After the last three years of financial crises and bailouts, no one can deny that leadership of an international institution like the International Monetary Fund matters. Previous leaders brought some significant changes to the IMF but did not go nearly far enough. The fund is still giving bad advice to European countries, such as supporting the fantasy that Greece can recover without restructuring its debt, and is continuing to force damaging spending cuts in times of recession. The question now is whether Christine Lagarde’s tenure as managing director of the fund will be any better.
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”.
Fed up of the colonial era ambience of the IMF leadership race? Sick of European leaders deciding they have the right to tell the rest of the world to shut up and accept their favoured daughter? Well, you’re not alone. In fact, the first internet surveys suggest you’re in the overwhelming majority.
First off the mark was the Guardian newspaper. In a simple yes / no questions, a whopping 75 per cent said the IMF voting process is “unfair and totally outdated”. Next up came a much more detailed array of questions from the Center for Global development – the poll is still open if you want to have your say. Here are a selection of the top findings:
83 per cent don’t think the Europeans “should maintain their maintain its customary prerogative of seeking IMF Board approval for a single European candidate”.
88 per cent believe “the traditional European prerogative to name the head of the IMF … should be replaced by a selection process that is open, competitive and merit-based, without regard to nationality.”
Away from the press cameras and microphones, what did Ms Lagarde and Brazilian Finance Minister Guido Mantega talk about? Rumour is that Mantega is willing to back her in exchange for “a strategic position” at the Fund, perhaps that of deputy managing director, traditionally held by the US…
IMF watchers have been following the drama of the selection process, Ministers are getting ready to decide which way to cast their vote, the pundits are ready to comment, but what about the other 6 billion + people who will be at the sharp end of decisions made by the new MD? In a response to the Guardian’s poll, long-time IMF campaigner David Woodward makes a compelling case for real democratic principles to be placed at the heart of the selection process. It’s worth quoting at length:
“…the only alternative [the Guardian poll] presents to the status quo is reform to “reflect the shift in global economic power towards emerging markets”.
As the Commission on Social Determinants of Health said,
“It is only through such a system of global governance, placing fairness in health at the heart of the development agenda and genuine equality of influence at the heart of its decision-making, that coherent attention to global health equity is possible.”
Nowhere is this more true than the IMF: it has virtually run the economies of much of the developing world (with serious adverse effects on health) for much of the last 30-35 years, while itself being run by the developed country governments, who have some 60% of the votes – four times their share either of population or of membership. The US, and the US alone, has a veto on all major policy decisions – including voting reform. The voting system was created in 1944, when only a handful of developing countries were members (most still being under colonial rule), they rarely borrowed from the Fund, and IMF lending did not carry any policy conditionality. Continue reading “David Woodward on the need for democratic principles at the IMF”→