Sex, BRICS, and PIGS at the IMF
Dominique Strauss–Kahn’s stunning resignation as director of the International Monetary Fund provides Asians and other emerging nations with their best chance yet to break precedent and claim leadership of the IMF. The question is whether these countries are ready to advance a candidate now that the opportunity has sprung suddenly upon them.
The timing of Strauss–Kahn’s departure couldn’t be more propitious for the BRICS—Brazil, Russia, India, China, and South Africa–as well as comparable countries such as Turkey. China’s voting share at the fund is now 6 percent, compared with a 14 percent contribution to global GDP; Europe’s numbers are upside down: a 29 percent voting share, a 20 percent slice of global GDP. Altogether, the “middle income” powers will by every forecast lead the global economy over the next several decades. From this perspective, it is the moment to pounce after a long campaign for a greater say at the top of the IMF.
These nations deserve it. Ten out of 10 IMF directors have been European since the fund was founded in 1946, and this reflects a world gone by. It’s not a matter of a symbolic figure at the top. The fund needs to broaden its policies to reflect a world in which the neo-liberalism of the West is balanced by other outlooks—and thus other ideas as to how to address a crisis or how to set criteria and “conditionality” for IMF assistance.
There are already names coming out of the BRICS and similar nations. One is Kemal Dervis, who now heads the UN Development Program, and another is Arminio Fraga, a former central banker in Brazil. Min Zhu, a Chinese, is currently a top adviser at the fund. Any of these and others could plausibly stand for Strauss–Kahn’s position and more plausibly for the deputy’s job, which John Lipsky, an American, is to vacate.
But the timing of the explosive events surrounding Strauss–Kahn’s alleged sexual misdeeds cuts two ways. The debt crises among what have been called (without prejudice) the PIGS—Portugal, Ireland, Greece, and Spain—are pressing business for the fund now. German Chancellor Angela Merkel appears especially eager that a European take over from Strauss–Kahn.
The European Union’s wagons appear to be circling swiftly around French Finance Minister Christine Lagarde, overseer of an impressive post-crisis recovery. This underscores the BRICS’ principal weakness: They have no group similar to the EU to advance their man (or woman). As Morris Goldstein, a former IMF director, told The Telegraph in London this morning: “It takes a candidate to beat a candidate.”
In the long run, the Strauss–Kahn events will prove a gain for middle-income nations whether or not they capture the IMF job. The abrupt vacancy atop the fund has pushed the question of old practice and present reality to the center of the table, and it won’t fall off now until it’s resolved. The BRICS and their supporters may not triumph this time, but their moment is suddenly a lot closer. Even Chancellor Merkel has now acknowledged this much.