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In Search of A New IMF Chief

Is Christine Lagarde, France’s gifted financial minister, a shoo-in to succeed her fallen countryman Dominique Strauss-Kahn as the next IMF chief? Not so fast. In the first of his "Letters From the Editor" column, Bill Inman explains why a broader search would improve a voting system

Dear IMF:

I understand your organization is undergoing a massive job search to find a new managing director to replace the suddenly fallen Dominique Strauss-Kahn. And that nominations are pouring in from around the world.

Not surprising given that the International Monetary Fund is a global entity, rising from the ashes of World War II to oversee the world’s financial system and counting 187 nation-members, up from 29 a few decades ago. It has offices in most developed countries and a rambling headquarters complex not far from the White House in Washington.

So imagine my puzzlement when I learned that the inside betting is that Dominique’s replacement will be another French national, more precisely a French woman, Christine Lagarde, France’s gifted financial minister.

Nothing against Minister Lagarde. By all accounts she is talented and driven. But she is French and the voting to this point seems to be far from an open process, certainly not a mechanism explainable or accessible to the press. Yet this organization whose offices span the globe — an organization that sincerely promotes transparency, open governance and accountability in finance — has determined to choose its next leader in a closed room by a handful of unelected electors.

Why not a banker from Brazil, the fastest growing economy in the Americas; or from China, the fastest growing economy in the world; or from the host of vibrant emerging and frontier economies who have inherited the mantle of financial leadership now that the West has shown its fragility. You get my drift. None of these countries has ever had an opportunity to place a top man or woman at the IMF.

Am I overstating the case? I think not. These countries know they’ve been snubbed. And these are the same now called upon to address debt issues of Europe (left unfixed by decades of IMF neglect), make sense of exchange rates in Asia and the address the balance of payments crisis in the U.S.

Consider this unusual joint statement from South Africa and Australia:

“In order to maintain trust, credibility and legitimacy," the two nations declared when they heard they were not in the bidding for the IMF spot, “there must be an open and transparent selection process which results in the most competent person being appointed as managing director regardless of their nationality.”

To be sure, there is no scarcity of viable candidates. Most recently mentioned: Agustin Carstens, central bank governor in Mexico; Montek Singh Ahluwalia, deputy chairman of  the planning commission in India; Trevor Manuel, former finance minister of South Africa; and Kemal Dervis, former finance minister of Turkey. For a moment, imagine the positive impact on the world of a well-educated, western-oriented moderate Moslem selected to run the IMF.

Time is not on the side of a diverse search, unfortunately. The IMF wants to name a new leader by June 30, in time to deal with the growing debt crisis in Europe. Since Greece received its $150 billion (110 billion euros) bailout, the country has lurched from crisis to disaster.  The IMF is scrambling to keep Greece from a default.

That takes a strong leader, one who can fairly represent all. 

William H. Inman.
Editor, Institutional Investor

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