After the European stitch up of the IMF top job, the case for major reform is clearer than ever

July 1, 2011 by Leave a comment

First published on the World Development Movement blog on 30 June 2011

As Christine Lagarde is briefed on her new job as the managing director of the IMF (the World Bank’s sister organisation, set up post-war to promote economic stability) we are left to reflect on the rigged selection process and sad inevitability of her appointment. The legitimacy of the Fund, already in pieces, was dealt a further blow by this debacle.

Lagarde was crowned long before the formal selection process had even begun. European leaders brazenly ignored their previous commitments to an open, merit-based and transparent process. Using the Eurozone crisis as an excuse both for the speed of the process (cut from ten weeks to six), and the need for a European head, they praised and promoted Lagarde’s candidacy, openly undermining the selection process. This necessity for local knowledge and understanding clearly wasn’t the case when Africa, Asia and Latin America were in crisis.

Full article available here

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Open statement: International NGOs call for IMF selection process to start over

June 25, 2011 by Leave a comment

 Open statement on the IMF selection process
24 June 2011

In the wake of the Dominique Strauss-Kahn scandal, the IMF board set out a procedure for selecting a new head of the IMF, attempting to meet commitments for an open, transparent, and merit-based selection process. Even before the board’s action, a broad swathe of civil society organisations from around the globe had already articulated clear standards and procedures for how an IMF managing director should be selected.

The board’s procedure fell short of both their own previous agreements and the calls from civil society groups. This weaker process was then subverted by European real-politik which saw the continent’s governments clinging to an outmoded system of global economic governance which accords them undue privileges.

The imminent selection of Christine Lagarde to lead the IMF has laid bare the hypocrisy of a selection process which was neither truly fair and open, nor merit-based, especially given the existing imbalance in voting shares at the IMF. The rushed de facto appointment of Lagarde by European powers contradicts commitments by the G20, the IMF board and European finance ministers over the past years. Under Lagarde, the IMF is likely to further lose legitimacy, and be relegated to being the junior partner in the European Central Bank’s destructive bailouts of private creditors and punishment of ordinary eurozone citizens.

This does not have to be. There is still a chance to rescue this process and possibly the IMF’s legitimacy. The IMF board needs to start over, revamp the process and take a more professional approach that leads to a field of candidates committed to reforming the IMF and its approach to both rich countries and developing ones. In the meantime, it is imperative that the US publicly declare that it no longer expects tradition to hold, and that the filling of the posts of IMF first deputy managing director and president of the World Bank should be decided on merit and without regard to nationality. It is time the governance of our international financial institutions moves into the 21st century.

Sincerely,

  1.  Oxfam International
  2. ActionAid International
  3. Bretton Woods Project
  4. New Rules for Global Finance
  5.  11.11.11- Coalition of the Flemish North-South Movement
  6. African Forum on Alternatives (Senegal)
  7. AMODE (Mozambique)
  8. Association for Women’s Rights in Development (AWID)
  9. BOND (UK)
  10. CAFOD (UK)
  11. CEE Bankwatch Network
  12. Centre for Health Policy and Innovation
  13. Centre For Social Concern (Malawi)
  14. Christian Aid (UK)
  15. Civicus
  16. Compass (UK)
  17. CRBM (Italy)
  18. European Network on Debt and Development (Eurodad)
  19. Fundar, Centro de Análisis e Investigación (Mexico)
  20. Just Foreign Policy (US)
  21. International NGO Forum on Indonesian Development
  22. Jubilee Australia
  23. Jubilee Debt Campaign (UK)
  24. Jubilee USA Network
  25. Public Interest Research Group (India)
  26. Sisters of St Joseph of Springfield
  27. SLUG (Norway)
  28. The Norwegian Forum for Environment and Development
  29. Third World Network
  30. World Economy, Ecology & Development Assoc. (Germany)

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In the news: Lagarde limbers up, Brazil backs Carstens (maybe)

June 23, 2011 by Leave a comment

Today Lagarde meets with the IMF board following meetings with IMF officials and US Treasury Secretary Timothy Geithner yesterday. Although still a long-shot, Carstens may be buoyed somewhat by the news that Brazil may back him after all. Paulo Nogueira-Batista, Brazil’s executive director at the Fund was quoted as saying “Brazil may well decide to support Carstens”. More symbolic than anything (their chair commands 2.79% of the vote) it at least shows a willingness to express their grievances at the process with deeds as well as words and saves Carstens the embarrassment of not having the support of leaders from his own region. Nogueira-Batista continues, “this institution has a long way to go in undoing problematic governance structures … this [campaign] process has helped somewhat by highlighting the weaknesses”.

Domenico Lombardi, a former IMF board member pointed to the dilemma faced by many nations in voting for anyone else but Lagarde, saying that “in the end this person is going to be the managing director of the institution. There is really no sense in voting for somebody else when it’s clear who will win”.

Still looming is the French courts’ decision on whether to pursue legal action against Lagarde for accusations of abuse of office over a settlement between businessman Bernard Tapie and the French government. Recent reports suggest that an official under her ministry’s authority is too under investigation.

The IMF board will meet on June 28 to discuss the candidates, announcing the victor by June 30.

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Carstens states his case for the top job

June 22, 2011 by 1 Comment

Carstens’ presentation to the IMF board reads like a power play in challenging the legitimacy of the Fund and their commitment to a transparent and merit-based selection process.

Lagarde will no doubt benefit from Carstens’ statement being made public before she meets with the board on Thursday. Still, Carstens sure to have the Lagarde camp working overtime produce a convincing declaration of her suitability for the post.

It started in May with an eight page curriculum vitae of sorts in which he spelled out why he should get the job, starting:

To facilitate the transparent and merit-based selection process, I hereby offer an overview of my professional background; economic policymaking record; managerial and diplomatic skills, with particular attention to multilateral cooperation; understanding of the Fund and the policy challenges facing the Fund´s diverse membership; and, in closing, my strategic vision for the institution.

Long-time readers of the blog will no doubt be interested to see how it compares to the candidate assessments offered by some of his critics…

Throughout there are digs at the European stitch up such as: “we need a Managing Director who can best serve all of the member countries, not merely those experiencing challenges at one particular point in time.”

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In the news: Yes, but what will they do? Did you hear the one about the economist and the lawyer?

June 20, 2011 by 1 Comment

Sunday’s Financial Times Editorial offered some thoughts on what the next IMF recruitment process should look like and what should be expected of future candidates. The focus, it argues, should be on what the prospective candidate would do as managing director, not their support base or geographical origins, i.e. their plans and policy positions should be made clear. It claims “a better recruitment process for the top IMF leadership will be one of the many things the next managing director will owe to poor and middle-income countries, especially if it is Ms Lagarde.” Amongst others is the deputy managing director position, which by convention is held by the US; and a reform of the Fund’s governance structure.

Hinting throughout at the conflict of interest that would meet a European head given the current eurozone crisis it asks that the next MD “devise a gradual exit strategy from the eurozone” and that the Fund be reinvented “so it can do its part in managing the shift of economic power to the emerging world.” It ends by stating: “Its next boss should make clear that the IMF will be more useful to all its members the less beholden it is to any one of them.”

The New York Times too opines that “we need to know more to decide who would make the best IMF leader at this critical juncture.”

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Is IMF choosing the right boss?

June 17, 2011 by Leave a comment

By John Jacobs, program officer for the Halifax Initiative. A coalition of development, environment, faith-based, human rights and labour groups, and the Canadian presence for public interest work and education on the IFIs.

Originally published in the Chronicle Herald

The candidates being considered for International Monetary Fund’s new boss do not inspire much hope for an institution in need of credibility. Much of the media’s focus has been on the nationality of the candidates rather than on which capabilities are needed to address the IMF’s major challenges: shifting to a more flexible policy orientation and adapting to a changed global economy.

According to a recent report by the IMF’s Independent Evaluation Office, the Fund’s effectiveness has been hindered by a “high degree of groupthink, intellectual capture and inadequate intellectual approaches.” The groupthink was founded on the belief that “market discipline and self-regulation [are] sufficient to stave off serious problems in financial institutions.”

Put another way, the IMF believed that the global financial markets should be left to their own devices to chart the contours of economic globalization. As a result, mere months before the financial crisis, the “IMF’s banner message was one of continued optimism and … pointed to a positive near-term outlook and fundamentally sound financial market conditions.” The Fund continued to endorse “light-touch regulation and supervision policies” — policies that we now know contributed to the crisis.

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In the news: Carstens in China, US to move in on Number 2

June 16, 2011 by Leave a comment

Carstens is due in China today to drum up some support from the Asian economies. Though neither candidate has the official backing of the Chinese, there have been some statements in Lagarde’s favour, which the French have been happy to take as endorsements. Both sides should be cautious when jumping the gun – in Indonesia; the Finance Minister Angus Martowardojo is under fire for his “personal support” of Lagarde, which is not yet the official stance of the county.

In an interview with the Miami Herald Carstens put forward a case for unified BRICS support:

“If I win, it would be a strong statement of Latin America’s power … And even if we don’t win, a strong Latin American vote against the status quo would be a strong signal that we don’t agree with the way things are being done at the IMF. That’s why it is so important to have a region-wide Latin American vote.”

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Shortlist announced – and then there were two…

June 14, 2011 by 1 Comment

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”.

Oh dear, what would FIFA say?

From the Guardian

 

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Country positions: Which candidate will your government vote for?

June 13, 2011 by Leave a comment

With nominations in and lobbying winding down we want to know who you’d (dis)like to see as the head of the IMF [see sidebar].

But who will our governments be supporting?

Our friend Tony Fleming over at Global Memo has been keeping a tally of country position statements. Pick a country and see what they say. What’s more, if you’ve info that he hasn’t, why not help him fill in the blanks?

As well as documenting their position he notes each member state’s voting percentage to give us an idea of how much sway they have. But remember, it’s not the country’s individual voting share that counts per se but rather that of their country representative on the board.

Whilst the US, UK, France, Japan and Germany have their own seats, the remaining 182 members are represented by 19 country directors.

So while Fischer will get the backing of Israel, and Marchenko had the support of the Ukraine and other CIS states, their votes are cast by the Netherlands who early on in the process said “Europe should retain its traditional right to name the IMF chief”.

Sound fair?

With Lagarde gaining the vocal support of more countries by the day, the maths it seems, is also on her side…

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Carstens in Brazil, Lagarde heads for China

June 2, 2011 by Leave a comment

Angela Merkel continues to bat back question on the leadership battle. She feels that in the long-run, of course it does not make sense for the US to automatically head the World Bank and the Euro-zone the Fund. How long is a piece of string?*

Former IMF chief economist Simon Johnson continues to stir things up. After giving Ms Lagarde a less than favourable review last week, he shares some thoughts on why exactly it is so important for Europe to hold onto the IMF. Curious given that a few years ago the EU attitude risked pushing the IMF into insignificance.

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…

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