How to choose next IMF leader
Task for board of governors in Lima
by Peter Doyle
Fri 9 Oct 2015
Selecting the right leader for the International Monetary Fund from next summer should be high on the agenda of finance ministers and central bankers meeting in Lima this weekend. In Lima, IMF managing director Christine Lagarde lauded the ‘new Latin America, and the new IMF’. But, with regard to selecting a new leader, the IMF has not changed its spots. The longstanding ‘informal deal’ between Europe and the US that only Europeans are appointed continues to exclude the overwhelming portion of humanity, including those from the Americas, from proper consideration. The IMF deserves better than this and should lead globally by example on such matters.
Accordingly, firm criteria are needed to select the best candidate for the next five-year term after Christine Lagarde’s mandate expires in July 2016.
Three criteria seem essential.
First, the candidate should demonstrate professional mastery of applied international macroeconomics. The IMF is perpetually required to adjudicate macroeconomic issues of a highly technical and contentious nature, on which there are strong voices on all sides. The managing director must be capable herself or himself of assessing the technical merits of different proposals, which might mean standing up to staff and/or political consensus on the IMF board.
Second, politicians should be excluded. The managing director must be neutral (and be seen as such) in adjudicating between the often competing economic interests of member states. The appointment of politicians to run the Fund since 2000 has compounded long-standing concerns that the IMF acts unduly as an agent of its major shareholders.
Third, the nominee must have proven leadership skills. The IMF chief has to chart paths through intense technical and political disputes; operate a large, querulous, and diverse bureaucracy; identify priorities for the IMF and the world economy; liaise with other international bodies; and persuade world leaders to back Fund proposals on all these matters. Exceptional leadership is essential.
To accomplish this, I favour open advertisement of the post, followed by a pre-selection review for candidates fulfilling the criteria. A panel of eminent international applied economists – comprising perhaps Stanley Fischer, Carmen Reinhart, Raghuram Rajan, Martin Wolf, Hyun Song Shin, Anne Krueger, Joseph Stiglitz, Ricardo Hausmann and Ngozi Okonjo-Iweala – could produce a shortlist of three to go forward for selection by the IMF board of governors.
Anyone doubting the urgency of all this should note that the IMF has failed to anticipate any of the recent global crises: the trans-Atlantic banking crisis, the euro crisis, and now the unfolding China-cum-emerging market crisis – early-warning failures which can be directly traced to the appointments of managing directors and their impact on the internal workings of the IMF. And to avoid direct conflicts of interest there is a compelling argument to exclude European candidates in 2016, even if professionally sound, because the bulk of outstanding IMF lending is to Europe.
A strong IMF, with competent and legitimate leadership, is central to addressing immediate global challenges. Accordingly, emerging market countries, rather than pressing for ‘their’ candidate for MD, would do better to champion such reforms to the selection process, in parallel with similar changes to the appointment process for the World Bank president. And the IMF's board of governors, led ultimately by President Barack Obama and Chancellor Angela Merkel, should back such steps for both institutions so as to strengthen the global financial architecture in Lima, for the good of the IMF, the World Bank, and the global economy.
Peter Doyle is an economist, commentator, and former IMF senior staff member.
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