It is not easy to predict where financial stresses that require alleviation by the IMF will emerge next, or what form the mitigation strategies will take. Almost certainly, though, after a period of extremely easy liquidity and associated leveraging in financial markets, the call on IMF advice and resources will be greater than in the past. It support will have to take new forms. It will also have to sell economic policy packages to a governing body from an increasingly multipolar world.
Even before we get to that point, it is not difficult to see that with the threats to international trade and investment, and disputes over policy involving the most powerful countries in the world, the IMF in my opinion needs to play a much more central role as honest broker and arbiter.
It has to be an advocate for the often overlooked interests of the entire world, over those of a specific bloc or country.
In my opinion, we need the IMF’s role to change as a new order emerges. That order has to meet the requirements of a multipolar world, or we will see the world Balkanized.
It is time to forge a fresh consensus, possibly by restructuring the mandates of multilateral institutions to encourage faltering international trade and investment, while addressing the legitimate concerns of those who push back against globalization. We need to emphasize what works in promoting growth and stability, to help people escape poverty and the scourge of financial crises. We need leadership of the IMF with a vision of what is necessary to keep this fracturing world together, and with the political skill to sell that vision around the whole world.
The EU has chosen Kristalina Georgieva as Europe’s nominee for the job of managing director of the IMF, vacated by Christine Lagarde on September 12 when she moves to the European Central Bank. The next hurdle is the IMF Board, which needs to consider Ms. Georgieva alongside candidates nominated from other parts of the world. And this time the whole IMF membership needs to amend the fund’s rules to change the age requirement that no person shall be initially appointed to the post after reaching their 65th birthday – otherwise Ms. Georgieva will not be able to assume the top position. Regardless of her capabilities, that she does not meet this criterion suggests the insensitive nature of the EU’s choice. It reasserts the privileges of a tired and defunct order, under severe threat from old, powerful member states and new ones knocking on the door.
Continuing the tradition that the job goes to a European means that future heads cannot help but be seen as partial, owing their position to the powers that put them there. The EU, which is taking the high road on inclusion and diversity, should in my opinion no longer insist on exclusion and privilege in the most important jobs. It should more set an example for other multi-national organisations by forgoing its “ancient droits.” Why not break the mould by appointing the best candidate, regardless of nationality?
The IMF board in my opinion should hold an open competition, perhaps with the help of a committee of international worthies such as Gordon Brown, Gill Marcus, and Ernesto Zedillo, to select the next managing director, and then have that candidate voted on by the board. All things being equal, it would in my opinion be best if the candidate came from outside the traditional hunting grounds. There are strong candidates from emerging markets, with in my opinion unmatched experience and intimate knowledge of the international monetary system. Tharman Shanmugaratnam chairs the Monetary Authority of Singapore, serves as Singapore’s senior minister, and chaired the IMF’s international monetary and financial committee. Agustin Carstens now leads the Bank for International Settlements, served as central bank governor and finance minister of Mexico, and led reforms as deputy managing director of the IMF. Such candidates combine the political experience and technical monetary skills that are in my opinion so important in the international monetary system.
On the 75th anniversary of the foundation of the IMF and the World Bank, the problems these institutions were set up to deal with are still with us, albeit in different forms. For example, we need a strategy to deal with the new types of monetary policies that came out of the global financial crisis to ensure their possible adverse spillovers are limited.
We should recommit to the spirit of Bretton Woods and to the international economic system as a force for global peace and prosperity. This is not a strategy for Europe and the US, for the G7, or for even the G-20. It is completely global – something for all the members of the IMF. The choice of managing director in my opinion should reflect that.