Read My BRICs: No New French IMF Chiefs!

♠ Posted by Emmanuel in , at 5/25/2011 01:54:00 PM
Coming from a developing nation, I am a long-time follower of third world solidarity movements. The Non-Aligned Movement, the G-77 and the New International Economic Order (NIEO) are to me high points of South-South cooperation even if the results of their activities have often been muted. For many posts now, I have been agitating for a non-Western IMF chief alike what has been promised by Americans and Europeans for the longest time [1, 2, 3]. Or at least prior to Dominique Strauss-Kahn's--how do I put it--questionable extra-curricular activities. Certainly, it's time for the West to let the rest of us have a say in international economic governance if the system is truly a liberal institutional order. After all, the eastward shift in economic gravity is pronounced.

Yet, it is observably true that LDCs--particularly the major developing ones--are not as united as the Europeans are behind French Finance Minister Christine Lagarde taking over the top slot at the IMF. LDCs themselves fight over many things such as Brazil taking a dim view of China's currency policy or engaging in bikini wars. So, observers take the point of view that while developing countries agree on "anyone but another European" (or American for that matter), they don't have a single unity candidate alike Europeans backing Lagarde. Instead, they have squabbled over uniting behind a particular candidate, preferring to put forward their own nationals' names. So, unlike Europe, they fail in consolidating their voice. Remember: united we stand, divided we fall at the IMF.

To compensate, the representatives of the Brazil, Russia, India, China and South Africa (BRICs+ ?) have together put forward a position statement. While not entirely getting behind a candidate, as mentioned above, it's a positive step that they are at least seeing eye to eye on the need for diversity during a critical succession period:
We, as Executive Directors representing Brazil, Russia, India, China and South Africa in the International Monetary Fund (IMF), have the following common understanding concerning the selection of the next Managing Director of the International Monetary Fund:

1) The convention that the selection of the Managing Director is made, in practice, on the basis of nationality undermines the legitimacy of the Fund.

2) The recent financial crisis which erupted in developed countries, underscored the urgency of reforming international financial institutions so as to reflect the growing role of developing countries in the world economy.

3) Accordingly, several international agreements have called for a truly transparent, merit-based and competitive process for the selection of the Managing Director of the IMF and other senior positions in the Bretton Woods institutions. This requires abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe. We are concerned with public statements made recently by high-level European officials to the effect that the position of Managing Director should continue to be occupied by a European.

4) These statements contradict public announcements made in 2007, at the time of the selection of Mr. Strauss-Kahn, when Mr. Jean-Claude Junker, president of the Euro group, declared that “the next managing director will certainly not be a European” and that “in the Euro group and among EU finance ministers, everyone is aware that Strauss-Kahn will probably be the last European to become director of the IMF in the foreseeable future”.

5) We believe that, if the Fund is to have credibility and legitimacy, its Managing Director should be selected after broad consultation with the membership. It should result in the most competent person being appointed as Managing Director, regardless of his or her nationality. We also believe that adequate representation of emerging market and developing members in the Fund’s management is critical to its legitimacy and effectiveness.

6) The next Managing Director of the Fund should not only be a strongly qualified person, with solid technical background and political acumen, but also a person that is committed to continuing the process of change and reform of the institution so as to adapt it to the new realities of the world economy.
It's a highly qualified statement, yes, but I am generally on board with the argument that maintaining a US (World Bank)-Europe (IMF) stitch-up of international financial institutions is certainly not conducive to evolving patterns of economic activity. Now, if only these developing countries could unite behind a single candidate, then the contra-Lagarde will be more of a reality than a theoretical persona.

The time is now. Don't take any more excuses and get it done. And certainly, LDCs can show great displeasure come voting time. Meanwhile, Eswar Prasad urges the major developing economies to act quicker in response to this European attempt to do an end run on the selection process:
The Brics are pushing hard for a competitive vote with more than one viable candidate, rather than just a pro forma process intended to confer legitimacy on the presumptive winner. There is a brief window of opportunity for emerging markets to make their point, even if they lose this round of the battle. To grab it, they must quickly up their game.

Japan and the US are the swing votes. They have restated support for a transparent and merit-based process, and have not taken sides yet. But neither wants the outcome to threaten its own privilege of appointing a deputy managing director. Therein lies an opportunity.

Emerging markets must first unify around one candidate. Each of the big players has its own agenda, so picking a candidate from among them may be a hard sell within the group itself. Augustin Carstens of Mexico has already thrown his hat in the ring and there are other excellent candidates from “neutral” countries, like Tharman Shanmugaratnam from Singapore, who could step into the breach.

Second, they must ensure China’s support by pushing to elevate Zhu Min, the highest-ranking Chinese representative at the fund, to a new, fourth deputy managing director position. Third, they must strike a bargain with Japan and the US to support them retaining their own deputy managing director positions for the next five years. Fourth, their candidate should draw up a clear list of governance reforms and a plan for acting on them to line up support from other developing economies.

This approach may seem mercenary. But it is time for emerging markets to shed the grand vision of pure merit-based selections and get down to the bare-knuckled politics that Europe is practising. This is not just in their own interests but also for the greater good of an institution that is now central to global financial stability.
I agree that "merit-based" selection is the stuff of pseudo-technocratic BS: this is raw international politics at the beginning of the 21st century. May the newer entrants prevail over the old order. While Lagarde presents herself as a candidate for diversity in being the first putative female IMF managing director, it's not necessarily the burning issue at the moment to be fair.

Bedsides, who's to say that there's a shortage of female LDC candidates for the job? How about Sri Mulyani Indrawati--formerly Indonesia's finance minister and currently the World Bank managing director? Figuratively speaking, the ultimate sacrifice in the service of third world solidarity may be the BRICs+ choosing a unity candidate outside their citizenry but also from a large LDC that looks like a force to be reckoned with--Indonesia.