World War II bargain struck among the world’s richest countries — means that only a European can become the new managing director of the IMF, an institution owned by 187 member nations. This arrangement, which effectively discriminates against 93 percent of humanity, has enjoyed the support of the United States, the IMF’s largest shareholder.
In its daily work, the IMF demands that the governments that seek its financial assistance adopt market principles of efficiency, transparency and meritocracy in exchange for its help. Yet that same institution selects its leader through a process completely at odds with those values. According to the agreement between Western Europe and the United States, the IMF’s top job always goes to a European, while the presidency of the World Bank is reserved for an American. This has been the case since these institutions were created in the mid-1940s, and while the deal might have reflected the world’s realpolitik at the time, it is now obsolete, unacceptable and counterproductive to the cause of global economic stability.
Even the leaders of the Group of 20, the assembly of nations that accounts for more than 80 percent of the world’s economy and two-thirds of its population, recognize that leadership selection at these institutions must change. When they met in early 2009 in London on the heels of the financial crisis, the G-20 leaders asserted that “the heads and senior leadership of the international financial institutions should be appointed through an open, transparent and merit-based selection process.”
That this is not already the standard is outrageous. No more outrageous, of course, than how European countries are offering countless excuses for why Strauss-Kahn’s replacement must carry a European passport.
Didier Reynders, Belgium’s finance minister, offered the prevailing European view when he said that “it would be preferable if we continued to hold these posts.” German Chancellor Angela Merkel has stressed that a person from the developing world can indeed ascend to the IMF’s top job, but only “in the medium term.” For now, she asserts, it should be a European. French Finance Minister Christine Lagarde is already being touted as a favorite by the U.S. and international press, and even a top Brazilian official admitted to Reuters that “Europe is likely to keep its deep stranglehold on the position.”
Influential European columnists such as Martin Wolf and Wolfgang Munchau have argued in the Financial Times that given the IMF’s critical role in the rescue of the continent’s troubled economies, only someone with vast political contacts in the region can operate effectively there. “Certainly, no non-European could play the role Mr. Strauss-Kahn did in the eurozone,” Wolf writes. Or as Munchau puts it, “I wonder to what extent a highly competent Mexican central banker, for example, would be able to fulfill this role?”