14 February 2016
The International Monetary Fund (IMF) closed the nomination period of the next IMF Managing Director on 10 February. Incumbent Christine Lagarde is the only candidate. Given the recent history of the selection of the IMF Managing Director, a single candidate seems odd. The lack of competition or interest in one of the most important international official positions risks undermining credibility and legitimacy of the selection process.
In 2007, at the time of the selection of Dominque Strauss-Kahn, Jean-Claude Junker, then president of the Eurogroup, said that “in the Eurogroup and among EU finance ministers, everyone is aware that Strauss-Kahn will probably be the last European to become director of the IMF in the foreseeable future”. In 2011, the IMF Executive Directors representing Brazil, China, India, Russia and South Africa, declared that the “convention that the selection of the Managing Director is made, in practice, on the basis of nationality undermines the legitimacy of the Fund.”
The IMF is the most important multilateral institution. The IMF Managing Director is critical in setting the agenda of the institution and be an effective head of the IMF staff. The person needs to have convening power and be able to lead international monetary policy cooperation, the main mandate of the IMF. The appointment of the IMF Managing Director therefore should be an important event. By having a single candidate only, it diminishes quality and relevance of the selection process.
The Managing Director selection process has rarely been completely uneventful. It has been normal practice that there were several candidates, Jacques de Larosière of France and Willem Duisenberg of the Netherlands in 1978; Michel Camdessus of France and Onno Ruding of the Netherlands in 1986, some candidates had to withdraw amid opposition by some key IMF member countries, e.g. Ciao Koch-Weser of Germany in 2000. In 2004, Rodrigo de Rato of Spain had opposition and in 2007 Dominique Strauss-Kahn of France. In 2011, Ms Lagarde faced other candidates.
The candidate search imposes certain restrictions and invites to some or considerable deal-making. Nominations can only be made by the Executive Directors of the IMF. The view of one’s country’s rightful turn may complicate things and the fact that the European Union recently agrees on a single candidate reduces competition greatly. Similarly, the view that a certain group of countries should be favoured reduces choice.
Managing Directors from France have occupied the job 60 percent of the time since inception of the operations of the IMF in 1946 (see January 2016 Newsletter). 70 years later there have only been Europeans and by the looks of it there will continue to be. Ms Lagarde’s nationality is an issue and her legal entanglements in France represents a major problem. So why are there no other candidates?
IMF Managing Directors tend to be former central bank governors and finance ministers but not always. As an official finance institution, a senior public official with some monetary or fiscal policy background seems a must (though should not be). There is some implicit standing that comes with the country of origin, the finance minister of Tonga may find it more difficult to impose his authority than the finance minister of Austria. The record as finance minister or central bank governor also matters, a finance minister from Greece may struggle and so would a governor from Zimbabwe to gain acceptance. Any shenanigans in any former position normally pose a major obstacle. Academic requirements are minimal even though the IMF staff has the highest concentration of PhDs in economics possibly anywhere. The gender balance at the IMF is tilted heavily towards men (few women do PhDs in economics) so being a woman helps. There is no prerequisite to have had relevant private sector experience. Some prior international engagement is useful and good knowledge of the G7 and or G20 circles is a plus. With the IMF 188 member countries, these criteria reduce the list of possible candidates but not to one.
Some may argue that Ms Lagarde did such a great job that she should simply be given another turn to continue. Others may simply assume that Ms Lagarde’s reappointment is a foregone conclusion amid some suspicion of collusion. Some may say that the list of candidates who have what it takes is actually extremely short. Others still do not want to upset their political allegiances or friendships. Whatever it is, it is not a good sign that there is no competition or sufficient interest for the job of IMF Managing Director. It may reflect cohesion. It may also signal indifference.