this organisation. Because, the world has given it immense power to oversee global finance — and that impacts our economy, our jobs, our future. Because, this organisation has lost its intellectual credibility. And because, France has held the top job for 26 of the past 33 years at this institution.
Here’s an organisation that tells countries to have discipline, exercise restraint and tighten belts on the fiscal front, while its head has allegedly heeded to none of these on the physical side — do remember, though, that the charges of sexual assault on the now-disgraced former IMF chief Dominique Strauss-Kahn are yet to be proved. Here’s an organisation where India’s vote has less power than that of Canada, Italy, Saudi Arabia and Russia — leave alone US, China, Japan, Germany and the UK.
But it is not just the political nature of voting that is under scrutiny. An emerging question also is: why should a politician, with political interests still alive, be made the head of an organisation that can dispense favours worth over a trillion dollars? The question is crucial, as France’s finance minister Christine Lagarde — a fine mind, no doubt — is the front-runner.
The answer can be tackled through just one word: transparency.
India and the rest of the non-EU world, including China, Australia, Brazil, and South Africa — none of them has a candidate to back so far — are seeking merit and transparency. Predictably, the IMF, in its selection process has failed to deliver transparency. “Although the executive board may adopt a shortlist by a majority of the votes cast, the objective of the executive board is to adopt a shortlist by consensus,” the process says.
While 'merit' can be taken for granted, the question really is in the selection process. “Everyone will be equally meritorious but most selections will be, as has been in the past, through a process of consensus,” a senior official told me. “There will be some quiet informal jostling and seeking support. Some will withdraw. And then we’ll see who’s left, and vote.”
Consensus, I’m afraid, is not transparency, it’s power-mongering, it’s subjecting an important institution to wheeling-dealing, it's playing politics. And if this is the way forward, there’s not much to look forward to from our multilateral institutions.
“With the rise of the ‘rest’, global economic governance is ever more important,” Raghuram Rajan, former IMF chief economist and professor at University of Chicago Booth School, wrote recently in Financial Times. “If western politicians want the rest to take their responsibilities seriously and to legitimise our system of multilateral institutions, the first step must be to give up their stranglehold on power.”
We saw the blatant abuse of this power about a decade ago. “The disparity between how the West responded to its crisis and the demands imposed on East Asia during their crisis 10 years ago have opened the IMF up to charges of hypocrisy,” Nobel laureate and professor at Columbia Business School Joseph E Stiglitz wrote in The Telegraph on Sunday. “Not surprisingly, there is a lingering lack of confidence in the institution, and this hampers the ability of the international community to address basic global issues.”
If the global financial sector is demanding utmost transparency and disclosures from private participants not only in financial products but equally in their governance, the old vested interests that have been running the IMF can’t preach one idea and practice another. India may not have a ready candidate, but it can certainly push for this small reform that can replace the disgraceful exit of Kahn with some honour at the IMF.