Why Lagarde needs a full term in office

By Felix Salmon
May 20, 2011
moved from Harvard to Pimco in 2007 if he was only offered the job for less than 18 months, at which point he would have to reapply for his job under a different system? Because that's the offer that El-Erian thinks the IMF should make to Christine Lagarde:

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Would Mohamed El-Erian have moved from Harvard to Pimco in 2007 if he was only offered the job for less than 18 months, at which point he would have to reapply for his job under a different system? Because that’s the offer that El-Erian thinks the IMF should make to Christine Lagarde:

Instead of a new five-year term, Lagarde should be appointed just to complete Strauss-Kahn’s term that runs until 2012. During this period, Lagarde would be charged to lead the IMF’s Executive Board to put in place a selection process that is open to all nationalities, transparent and merit-based — or the minimum standard of governance for an institution that is owned by 187 member countries and charged to serve them under the principle of “uniformity of treatment.”

Of course, come next year, Lagarde would be eligible to stand for a full term in an election that is open to all; and one that is based on merit rather than misplaced notions of national prestige and harmful political horse-trading. 

If my assessment of her qualifications is correct, she would be well placed to secure the necessary global support under a process that is credible and long, long overdue.

I can see where El-Erian is coming from here, but this idea would hobble Lagarde’s effectiveness from day one, making her something of a lame duck even before she formally started. Yes, there would be a good chance that she would get a proper five-year term starting in 2012. But right now the IMF needs all the leadership it can get, and having a managing director serving out a deliberately-truncated term, as though she was just filling in for DSK rather than taking over in her own right, would not help in that regard.

If Lagarde is like previous European IMF MDs, she’ll pay lip service to the idea of implementing a transparent and merit-based selection process, but won’t actually do anything about it. That’s why El-Erian wants to force the issue now. But realistically, change on this front can only come from the Europeans themselves, probably in conjunction with a US decision that it would be willing to give up the top job at the World Bank. That will take a lot of delicate jostling and international negotiation. It’s not something which can be pushed through in the space of a week or two while the IMF is leaderless.


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This is what you might call “Larry Summers syndrome” (and Brad DeLong did indeed suggest Larry Summers for this job) – the idea that there is something called “merit” which is all that needs to be taken into account and that political considerations should not enter into the equation for this political job.

The IMF is neither a mutual fund nor a university department. It’s a political appointment and it needs to be led by someone who can handle the politics. In fact, the *only* “merit based” criterion I would regard as relevant would be that since the IMF has too many academic economists already relative to political experts, it ought to be a cause for immediate disqualification of a candidate that they had an academic publishing record, or even a PhD qualification in economics.

Posted by dsquared | Report as abusive

This job is, and will in the future be even more so, _important_. Putting economies right, massive macroeconomic implications for the affected countries: at the end of the day millions of lives will ruined or improved depending on IMF actions over the next few years.

But we should commit now to perhaps keeping the perhaps wrong person in the job for yet 3.5 years more because, hey, we were forced in May ’11 to give her a 5-year _contract_?!? She is going to be chosen and hired in an absurd and uncritical hurry (and against the principles that most “serious thinkers” think should prevail now) just because her predecessor found himself in Rikers and we had to act quickly. But really, is committing to stand by a choice-under-absurd-pressure more important than doing right by the poor around the world for the next half-decade- ?!?

If there’s value in revisiting the appointment in a short time, we should do so and be upfront that we will do just that. By all means write the contract so that she gets good severance pay for any time not served (in the scheme of things, this is beneath trivial). You yourself have (in essence) argued that this is a forced choice under the current circumstances. If so it is not just allowable, but almost morally mandatory, that we revisit the choice relatively quickly as soon as we have the luxury of taking more (indeed, any) care?

Posted by bxg21 | Report as abusive

Interesting, appreciate you posted.

Posted by chris251984 | Report as abusive

With El-Erian’s approach, it would be a lot more efficient to vet the IMF deputy to the chief position, rather than go through the entire process of nominating candidates for these short spells. Look at the recent history of the IMF leadership – the last 3 leaders did not fulfill their 5 year terms. If we had a system whereby the replacements merely filled in the old director’s shoes for the remainder of their term, we’d have ended up with a higher turnover, and consequently a less stable organization.

El-Erian’s proposal would only really be logical if the deputy was being promoted to the IMF leadership – that would provide the right balance of fairness and stability. It doesn’t make sense though given the existing election process.

Posted by sanchk | Report as abusive