Why Lagarde will be the next IMF managing director

By Felix Salmon
May 16, 2011

It now seems more likely that Dominique Strauss-Kahn will end up in a prison cell than that he will be elected president of France. Either way, his career at the IMF is over, which means that the race to succeed him is on.

Gordon Brown would love the job, but he’s not going to get it, which is great. The front-runner is Christine Lagarde, who would be better than Brown. But France has held the top job at the IMF for 26 of the past 33 years. It’s time for a change, on that front.

Historically, the IMF managing director has always come from Europe; if Lagarde doesn’t get the nod and the tradition is continued, then the obvious name is Italy’s Mario Draghi. But there are very good reasons why the head of the IMF, at least this time round, should not be a European — not least that Strauss-Kahn himself, along with various European finance ministers, said when he was nominated in 2007 that this was the last time Europe would get to railroad its own candidate into the job.

The competition was tougher in 2004, when two serious heavyweights were nominated to contest the election of a European — Stanley Fischer and Mohamed El-Erian. I suspect that El-Erian’s far too happy at Pimco (and in California) to throw his hat in the ring this time round, but he’s been so vocal on public-policy issues of late that it’s just conceivable he could allow his arm to be twisted. Fischer is still a contender, but he’s 67 years old now — as is Montek Singh Ahluwalia, another potential nominee. The age limit on IMF managing directors is 65 for a reason, and although it can be changed by a vote of the Fund’s member countries, that extra hurdle is likely to be enough to prevent either of those two men from getting the job. And Fischer has other counts against him — he was vice chairman of Citigroup during the bubble years of 2002-2005, for starters.

What’s more, there would be something a bit weird about the first African managing director of the IMF being a white Jew — culturally, Fischer is closer to Strauss-Kahn than he is to, say Trevor Manuel, whose elevation to IMF managing director would be a very visible and welcome change in the way the international financial architecture is run. Manuel is pretty light-skinned, but he grew up on the wrong side of the color line in apartheid South Africa, and has the years in South African detention during the 1980s to prove it. The men who have run the IMF to date are the heirs to Europe’s colonizers; Manuel very much counts as one of the colonized.

If the IMF is looking for an international technocrat, rather than a politician, then Mexico’s Agustín Carstens is likely to be in contention — but I very much doubt that he’ll get the job, if only because the head of the World Bank is (as ever) an American, and the rest of the world would not stand for both institutions being run by North Americans.

South Americans, by contrast, would be fine: one dark-horse candidate might be Brazil’s Arminio Fraga.

The top name on Alan Beattie’s list, however, and the most likely non-EU head of the IMF, is Turkey’s Kemal Derviş. Richard Adams says that he “ticks all the boxes”, but the IMF has more power than ever these days, and is going to be called on to make incredibly important decisions with respect to troubled European sovereigns over the course of the next managing director’s tenure. Whether Derviş is up to such a task is very much open to question:

Dervis carries limited political weight. He was his country’s economic affairs minister for just two years and his career has been spent mostly with the World Bank (20 years) and five years as head of the UN Development Program — not an organization that inspires achievement.

Add it all up, and my guess is that the French are going to do it again: Christine Lagarde will become the first female managing director of the IMF. She has the political skills and the economic credentials to get the job, and Europe will feel much more comfortable with a European in the role over the next few turbulent years. The US won’t object, and the Asians will go along with the choice since they don’t really have a candidate of their own. As ever, there will be some pro-forma gnashing of teeth about how a non-European should really get the job next time. But I’m not holding my breath.


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So, all else equal, Stanley Fischer is disqualified because he is Jewish? How quaint.

Posted by GlibFighter | Report as abusive

Can we open a book on this, Salmon?

6/4 Lagarde
3/1 Carstens (bless you for lumping Mexico in with the gringos)
5/1 Brown
8/1 El-Erian
20/1 Moises Naim
33/1 Paul Krugman
50/1 Jim Cramer
100/1 Cristina Fernandez de Kirchner’s latest FinMin
200/1 Lady Gaga, Peter Schiff, Any CNBC anchor etc etc

By the way, I rate your chances higher than Fraga’s

Posted by ottorock | Report as abusive

Darn, forgot to price up Ron Paul

Posted by ottorock | Report as abusive

Mario Draghi will become the next head of the ECB, so he won’t get the job. Anyhow, aren’t you being a little hasty here? What happened to presumed innocence?

The US has a reputation for acquisitive females making sexual accusations to get men into trouble. All you have to say is that you are a banker, an enormously powerful banker (and let’s face it, Dominic Strauss Kahn doesn’t have a crisis of insufficient self-confidence) and maybe even overdo it a bit and say you are the world’s most powerful banker and while blowing yourself up your maid thinks she can make a quick buck.

I wouldn’t put it past a Frenchman to have wandering hands, but am not 100% sure what DSK’s target might be here. His wife seems 100% sure he would NEVER do anything like that. I know Frenchmen can be hyper critical and treat waiters and servants terribly badly, so perhaps he somehow insulted the woman and she’s after revenge. Who knows.

But to suggest we write him off without waiting for a trial is very shallow of you Felix. Getting rid of him as President of the IMF just because of an allegation smacks of fit up and sting to me. And no, we don’t want another American in charge of the levers of IMF and world banking for governments when the problem originated in the US in the first place, the US has terrible finances because taxes are too low, and most of the world’s money is elsewhere anyhow.

Of course, the German’s haven’t had a major post Internationally for a while, at least not since the ECB passed into the hands of a Frenchman. If not Kahn, then why not Vielgeld von Bankenberg or one of his colleagues?

Posted by FifthDecade | Report as abusive

Totally unrelated, but I don’t know how I missed this:

Hernando DeSoto’s article on our state of affairs
http://www.businessweek.com/magazine/con tent/11_19/b4227060634112.htm

Posted by DanHess | Report as abusive

where is Bini Smaghi on this list? He would need a better job to vacate his spot on ECB to make room for Draghi

Posted by CGCC | Report as abusive

What say you to Raghuram Rajan? He’s a former IMF chief economist, expert in finance and banking, U. Chicago professor and an Indian to boot.

Posted by S_van_Norden | Report as abusive

What about Arminio Fraga? I know he’s pretty much committed to JP Morgan, but at this point he’s as good a choice as El-Erian.

Posted by lgg | Report as abusive

I honestly don’t see why American commentators are all saying that this damages DSK’s chances in France. The generally overlook the sex crimes of public figures.

As long as DSK doesn’t miss the election, I reckon he’ll be fine.

I think the real issue here is whether the IMF is going to start asking for diplomatic status for its officials.

Posted by DrFuManchu | Report as abusive

dervis will win…

Posted by Ocala123456789 | Report as abusive

THere are so many conspiracy theories out there as a result of this story already.

Was the Hotel worker an immigrant? This whole thing sounds so bizarre as to be completely going down the wrong track. Does the Hotel Worker speak perfect English? Did DSK take a shower, hear the maid come in, not have any clothes in the bathroom, then dive through to his room to get some clothes on before the maid got there, then in his haste collided with the maid as both tumbled to the floor, DSK swearing at the maid landed on top of her on the floor, perhaps placing a hand by accident where it shouldn’t go as can happen when you instinctively put your hand out to stop yourself falling, giving the maid a shock. The maid then reported she had been ‘attacked by a mad guest’, the Hotel then jumped to the wrong conclusion that nakedness+attack = rape and reported it.

Then the authorities stepped in, rather heavy handedly, press present at arrest, pictures with handcuffs on, no bail, placed in High Security prison, not allowed to shave before trial, consistently villified and belittled, as if a trial had already found him guilty.

Consequences? Well, this strengthens the hand of the unpopular right wing Sarkozy and the even more right wing Fascist Le Pen (who without DSK, the leading left-centre hope) has a real chance of taking the French Presidency and putting nukes into the hands of a Fascist government for the first time ever (the Tea Party not yet having done more than influence elections, not yet won any). This could be a NeoCon dream.

Even if neocons aren’t politically involved, some of their banking cousins who want to undermine the Euro might not complain about further instability for the currency as a consequence of the IMF chief being incommunicado for a time. These are all parts of various conspiracy theories out there right now – and they’ll get worse, I’m sure.

For me, I just think it’s sad that the US legal system has drifted so far away from presumed innocence, the foundation on which all Anglo-Saxon speaking countries base their law on: A man is presumed innocent until proven guilty.

Just not in the Land of the Free.

Posted by FifthDecade | Report as abusive

“The US has a reputation for acquisitive females making sexual accusations to get men into trouble” Yes but Jews have a well known reputation for being sexist pigs who couldn’t care less who they screw over so long as that person is a goyim. It’s a good thing we don’t generalize isn’t it.

Posted by ezeqruls | Report as abusive

“THere are so many conspiracy theories out there as a result of this story already……..” Yes, and then perhaps he inadvertantly grabbed his willy and shoved it in her mouth by mistake.

Posted by ezeqruls | Report as abusive