Christine Lagarde and the European IMF
In recent weeks, Christine Lagarde has been on a whirlwind tour seeking support for her candidacy as the new IMF director. Her trips to Brazil and India are reported to have failed in receiving explicit endorsement. India has openly not given any assurances as they continue to look for consensus, while Brazil has been pressing on the need for more reforms at the institution. China has openly asked whether one of its own, Zhu Min-a former central bank deputy governor currently serving as an economic advisor to the IMF’s managing director, will be her deputy. Thanks to the unwavering support of European nations, Madame Lagarde’s candidacy has turned the race into an uphill task for her rivals.
Augustin Carstens, Mexico’s head of the central bank is technically the only other candidate still swinging. An alumnus of the University of Chicago, Carstens holds a doctorate in economics. Among other positions, his experience includes a stint as an IMF deputy managing director at a critical time of crisis in the management of the fund.
The (South) African candidature, Trevor Manuel, dropped out early. Citing the sense of European ‘birthright’ towards the directorship as a hindrance, he has also pragmatically pointed out how difficult it is for anyone to run against the reality of Europe’s voting power that is based on shareholding.
Together, Carstens and Manuel have voiced the discontent with European dominance within the IMF as the institution is viewed as being traditionally archaic, in need of a ‘Southern’ jolt and the bearer of major future risks to the global economy.
Most pundits have focused on how European support has been like a comfortable pair of high heeled shoes enabling Lagarde to strut all the way to the directorship, while the ‘south’ has not figured out which shoes to wear for the race. This contest is not only about who prevails in the process but the reasons for others to participate in it. Lagarde may be set to win, but betting on the nature of horse trading and national interests set to emerge, the ‘south’ should be in for a win as well.
The Western and European dominance herein referred is obviously not about who holds office per se but who has what voting rights. The Economist has recently pointed out that collectively the economies of the EU countries amount to just fewer than 24% of the global economy yet they have 32% of the votes in the IMF. In comparison to the BRIC’s and South Africa whose combined economies make up about 21% of the world GDP while only possessing 11% of voting rights.
Surprisingly, sub-Saharan Africa, (excluding South Africa) is the most over-represented region, with 3.1% of the vote though it makes up for a miniscule 1.35% of the world economy. It therefore seems that if Lagarde is to guarantee a legitimately decisive consensus for her win, she should be horse trading on voting rights rather than on office positions. This is especially the case now that the US diplomatically hopes for the best possible candidate. The Carstens candidature, though not as robust as Madame Lagarde’s is obviously being waved in her face. He comes from Mexico-an emerging country, knows the IMF well having served in it, and his campaign to improve the “lagging behind” of the lending powers fits well into the IMF reform agenda. His candidature looks like a tactical bluff which will nevertheless speak volumes if there is no consensus on Lagarde. Whichever way it pens out the IMF campaigns are showing how critically emerging powers are imagining the prospects of increasing their power in institutions.