IMF fracas offers chance for Third World revamp
By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Emerging economies were always going to have a bigger say in the affairs of the International Monetary Fund. Dominique Strauss-Kahn’s shocking arrest over the weekend should accelerate that moment. While Europeans have traditionally led the IMF, recruiting a new chief from an emerging economy — particularly one that’s been through the IMF wringer — could broaden support for the fund among rising powers.
The world’s poorer countries have often viewed the IMF as an instrument of U.S. and European economic power. And the traditional carve-up of leadership — with a European heading the fund and an American at the World Bank — effectively proved this to be the case. Developing nations were more often viewed as potential supplicants for IMF largesse than as valued stakeholders. And until relatively recently, emerging market powerhouses had far less voting strength than their economic heft justified.
But the old arguments for entrenching developed world powers in both organizations are antiquated and fail to reflect the new balance of global economic power and the challenges these will pose for the IMF in years to come. Moreover, there are many strong candidates, with more relevant experience, from developing nations — something that might not have been the case in previous years.
True, opening the field to a non-European would create frictions of its own. Any of the BRIC countries would dearly love to see one of their nationals take the top spot. But a squabble among them might help the Europeans hold the post. Their priority should be to work together to break the Old World monopoly on the post.
Compromise candidates could include Turkey’s Kemal Dervis, who has sat on both sides of Washington lending decisions. As economy minister he haggled with the IMF for a bailout in 2001. He also worked for over two decades at the World Bank. Another popular option might be South Africa’s veteran ex-finance minister Trevor Manuel, who won plaudits as chair of the World Bank’s Development Committee.
There are already ominous signs, including from German Chancellor Angela Merkel, that Europe may dig in its heels. This would be a shame. The voting reforms pushed through by Strauss-Kahn helped to assuage some of the long-standing skepticism toward the IMF. Appointing a new chief from the developing world — especially a former fund supplicant — holds the best chance of winning over remaining IMF naysayers.