Wednesday, June 1, 2011

Whither Europe cont.

My colleague, Ben, points to The Economist's shifting view on who should lead the IMF.  I thought I'd follow that up by linking to Sebastian Mallaby's opinion piece in The Washington Post.  He also objects to the process currently underway, but focuses his dissent on two seperate items.  First, he doesn't believe Christine Lagarde is qualified.  He notes:

"[I]t is not helpful that Lagarde is a lawyer. She is an accomplished one, certainly, as well as a fluent English speaker and impressive politician. But to convincingly speak truth to power, you need a firm grip on the research on which that truth is based. Ideally, the IMF should be led by a heavyweight economist — somebody such as Stanley Fischer, the experienced and respected former MIT professor who runs Israel’s central bank and who sought the top IMF job in 2000. Failing that, the IMF should be run by a financial official who understands the treacherous interplay of policy and markets — someone such as Switzerland’s central bank chief, Philipp Hildebrand, who previously worked for a hedge fund. Agustin Carstens, Lagarde’s Mexican challenger, ticks these boxes more than she does."

But beyond that he criticizes the Obama administration for not blocking the nomination of Lagarde.  Mallaby wishes Obama was more like Roosevelt, who sidelined "arrogant Europeans" at the Bretton-Woods Conference, which gave birth to the World Bank and the IMF.  Mallaby continues: 

"If President Obama were Roosevelt — if he were serious about nurturing weighty international institutions — he would block Lagarde’s appointment. But the European shareholders at the IMF want to protect the neocolonial custom by which they control the fund’s top position. They don’t like sharing with the monkeys. Obama seems set to go along."

I'm not sure what Mallaby is chasing here, but I think he neglects one obvious thing.  Due to Bretton Woods and the history of the IMF and the World Bank, a European has led the IMF and an American has led the World Bank.  If Obama were to advocate for a non-European candidate, he would upset this balance, likely finding the next American nominated to lead the World Bank to be challenged.  It would end a quid pro quo that may be anachronistic in its neocolonialism, but not entirely disadvantageous for the United States.

I tend to think it's time we open up the nomination process and let a renowned voice from the developing world lead the IMF and the World Bank.  Certainly there are qualified people out there, but one can't forget to acknowledge the quid pro quo that has existed for a long time in these organization and how their two largest patrons want to sustain the status quo.

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