Two Wrongs Don’t Make a Right at the IMF and World Bank

One has go back to the “Year of Three Popes” (1978) to find a succession drama as strange as what has been happening at the International Monetary Fund and the World Bank, the two pillars of the global financial system. Two months ago, Bank President Paul Wolfowitz resigned amidst an extraordinary staff mutiny and governance debacle. Now, his counterpart at the International Monetary Fund, the former Spanish Finance Minister Rodrigo Rato, has shocked major stakeholders by announcing that he, too, will leave in October.

To lose one international lending institution head is misfortune, to lose two looks like carelessness (my apologies to Oscar Wilde). Coming on the tenth year anniversary of the Asian financial crisis, the caldron in which today’s ultra-liquid capital markets were forged, conspiracy theories abound.

Frankly, sticking to the public record, the two resignations seem like night and day. When Wolfowitz was finally pushed out after a bruising battle, Bank staff were beside themselves with joy. By contrast, most IMF staff seem genuinely depressed by Rato’s departure.

Wolfowitz’s pre-Bank claim to fame was his role as an architect of the Iraq war, arguably one of the greatest strategic debacles since Napoleon’s invasion of Russia. Rato, by contrast, was Spain’s finance minister during the country’s best economic era since the sixteenth century.