What if the IMF chose its chief on economic merit?

May 20, 2011

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Wayne Arnold

The race to succeed Dominique Strauss-Kahn is underway. Picking the International Monetary Fund’s next chief will depend on personalities and politics. But what if the decision was based on economic performance of the IMF’s 187 member states? In that case, none of the current favorites would look particularly good.

Start with growth: on a measure of average annual growth in GDP per capita over the past five years, India looks strong with 7 percent. That should favor Montek Ahluwalia, the country’s economic planner. But Azerbaijan is the winner with nearly 16 percent growth.

Price stability is another priority for policymakers. In this category Axel Weber, Germany’s former central banker, might claim credit for the country’s average inflation rate of 1.6 percent. But it is Japan, emerging from deflation, which has the most placid prices.

Growth must be accompanied by jobs. Tharman Shanmugaratnam, Singapore’s finance minister, can boast an average unemployment rate of just 2.5 percent over the past five years. However, the IMF reckons the jobless rate in both Uzbekistan and Belarus is less than 1 percent — though those figures probably deserve closer scrutiny.

Europe’s travails are a reminder of the importance of a strong government balance sheet. Here it is oil-rich Norway, with a surplus equivalent to 140 percent of its economy, which wins hands down.

The current account balance is another key barometer: big deficits and surpluses are the source of much global economic instability. Canada’s deficit of just 0.65 percent of GDP should favour Mark Carney, the country’s central bank governor. However, Myanmar, Paraguay and — surprisingly — Egypt are in even greater balance.

Most important, though, is the overall mix of policy. Ranking the IMF’s members on each measure, and adding up the scores, suggests South Korea is the winner. Its well-distributed income, low unemployment, current account surplus and relatively low government debt make it a role model, albeit an unlikely one. France, the home country of IMF front-runner Christine Lagarde, looks shoddy by comparison.

National economic statistics are crude, and any single policymaker’s contribution to success impossible to measure. Even so, if the IMF wanted to set an example to the rest of its members, it would replace Strauss-Kahn with a South Korean.

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