Why Fischer’s IMF candidacy is a non-starter

June 13, 2011
decision to throw his hat into the ring as a candidate for managing director of the IMF has been lauded by Mohamed El-Erian, who reckons that "he would likely prevail in an open, transparent and merit-based selection process." Insofar as this is true, it's a bit depressing.

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Stan Fischer’s quixotic decision to throw his hat into the ring as a candidate for managing director of the IMF has been lauded by Mohamed El-Erian, who reckons that “he would likely prevail in an open, transparent and merit-based selection process.” Insofar as this is true, it’s a bit depressing.

I’m no great partisan for Christine Lagarde, whose main qualification for the job is that she’s French. But she’s smart, she’s tough, she’s an able politician — as the latest endorsements of her candidacy attest — and she has the ear of the European heads of state who are going to be forced to make some very tough decisions during her inevitable tenure at the Fund.

The job of IMF managing director is a particularly tough one. Everybody else at the Fund can kid themselves that they’re working for the managing director — the boss. But the managing director himself works for a fractious and highly opinionated board of directors which can be counted on to micromanage and second-guess every important decision. As such, the main skill needed in a managing director is to be able to manage those delicate relationships with great finesse, while at the same time projecting enough power and authority that any interference is kept to a minimum in the first place. It also helps to be respected by key heads of state, who ultimately direct the board.

This is where Fischer’s interview with the WSJ is revealing, and not in a particularly flattering way. Remember, here, that Fischer was number two at the IMF during the Asian financial crisis:

“There are serious economic issues” that need to be addressed, Mr. Fischer said, and IMF staffers often offer conflicting advice. “Without having that [economic] training, it’s very hard to know who’s right and who’s wrong,” he said…

Since the global financial crisis of 2008, the IMF has eased up on some of the requirements it once imposed on countries that accept emergency loans. Mr. Fischer said he approved of those changes and had tried to do something similar when he was at the IMF a decade ago but couldn’t win sufficient support from the IMF’s board.

This is the view of someone who sees the biggest issues facing the IMF managing director to be technocratic, rather than political. I have no doubt that Fischer is better at adjudicating economic questions than Lagarde — this is the man, remember, who co-authored a hugely respected economics textbook (now in its 11th edition) with none other than Rudi Dornbusch. But Fischer by his own admission is bad at winning support from the board. Either that, or in fact he was perfectly happy with the IMF’s economic orthodoxies in 1998-9. Which is quite likely, given that he quite literally wrote the book when it comes to economic orthodoxy. I remember those days reasonably well, and I certainly didn’t get any impression from Fischer at the time that he had any issues at all with the policies he was espousing.

One other thing is worth remembering about Fischer’s role as first deputy managing director: the job is always held by an American, and he got the job by dint of his US citizenship. It’s therefore a little rich for him to turn around and start complaining that he’s up against the very same set of conventions which allowed him that job in the first place.

It’s also worth remembering, while we’re on the subject of failed economic orthodoxies of the recent past, that Fischer spent three years, from 2002 to 2005, at Citigroup, working very closely with Bob Rubin. Indeed, he’s the only person I can think of who actually formally reported to Rubin, whose reputation has been comprehensively demolished by the financial crisis. As the co-author of an incredibly lucrative economics textbook, Fischer didn’t need the money; it’s fair to say that he saw no particular problem with taking the contacts he built up over a long public-sector career and turning them into profits for Citi shareholders, just so long as he got paid millions of dollars for doing so.

My feeling about Fischer is that he would be a managing director not dissimilar to the French technocrats who ran the shop during the 80s and 90s, Jacques de Larosière and Michel Camdessus. He’s not an agent of change; he’s a throwback to the past. And although he claims to be “full of vigor” at the age of 67, he’s probably a one-term MD at best, in an institution which has had altogether too much turnover in that role since Camdessus stepped down in 2000.

Of course it is high time that a non-European became managing director of the IMF. But Fischer is not the kind of break with tradition that the Fund needs — by non-European nobody means American, and Fischer would have a very hard time trying to present himself as an African, even if he was born in what is now Zambia.

So when Lagarde inevitably gets the job, let’s not shed too many tears that Fischer didn’t get it instead. In some kind of technocratic utopia, he’d be perfect. But in the messy real world, with his age and his US citizenship and his Citigroup years and his actions during the Asian financial crisis all counting against him, his candidacy is a non-starter. I’d be surprised if anyone at all, bar Israel, ended up voting for him.


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