It is widely expected that former French Finance Minister Christine Lagarde will be voted in as the next head of the International Monetary Fund. After Dominique Strauss-Kahn’s attempted sexual assault charges brought him down, the latest talk was how this would impact the IMF and, more importantly, was it time for a change at the helm for the organization? Every sitting president of the IMF has been a European, just like every president of the World Bank has been an American. Its not written in the rules that this is the case, but the general “gentlemen’s agreement” between the U.S. and Europe after the Bretton Woods conference has made this so.
Some thought this was the time when developing economies, such as Brazil, China, and Russia, would attempt to reverse this trend. After all, they are the future of the global economy. The European countries greatly disagreed with this logic. In their minds, the E.U. is going through a major crisis in confidence with Greece, Ireland, Portugal, and possibly Spain, running into crushing debt trouble they believed a European was best to handle the situation to a European problem. Despite balking from the developing world that a refreshing look was necessary, Lagarde will probably win.
Her opponent was Agustin Carstens, the head of Mexico’s central bank and former Mexican Finance Minister, he looks very qualified. Many see him as a very gifted economist with a knack for getting countries out of trouble, like Argentina in the late 1990s and Mexico today. The main criticism leveled at him is that he studied at the University of Chicago, home of famed free market economist Milton Friedman. Although he does have a belief in free markets, Carstens is not completely opposed to regulations, he advocated for tighter regulation on Mexico’s banks in 2009 and said Brazil should have tight regulation of foreign capital.
Alas, both Lagarde and Carstens would be good candidates for the position. They both are qualified to run the institution in a time of crisis. However, the debate is not really about the candidates. Rather, it is about power exerted by the U.S. and Europe. The U.S. holds 17% of the vote and the European countries have 47%. U.S. Treasury Secretary Timothy Geitner threw his support behind Lagarde this morning. With both support the U.S. and Europe she is on a sure path to victory.
The main problem is that the developed world does not vote in lockstep. We talk about them as one group of nations, but they do not have a united coalition. Even so, Brazil, Mexico, and Russia all supported Carstens, but Russia will switch its vote to Lagarde later today. China, the anchor of the this loose coalition also pandered to both candidates and would wait until the U.S. and Europe decided before announcing its position. In the end, no one wants to stand up to the U.S. or Europe. With growth trends leading away from the West and towards the South and East, they can never exercise their power because the international system is rigged towards a post-World War II way of thinking. Reform is not bound to happen because the U.S. and Europe do not want to give up that power they’ve had for so long.
This race is more than nominating an IMF Chief, its about power and the politics of institutional inequality. Its proof that if you make the system, you win, but if you just become a new player, no matter how hard you work, you will always lose. Who knew the U.S., touting its values of upward mobility, would take part in such a system of old, European aristocratic rule. I guess the U.S. sees it more like Orwell’s paraphrased final words in Animal Farm, “All countries are equal, but some are more equal than others.”
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