TWN Info Service on Finance and Development
Changes needed at troubled IMF
This quickly sparked a race for his successor in the most important position in finance among international organizations.
European leaders were quick off the mark, arguing that the post should again be taken by a European, as according to the old but discredited tradition.
It has been increasingly recognized that the convention that the IMF chief must be a European while the World Bank President should be an American can no longer be justified.
The two leaders should be selected from persons from any country according to merit, and not on the basis of their being European or American, which is a colonial or neo-colonial principle.
Candidates from developing countries should have
an equal chance, especially since these countries have increased their
share of global GNP, and many of them (especially
Well-known figures from
But the European Commission President and the
political leaders of
Ironically, the apparent "front runner" is another French citizen, the finance minister Christine Lagarde. Why should a French national succeed another French national who had to resign in disgrace, and when the top IMF job has previously been held disproportionately by French nationals (who have had the job for 35 of the 64 years of the IMF).
European leaders are arguing that the IMF chief
needs to be European because much of the present IMF loans in value
are going to European countries
They argue that a European IMF chief would be best for dealing with the European crisis, as he or she would understand the region better.
This is a strange argument fraught with double
standards. When East Asian countries suffered a debt crisis in 1997-9,
and the IMF's main clients became
Similarly, there was no hope that an African or South American could occupy the upper posts of the IMF, even though many countries in those regions were in financial crisis and were the main borrowers in the 1980s and 1990s.
Veteran journalist and Editor Emeritus of the
South-North Development Monitor (SUNS) Chakravarthi Raghavan argues
that the spreading economic crisis in
In the 1980s, when democratizing international
institutions was on the agenda, the
"This logic applies here. No European should be allowed to head the IMF," he said, adding that the IMF's rescue packages for Europe have become efforts to protect the interests of French and German banks who are major creditors and bond holders of Greece, Portugal and Spain.
It is a clear case of double standards in the
outrageous demand by
Despite this, it is likely that
If developed countries unite under a single candidate, they will most likely get their way.
Still, it will not be a guaranteed or even an
easy win for
Many developing countries have recently called for an open and democratic selection process for the heads of the IMF and World Bank. Developing and emerging countries have control collectively of 44.7% of the votes. The IMF chief must get 85% of the votes.
Ministers of the G24 (a group of developing countries that operate in the IMF and World Bank), meeting in April, repeated their call "for an open, transparent, merit-based process for the selection of the President of the World Bank and the Managing Director of the IMF, without regard to nationality."
They also called for "concrete actions and proposals to be put forward to guarantee this change."
While the developed countries have a majority
of the voting rights, the developing countries can theoretically block
the candidate put up by
The reality is that the developed countries tend to unite behind a candidate from among them, while developing countries have not, till now, been able to come up with a single candidate of their own which they then support together.
Though the selection of a new chief is the present preoccupation, more important is the reform required for the IMF's policies and operations.
A South Centre paper, authored by Chief Economist Yilmaz Akyuz, points to its failure in preventing financial crises, which is its main task.
In its emergency lending activity, the IMF has also performed badly. It has advocated pro-cyclical policies to countries taking its loans, often deepening the countries' crises.
It has also failed to distinguish between countries facing liquidity and solvency problems, and lent to countries to repay their loans, with unfair terms of burden-sharing between the debtor country and its creditors.
The changeover of the leadership of the IMF is a good opportunity to discuss the weaknesses of the IMF and to reform its policies.
(* Martin Khor is the Executive Director of the South Centre.) +