Why Lagarde needs a full term in office
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.