NEW YORK – Sooner than expected, the International Monetary Fund will have a new managing director. For more than a decade, I have criticized the Fund’s governance, symbolized by the way its leader is chosen. By gentlemen’s agreement among the majority shareholders – the G-8 – the managing director is to be a European, with Americans in the number two post and at the head of the World Bank.
The Europeans typically picked their nominee behind the scenes, as did the Americans, after only cursory consultation with developing countries. The outcome, however, was often not good for the IMF, the World Bank, or the world.
Most notorious was the appointment of Paul Wolfowitz, one of the main architects of the Iraq War, to lead the World Bank. His judgments there were no better than those that got the United States involved in that disastrous adventure. Having placed fighting corruption at the top of the Bank’s agenda, he left in the middle of his term, accused of favoritism.
Finally, as a new order seemed to emerge in the aftermath of the US-made Great Recession, the G-20 agreed (or so it was thought) that the next IMF head would be chosen in an open and transparent manner. The presumption was that the outcome of such a process almost surely would be a managing director from an emerging-market country. After all, the IMF’s main responsibility is to fight crises, most of which have been in developing countries – more than a hundred since the disastrous policies of financial deregulation and liberalization began some 30 years ago. There were many heroes of these battles in the emerging markets.