IMF succession a chance for reform

PUBLISHED : Wednesday, 31 March, 2010, 12:00am
UPDATED : Wednesday, 31 March, 2010, 12:00am

With the popularity of Nicolas Sarkozy plummeting in French opinion polls and Dominique Strauss-Kahn 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 la gloire 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, as Professor Barry Eichengreen put it last week. Ah, naive academics: the demand is both redundant - because leaders of the Group of 20 promised that the new managing director would be freely chosen - 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 knows the way the world works and won't make waves.

Such a candidate would be bad for the IMF and bad for the world. In a tempestuous time like now, the IMF needs a head who can understand the perils, 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 chase 21-gun salutes as head of a small state.

Strauss-Kahn has already failed the first battle to protect the IMF from his successor and from political machinations by appointing a Japanese number three to his team and naming a Chinese, Zhu Min, to the nebulous but powerful post of 'special adviser'. Some insiders are already suggesting that Zhu might be a successor to Strauss-Kahn. Whatever Zhu's qualifications and personal strengths, even a rumour of contemplation of such an appointment would send a disastrous message of big power stitch-up.

The campaign needs to be conducted on simultaneous tracks. A job description should be drawn up with demanding qualifications for anyone even to be nominated, able to tick at least eight of 10 boxes, including academic achievement, experience of senior government posts, dealing with Washington, working at the IMF, a top job in a central bank or financial supervisory body.

Candidates from the US, 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. 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 a presented a sensible radical plan which would see the US reduced to say 13-14 per cent (from almost 17 per cent, above the 15 per cent veto for important issues), China climb to 6-7 per cent from below 4 per cent, 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.

Will China or other emerging powers show 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.

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 or Argentina, or Eduardo Aninat, Chile's former finance minister and former top IMF official, or Angel Gurria of Mexico, currently head of the OECD, or Ngozi Okonjo-Iweala, former finance minister of Nigeria now number two at the World Bank, or Montek Singh Ahluwalia, 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