recently as three years ago, many observers thought that the Fund had
outlived its usefulness and should be closed down. Since then, it has
intervened in Hungary, Latvia, Iceland, and Ukraine, among other
crisis-stricken countries – and has received a massive infusion of new
Part of the explanation for the higher esteem in
which the IMF is now held is its recent display of intellectual
flexibility – a rare virtue for a big, lumbering bureaucracy. It has
rethought its traditional opposition to capital controls. It has
suggested that central banks may want to consider higher inflation
targets in order to avoid hitting the zero bound in the event of
deflationary shocks. For this, it drew a stern reproach from Germany’s
Bundesbank – a clear sign that it is doing something right.
IMF has also put in place a Flexible Credit Line to disburse funds
quickly – and free of onerous conditions – to countries buffeted by
financial crosswinds through no fault of their own. The problem is
that, despite its alluring name, the new facility has had few takers,
and no Asian takers in particular.
Indeed, it is revealing that
when South Korea was desperate for dollars following the failure of
Lehman Brothers, it borrowed from the United States Federal Reserve,
not from the fund. After their experience in 1997-1998, Korean
policymakers would sooner jump off a cliff than borrow, even without
conditions, from the IMF.
Nevertheless, while not all is sweetness
and light, there has been progress. And for this the IMF’s strong,
politically astute management – not exactly something from which the
Fund has regularly benefited in recent years – deserves credit.
however, the rumour mill is heating up with gossip that the fund’s
managing director, Dominique Strauss-Kahn, will leave in order to
oppose Nicolas Sarkozy in the 2012 French presidential elections.
Sarkozy’s popularity is hitting new lows, and Strauss-Kahn’s friends
say that he has never made a secret of his political ambitions.
lame-duck managing director would hamstring the fund. Already there is
a sense that the IMF is reluctant to tell Europe more forcefully how to
handle its problem with Greece because the managing director must be
careful to avoid meddling in Europe’s internal politics.
top of this now comes the interesting news that the IMF has appointed
Zhu Min, previously a deputy governor of the People’s Bank of China, as
special adviser to Strauss-Kahn. Zhu will thus be part of the core
This, in turn, has fueled speculation that Zhu
will be a candidate to become the next managing director. It is the
turn of someone from outside Europe to head the IMF – Europe having had
a monopoly on the position since the Fund was created following World
War II. The bargain then was that the US could pick the president of
the World Bank while the Europeans would get the top slot at the IMF
(US policymakers in their wisdom believing that the bank would become
the more important institution).
But today’s world is more
multi-polar. It is no longer dominated by the Atlantic economies, so
those economies should no longer dictate who holds the top jobs at the
two Bretton Woods institutions. It is now, the argument goes, another
The obvious choice is Asia, home to the most
dynamic emerging markets. It is the region to which the world’s
economic center of gravity is shifting. If you ask Asian leaders what
would make them consider again
approaching the fund after their
traumatic experience with IMF “assistance” in 1997-1998, they will
answer: an Asian managing director.
In fact, this is precisely
the wrong way to think about the problem. The IMF’s problem in the past
has been parochialism and lack of accountability. The best way to
ensure that the fund remains open to new ideas is by selecting the
person with the best ideas to lead it. The best way to ensure that the
IMF’s management is accountable to all of its governmental shareholders
is to prevent the top job from becoming the sinecure of any region,
whether Europe or Asia.
The next managing director should be
selected on the merits, not on the basis of nationality. There should
be an open competition, in which the best candidate wins on the basis
of his or her ideas.
Asia has plenty of competent economic
officials who might be considered as the next managing director of the
IMF. But just because they are Asian is not reason enough to select
Barry Eichengreen is Professor of Economics and Political Science at the University of California, Berkeley.
© Project Syndicate 1995–2010