The next managing director of the International Monetary Fund should not be a European argues Adam Tooze, professor of history at Columbia University.
Tooze is the author of Crashed: how a decade of financial crises changed the world, a bestselling book and a huge influence on much of current global thinking.
The historian now argues that the appointment of a European following Christine Lagarde’s planned move to head the European Central Bank is “indefensible and anachronistic”.
Traditionally, a US citizen has headed the World Bank while it has a blocking vote on the IMF as its largest shareholder, but a European becomes the IMF managing director, a situation that has prevailed since the creation of the two Bretton Woods’ institutions first mapped out in a meeting of the Allied powers in 1944.
Yet Tooze says that this power-sharing arrangement between the US and Europe is looking increasingly threadbare and that this situation has been exacerbated by recent crises.
Writing for policy website Social Europe, Tooze says that the Eurozone crisis created an atmosphere of “toxic co-dependency”.
He says the IMF became unnecessarily embroiled in the national crisis programmes for Greece, Ireland and Portugal providing funding of €250bn overriding the concerns of other non-US or non-EU shareholders.
He believes that the fund should not have been involved in the disastrous management of Europe’s debt crisis while it also meant that Europe was too slow in building its own institutional responses.
While Lagarde has wisely kept Europe out of the most recent bailout for Greece in 2015, Tooze believes the fund is not safe in Europe’s hands.
The second significant element of Tooze’s argument concerns a shift in global economic influence and power.
He wants to see increasing emerging market influence over the fund – to begin to reflect the huge shifts in global power.
Currently the EU 27 collectively have a voting share of 25.6%, compared with 16.5% for the US alone with China on 6% and India on 2.6%.
That is due for significant revision, though it is likely that the US would oppose anything taking its share below 15 per cent which gives it an effective veto over the fund’s decisions.
Tooze also notes that the three most often-cited front runners from outside Europe are Augustin Carstens, formerly governor of the Mexican central bank and currently running the Bank for International Settlements, Raghuram Rajan formerly head of the Reserve Bank of India and Singapore’s former finance minister Tharman Shanmugaratnam though he has reservations about all three, their conventional approach and membership of the Davos’ set.
He wants the EU to take a bold step by not insisting on a European candidate.
The IMF board has begun the selection process and will make an appointment by the 4th October 2019.