The developing world has long sought to break an archaic tradition born alongside the IMF at Bretton Woods in 1944: that of reserving the global financial institution’s top position for a European. Progress toward the elusive goal came last October when, after years of discussion about a shifting global balance of power (mainly due to the rise of the BRICs), the Fund’s Board of Governors redistributed voting rights and shares to reflect the 21st century’s leveling power distribution.
In particular, China’s stake increased from 2.77 to 4.42 percent, making it the third largest shareholder, and India’s grew from 2.77 to 2.91 percent, raising it to seventh on the totem pole; Russia and Brazil also saw gains. America and other rich countries, by contrast, lost shares. Overall, the changes represent almost a 5 percent shift to the developing world since 2008.
Managing director Dominique Strauss-Kahn’s May 19, 2011 arrest and subsequent resignation thus present an extraordinary opportunity to break the IMF’s glass ceiling.
A Break Not Big Enough
Defenders of the status quo (mainly Europeans and Americans, the latter of which have held the World Bank’s reins since Bretton Woods) cite continuity of leadership during Europe’s debt debacle as reason to elect another European: the unfolding fiscal crises in Portugal, Ireland and Greece require someone with an insider’s knowledge of European politics, they say.
Others disagree. As The Economist points out, “imagine the laughter if somebody had made the same argument for Argentina’s finance minister in the 1980s or Thailand’s in 1997.” And that is not to mention the IMF’s mandate to “be an impartial arbiter of good economic policy.”
Nonetheless, French Finance Minister Christine Lagarde is Europe’s top prospect. While certainly qualified for the job, her election would bring the sort of continuity developing countries argue the Fund could do without: European leadership. For their part, the BRICs have publicly declared the need to break with tradition and select the next IMF managing director based on merit, not nationality. That would pave the way for a non-European, such as Mexico Central Bank Governor Agustin Carstens, thus far the only other candidate to officially join the race, to head the Fund.
The Limits To Change
The nomination period ends June 10, after which point the 24-member Board of Governors will short-list three candidates and make a final decision by June 30. However, since the Board reflects shareholder power among the Fund’s 187 members, and Americans and Europeans together hold more than 50 percent of its shares, the top post will almost definitely go to Ms. Lagarde. Though American officials have yet to publicly endorse a candidate, tradition holds that America backs the Europeans’ IMF choice in return for European backing of the U.S.‘s World Bank nominee.
In that light, the BRICs’ October share increase is mostly symbolic: the rising powers gained not so much real power as acknowledgment of rising clout on the global stage. Real change will depend on further eroding the West’s majority stake. Real change, then, may be on the South’s horizon.
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Breaking the IMF’s Glass Ceiling
June 5, 2011
The developing world has long sought to break an archaic tradition born alongside the IMF at Bretton Woods in 1944: that of reserving the global financial institution’s top position for a European. Progress toward the elusive goal came last October when, after years of discussion about a shifting global balance of power (mainly due to the rise of the BRICs), the Fund’s Board of Governors redistributed voting rights and shares to reflect the 21st century’s leveling power distribution.
In particular, China’s stake increased from 2.77 to 4.42 percent, making it the third largest shareholder, and India’s grew from 2.77 to 2.91 percent, raising it to seventh on the totem pole; Russia and Brazil also saw gains. America and other rich countries, by contrast, lost shares. Overall, the changes represent almost a 5 percent shift to the developing world since 2008.
Managing director Dominique Strauss-Kahn’s May 19, 2011 arrest and subsequent resignation thus present an extraordinary opportunity to break the IMF’s glass ceiling.
A Break Not Big Enough
Defenders of the status quo (mainly Europeans and Americans, the latter of which have held the World Bank’s reins since Bretton Woods) cite continuity of leadership during Europe’s debt debacle as reason to elect another European: the unfolding fiscal crises in Portugal, Ireland and Greece require someone with an insider’s knowledge of European politics, they say.
Others disagree. As The Economist points out, “imagine the laughter if somebody had made the same argument for Argentina’s finance minister in the 1980s or Thailand’s in 1997.” And that is not to mention the IMF’s mandate to “be an impartial arbiter of good economic policy.”
Nonetheless, French Finance Minister Christine Lagarde is Europe’s top prospect. While certainly qualified for the job, her election would bring the sort of continuity developing countries argue the Fund could do without: European leadership. For their part, the BRICs have publicly declared the need to break with tradition and select the next IMF managing director based on merit, not nationality. That would pave the way for a non-European, such as Mexico Central Bank Governor Agustin Carstens, thus far the only other candidate to officially join the race, to head the Fund.
The Limits To Change
The nomination period ends June 10, after which point the 24-member Board of Governors will short-list three candidates and make a final decision by June 30. However, since the Board reflects shareholder power among the Fund’s 187 members, and Americans and Europeans together hold more than 50 percent of its shares, the top post will almost definitely go to Ms. Lagarde. Though American officials have yet to publicly endorse a candidate, tradition holds that America backs the Europeans’ IMF choice in return for European backing of the U.S.‘s World Bank nominee.
In that light, the BRICs’ October share increase is mostly symbolic: the rising powers gained not so much real power as acknowledgment of rising clout on the global stage. Real change will depend on further eroding the West’s majority stake. Real change, then, may be on the South’s horizon.
