Monday, May 30, 2011

Is the Pope Italian?

Is the managing director of the International Monetary Fund French? One might just as well have asked in the not too distant past: Is the Pope Italian? Actually, the Italian lock on the Papacy ended with the elevation of the Polish cleric Pope John Paul II, but one can bet money that the next IMF managing director will be French.

A head of steam is building to choose France’s Finance Minister Christine Lagarde to replace another Frenchman, Dominique Strauss-Kahn, who resigned in the middle of his term after being arrested in New York on sex charges.

But there is more than mere sentiment behind the Lagarde push, and that is the tradition that the post must go to, if not a French citizen, then at least a European. Since the IMF was founded in 1947, the post of managing director has always been held by European in an unwritten tradition that the U.S. hold the World Bank Presidency and a European the IMF leadership.

This long-lasting “deal” between the Americans and the Europeans “is no longer tenable,” maintains Thailand Finance Minister Korn Chatikavanij who argues that an Asian, coming from the world’s engine of growth, should hold post of managing director.

Asian and other emerging nations have had better luck in breaking the U.S.-European lock that third organ of global economic management, the World Trading Organization. The WTO is also currently led by the Frenchman, Pascal Lamay, but once was headed by Supachai Panitdhpakdi of Thailand.

Supachai was the first Asian, indeed the first person from any developing nation, to head the WTO, but he had to share the post with New Zealand’s former prime minister Michael Moore due to an election impasse. Nominations to succeed Strauss-Kahn close on June 10, and so far no credible alternative candidate has emerged save for Mexico’s Central Bank Governor, Agustin Carstens.

So far no Asian candidate has yet put him or herself forward for the rest of Asia to rally behind. “We’re not used to organizing as a bloc,” said Thailand’s Korn, speaking in Tokyo recently the Nikkei Forum. But, he added , it is not for any dearth of plausible Asian candidates.

Among those who could easily fill the bill include Indonesia’s former finance minister Mulyani Indrawati, who was tapped to become one of the three managing directors of the World Bank, raking immediately below the American president Robert Zoellick.

During her tenure as Indonesia’s finance minister she earne considerable international praise for her work in reforming the country’s tax system, increasing Indonesia’s foreign reserves, and, the hot topic of the moment, reducing the nation’s debt ratio. And, of course, she is a woman and a Muslim.

Another serious Asian candidate might be Singapore’s finance minister Tharman Shanmugaratnam, although he recently took on the additional duty as the republic’s deputy minister after last month’s general election, which would indicate that he is not eager to move to Washington, headquarters of the IMF.

It is argued by some that a European at the head of the IMF is especially needed now so as to bring a necessary European perspective in helping to resolve the debt crises in Greece, Ireland, Spain and Portugal. Yet it was not considered necessary to have an Asian at the head of the IMF to bring any local perspective to the Asian Financial Crisis of 1997.

Japan and China do not have horses in this race, for the moment, but the two nations, Japan, in particular, will be worth courting by any candidate. Nor has Tokyo has taken sides in the contest so far, except to support a transparent and merit-based election process.

Japan has long held one of the three IMF deputy director posts (currently held by former vice finance minister Haoyuki Shinobara), and is eager to keep it. China might wish to supplant Japan at this level, but may settle for creation of a fourth deputy post for one of its citizens..

The Lagarde steam roller may have too much momentum to stop before nominations close in a week, especially has there may be strong sentiment to choose a French person to fill the unexpired term of Strauss-Kahn, but it could also develop into one of the more interesting East-West, developing-world –versus-developed-world contests.


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