The IMF: DSK's replacement should be a non-European

[RandBlade]

When America sneezes, Europe catches a cold

That famous saying has certainly been true recently, following the credit crunch sparked largely by the US Sub-Prime Market etc and bankruptcies in Wall Street, there's been bankrupt nations in Europe. Iceland went first but Greece, Ireland and Portugal have all failed. All of the latter three have had to be bailed out by their fellow ECB-nations, the EU and the IMF.

When Greece was bailed out it was supposed to have stopped the contagion, it didn't.
Then Ireland was bailed out and it was supposed to have stopped the contagion. It didn't.
Now Portugal is getting bailed out and it's supposed to stop the contagion. It won't.
Now Greece is having to come back for more money.

Italy and Spain are still looking grim.

Traditionally the IMF has always had a European leader. Makes little difference when Europe, the US etc are all strong and the nations being bailed out are typically third world ones. That arrangement is no longer the case though, the doctor is also the patient. IMF funds are being handed over hand-over-fist to keep Europe running.

There is currently a conflict of interest between Europe and the IMF. As the IMF continues to bail out bankrupt nations in the Eurozone, it would be ethically bankrupt to replace DSK with another Eurozone politician.

When the IMF bails out a country normally, they do so with plenty of strings attached. Devaluation is often part of it, though that can't happen due to the Euro. In fact we have a situation where the IMF in its professional capacity is getting down and involved in trying to bailout Europe, ran by a French Socialist with Presidential Ambitions. That is a problem.

Given then catastrophic state Europe has gotten itself into, the next IMF leader should be someone independent. Someone who can dispassionately get involved, make the tough calls. Whether its an American, or Asian or someone else, it should not be someone involved in the Eurozone.

[Dreadnaught]

The problem with many unpopular bailouts is that they often do work and prevent the ships from sinking. The issue here is the structure of these bailouts seem to be failing to tread a very narrow line between helping these economies recover and being politically viable by charging too-low rates.

Would you really want someone from China heading the IMF?

[earthJoker]

Yey, first Swiss IMF member (you said non-Eurozone right?)

[Loki]

Realistically speaking, a vast majority of the top economists in the world are either from the US or Western Europe, so if skill was the only criterion used, you'd still end up with an American or European nearly every time. And tribalism demands that both of those groups be satisfied, which is why the World Bank always ends up with an American and the IMF with a European.

[wiggin]

Realistically speaking, a vast majority of the top economists in the world are either from the US or Western Europe, so if skill was the only criterion used, you'd still end up with an American or European nearly every time. And tribalism demands that both of those groups be satisfied, which is why the World Bank always ends up with an American and the IMF with a European.

I think there are plenty of top economists who aren't from the US or Europe. Okay, most of them are trained in the US or Europe, but they aren't from there are often don't work there. There's Mohammed El-Erian of Egypt, Stanley Fischer of Zimbabwe/Israel, Kemal Dervis of Turkey, etc.

[Loki]

I think there are plenty of top economists who aren't from the US or Europe. Okay, most of them are trained in the US or Europe, but they aren't from there are often don't work there. There's Mohammed El-Erian of Egypt, Stanley Fischer of Zimbabwe/Israel, Kemal Dervis of Turkey, etc.

What percentage of top economists aren't European or American? 1%? 5%? I have no doubt that there are some, but they're a tiny minority, and most of that minority, as you pointed out, were trained in the US or Europe.

[wiggin]

It's not relevant, Loki. You need to look at the subset of economists who work in global economic policy institutions like the IMF, World Bank, and various central banks around the globe. There things get much more balanced.

[Hazir]

I don't give a damn about what emerging economies want or what Randblades pipe dreams about 'the best person' are. The job belongs to the EU and I have no desire to give it up just so that a person less likely to be working in my interest can satisfy some third world entity with an inferiority complex.

As far as I am concerned Trichet can move to the IMF.

[wiggin]

Uhm, could you explain why the job 'belongs' to the EU for any reason other than tradition?

I mean, I don't really care if a European is head of the IMF (and as Loki mentioned, it's likely to be an American or European anyways), but why does it belong to the EU?

edit: To clarify, I don't think the head of the World Bank 'belongs' to the US, either. It may be true that the majority of the qualified people to head the World Bank are currently in rich Western countries, but there's no real reason that couldn't change.

[Hazir]

I need no other reason than that it has been like that for decades. If you want to change things at the World Bank and hand it over because some emerging economy wants to have a go at it, by all means, have your way. But don't expect us to be walking away from the IMF any time soon.

[RandBlade]

I need no other reason than that it has been like that for decades. If you want to change things at the World Bank and hand it over because some emerging economy wants to have a go at it, by all means, have your way. But don't expect us to be walking away from the IMF any time soon.

Funny, when Russia and Qatar won the World Cup and the English were unhappy, I distinctly recall you piping up that "its not been there before" was a good reason to go elsewhere. That its been like that for decades is not a reason to continue.

Besides, its not in the hands of the EU to gift it. So it doesn't entail "walking away", if someone else gets voted in.

[wiggin]

I need no other reason than that it has been like that for decades. If you want to change things at the World Bank and hand it over because some emerging economy wants to have a go at it, by all means, have your way. But don't expect us to be walking away from the IMF any time soon.

Really? Really?! I swear, you're getting more and more irrational. Is this some stupid point of pride to you? Does it even remotely matter to you that the economic 'center of mass' of the world is steadily shifting away from Europe, and that eventually international organizations will have to reflect this?

I do have to give you credit that you don't even bother trying to hide how you feel, but it ain't pretty.

[LittleFuzzy]

Funny, when Russia and Qatar won the World Cup and the English were unhappy, I distinctly recall you piping up that "its not been there before" was a good reason to go elsewhere. That its been like that for decades is not a reason to continue.

Besides, its not in the hands of the EU to gift it. So it doesn't entail "walking away", if someone else gets voted in.

Hey, Hazir's only interest is the overweening aggrandizement of his view of "Europe". Surely you recognize it as an extra-national take on nationalism?

[Hazir]

Hey, Hazir's only interest is the overweening aggrandizement of his view of "Europe". Surely you recognize it as an extra-national take on nationalism?

Bullshit, this is about hard power politics. It is in the interest of Europe that we don't have to deal with some person from another area who needs to prove something. There is no reason why we should take such a risk, especially not now.

[Hazir]

Funny, when Russia and Qatar won the World Cup and the English were unhappy, I distinctly recall you piping up that "its not been there before" was a good reason to go elsewhere. That its been like that for decades is not a reason to continue.

Besides, its not in the hands of the EU to gift it. So it doesn't entail "walking away", if someone else gets voted in.

Football is a luxury, we're talking about who controls the bread and butter now, and people with high ideals how 'new people should get a chance' can go and stuff themselves.

[Loki]

http://www.nytimes.com/2011/05/19/wo...e.html?_r=1&hp

[Hazir]

http://www.nytimes.com/2011/05/19/wo...e.html?_r=1&hp

She seems like a good enough choice. I hope they have the sense not to put her there in some interim capacity.

[Loki]

The successor is going to serve out the rest of DSK's term (which ends in 2012).

It's interesting that out of the first 10 heads of the IMF, 4 were French (and another was Belgian). This is in contrast to only 1 German leader.

[wiggin]

Bullshit, this is about hard power politics. It is in the interest of Europe that we don't have to deal with some person from another area who needs to prove something. There is no reason why we should take such a risk, especially not now.

You do realize the IMF is the international organization for managing monetary policy, not the European one, yes? IMF policy that's good for Europe might not be good for everyone. Furthermore, given that the IMF's largest intervention by far is in Europe, might it make sense to have an outside perspective?

Honestly you're being nonsensical on this one. It's not a 'capitulation' of any sort.

[LittleFuzzy]

Bullshit, this is about hard power politics.

Which is in no way mutually exclusive with what I said. In fact it dovetails rather well with it. What I said merely fits this into an already established, pretty damn consistent pattern of behavior by you.

[RandBlade]

Bullshit, this is about hard power politics. It is in the interest of Europe that we don't have to deal with some person from another area who needs to prove something. There is no reason why we should take such a risk, especially not now.

Indeed that is correct. Which is why the rest of the world should insist upon it. The interests of the IMF are not necessarily the interests of the Eurozone.

[wiggin]

RB, I do see a reasonable argument for having someone comfortable with leaders of eurozone countries (and most particularly their finance ministers) lead the IMF right now. It's tough to get the eurozone to agree on anything, and being able to build consensus is a valid reason to get someone who's got the connections. While it's not necessarily a European, it most likely would be. That being said, there's also the concern of a conflict of interest here (I can't imagine the prior argument being used back in the Asian financial crisis to justify an IMF head from Asia, for example), which is a very cogent point.

I think the important point here, though, is that the IMF head should be picked on the basis of ability and what the fund needs right now (whether that's an outside perspective on the eurozone or someone with the political connections to make things work), not some obsessive argument about Europe 'deserving' the position.

[RandBlade]

RB, I do see a reasonable argument for having someone comfortable with leaders of eurozone countries (and most particularly their finance ministers) lead the IMF right now. It's tough to get the eurozone to agree on anything, and being able to build consensus is a valid reason to get someone who's got the connections. While it's not necessarily a European, it most likely would be. That being said, there's also the concern of a conflict of interest here (I can't imagine the prior argument being used back in the Asian financial crisis to justify an IMF head from Asia, for example), which is a very cogent point.

I think the important point here, though, is that the IMF head should be picked on the basis of ability and what the fund needs right now (whether that's an outside perspective on the eurozone or someone with the political connections to make things work), not some obsessive argument about Europe 'deserving' the position.

I 100% agree with everything you said.

[Hazir]

And anyway, these 'third countries' that think they have a claim should not think this whole talk is going anywhere untill they actually back it up with money. Especially the Chinese with their currency controls are the last with any claim.

[wiggin]

AFAIK China doesn't even have a candidate in the running. To be honest it sounds like the Turkish guy has the best chance. Two of the other top 5 or 6 contenders are too old by current rules, and the rest have less experience/clout.

As for backing it up with money, they might counter that they should be compensated with greater voting rights. You get what you pay for, neh?

[Hazir]

Except that they don't pay

If Dervis is European enough he may indeed not be such a bad choice.

[RandBlade]

I imagine although not showing it, Hazir's inner soul must be getting torn here. On the one hand "Europe, Europe #1!" on the other, the most probable alternative is Turkish.

[Hazir]

Well, he's been one of the best ministers of finance Turkey ever had. Anyway, he won't be the one to succeed DSK. The EC has already narrowed it down to 'EU'. And regardless of what you think, you can't become the IMF top person against the wishes of the EU.

[wiggin]

Except that they don't pay

If Dervis is European enough he may indeed not be such a bad choice.

Actually, a large portion of IMF revenue has come from loan repayments made to the developing world (until recently; now most of the IMF's outstanding loans are to European countries). Furthermore, the quota is paid by the member country and is directly tied to voting rights. So if their voting goes up, so does their payment.

[Hazir]

Actually, a large portion of IMF revenue has come from loan repayments made to the developing world (until recently; now most of the IMF's outstanding loans are to European countries). Furthermore, the quota is paid by the member country and is directly tied to voting rights. So if their voting goes up, so does their payment.

There is nothing automatic about the voting weight being adjusted and as a matter of fact the voting rights were already adjusted recently. EU members hold close to 31% of the votes, that's almost double the number of votes the US have. Other countries individually barely cross the 3% threshold.