News24

IMF decision irks developing countries

2011-06-29 09:30

Washington - Despite pledges of new transparency, the International Monetary Fund (IMF) again gave its top job to a French candidate on Tuesday, assuring continued ire from developing countries at Europe's hold on the job.

To the surprise of few, the global crisis lender's executive board named French Finance Minister Christine Lagarde as managing director, replacing her countryman Dominique Strauss-Kahn, who resigned on May 18 to fight charges of sexual assault in New York.

That made her the 11th European to hold the job since 1946, and the fifth from France - a record that comes thanks to a gentleman's agreement dating to their creation at the end of World War II that a US citizen would be president of the World Bank and a European would lead the IMF.

Despite a challenge by Mexico's central bank chief Agustin Carstens, few had doubted Lagarde's chances: Europe aggressively declared itself united behind her days after Strauss-Kahn departed and before any other candidates had a chance to surface.

A top European official at the time called it a "done deal".

Carstens persevered, while others - including the respected South African Trevor Manuel - stayed out, saying Lagarde already had the job sewn up.

Prediction falls flat

"I think a lot more could be done, a lot more should have been done to persuade Europeans that this birthright is not a birthright that should find a resonance in an institution as important as the International Monetary Fund," Carstens said at the time.

When Strauss-Kahn was chosen in 2007, Jean-Claude Juncker, who chaired the Eurogroup of countries, predicted that would be the last time a European got the job.

"The next director will certainly not be a European" he said.

That came after more than a decade of anger at the IMF's hectoring approach to developing country members, especially in the 1997 Asian crisis when it dictated reforms based on a developed country ideology that has since been partially jettisoned - especially its then-rejection of capital controls.

But the "consensus" choice of Lagarde proved Juncker wrong, even though the same developed countries that dominate the fund plunged into their own financial crises beginning in 2007.

"The process is rigged," said Arvind Subramanian, a former IMF economist.

Decided in the salons of Paris

"Fundamentally, the system must be made fairer by ensuring that no one group of countries gets an unfair advantage in the race to become the managing director of the IMF."

Sarah Wynn-Williams, head of IMF relations at global poverty fighting group Oxfam, said ahead of the decision that the managing director nominee is "not even decided by the board, it's not even decided in Washington".

Rather, she said, "it's been decided in the salons of Paris".

Bessma Momani, a professor of international economy at Canada's University of Waterloo, blames developing countries for not organising themselves into a real force to challenge Europe - evident in the inability of Carstens to gain endorsements from key countries like China and Brazil.

"The emerging market economies did not put up a fight for IMF leadership despite years of complaining," he said.

"They are the only ones to bear the blame for failing to unite behind a candidate of their own."

Calls for openess


Still, it would have been hard to break the Europe-US-Japan block that controls over half of the votes on the IMF board, if it came to a vote.

Carstens had proposed reforms that would end Europe's over-representation on the board, controlling seven of the 24 executive director slots.

Subramanian proposes slashing Europe's 32 percent quota to the 18% level of Washington's.

Tuesday's secretive "consensus" decision unsurprisingly sparked new calls for openness at the Fund.

"We regret the process was not the open and inclusive process we called for," said the Washington activist group New Rules for Global Finance.

"Above all the new managing director must accelerate the pathetically slow baby-steps of governance reform at the IMF."

Comments
  • GrainOfTruth - 2011-06-29 09:46

    When you've put in as much money over the decades as they have, then you can complain.

      jowza - 2011-06-29 10:10

      they just a bunch of glorified loan sharks

      Dan - 2011-06-29 10:40

      agreed

  • cgtours - 2011-06-29 09:58

    The IMF should be managed by Countries who do not always stand in line for handouts and whose Countries are well managed - Mexico should get its drugs and murders under control and as for Africa well Nobody needs to even comment.Maybe Brazil orCountry like Singapore etc. Never even Greece/Portugal etc. All the Countries complaining should look at their Governance! As for Trevor Manual, the weapon scandal, the fraud etc ( coming to light every day) gives him a disadvantage-he was Minister of Finance Remember? Did he not know what was going on? South Africa is loosing its reputation daily Internationally - so forget about it , we now fall under Corrupt Governments and out of Control Crime!

      Martin du Plessis - 2011-06-29 10:38

      Loosing it's reputation? I can't remember us having any kind of reputation in the last year or so.

  • Berrybrook - 2011-06-29 10:00

    Control should never be given to takers. It is the givers who need to be in control, otherwise there would be no IMF.

  • AndV - 2011-06-29 10:02

    Excuse me, name me only one leader from a developing country that has the compotence to be appointed in such a position. Mr Manuel might be competent, but representing a corrupt leader and government like the ANC disqualifies himself immediately. Africa always want and demand, but look at their shocking governance and leadership record, not to mention the disgracefull AU and SADEC clowns. So, pls stop crying and proof yourself first. Beggers can not contribute to anything....... These developed countries has to feed Africa day after day while their corrupt undemocratic leaders live in paradise. Africa, you are a disgrace to society and the human race. My apology for the strong words, but i can not report otherwise unless being dishonest.

      DoublySalmon - 2011-06-29 13:20

      Why don't the AU allow a typical EU citizen to lead it? Anyway, during the worst financial crises in recent history we don't need representatives of African countries - no African country has a 1st world, world class economy.

  • Wow! - 2011-06-29 10:13

    You put the money in. You choose the managment team.

  • Badballie - 2011-06-29 10:26

    unfortunately few other countries have a track record which would allow a confident appointment.

  • Proffie - 2011-06-29 10:35

    He who pays the piper calls the tune. Simple.

  • Slingervel - 2011-06-29 10:37

    Mr Zuma, interesting that Russia has supported the appointment of Lagarde. Mr Zuma, how come your comrades have dropped you in not supporting Trevor Manuel? You know why? Because you and your ANC cronies don't feature at all in their books. You only serve their purpose when it suits them - like prostitutes!

  • Martin du Plessis - 2011-06-29 10:41

    I don't see ANY sense in putting the person you're loaning money to in charge of the money lending department. Thats like giving a drug addict the keys to a drug-safe in a addiction-recovery center.

  • Virginia - 2011-06-29 10:43

    I ant to know, how can developing countries be head if and International money Fund when they cannot even get their own countries off the ground.People like Trevor Manual need to give their undivided attention to their own country before tackling something universal. Maybe just mayber the Asian countries sould be chosen not Africa.

  • pierreedge - 2011-06-29 10:53

    No surprise, the natural order has been respected. good.

  • Bemused - 2011-06-29 10:56

    As is said a hundred times already, certainly in the case of Africa, you don't qualify, period. If you don't like it, tough!. If the developing world wants to run a big financial institution then I suggest that they set one up themselves. Till then, get down to doing an honest days work, an honest days governance and set about moral and ethical leadership. Manage your countries properly and maybe in a decade or two, you will qualify to fill in the application form. Eish and Damn!!!!!!!!!!!

  • Welleducated - 2011-06-29 13:42

    Thank the lord that it did not fall into corrupt hands. Developing countries already have LONG fingers in theoir own country's coffers, all we need is International money wastage. COuld you imagine the ANC heading the IMF? The ANC racism and propaganda would spread outside SA, what a shameful disaster.

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