David Prosser: Lagarde is wrong: her nationality is both handicap and advantage
Thursday 26 May 2011
Outlook Her nationality is neither "a handicap nor an advantage", claimed Christine Lagarde as she launched her candidacy for the role of managing director of the International Monetary Fund yesterday. The French Finance minister has many excellent qualities but in this analysis, she is surely mistaken on both counts.
Ms Lagarde's nationality is a clear advantage in that the European Union, which controls almost a third of the votes at the IMF, wants another European to succeed Dominique Strauss-Kahn. Assuming Ms Lagarde attracts united EU support, she'll be well on the way to victory.
On the other hand, Ms Lagarde's nationality is a clear handicap, because so many people believe the next IMF leader should not be a European – and certainly not from France – whatever the qualities possessed by the candidate.
Which, then, ought to prevail? Handicap or advantage?
Ms Lagarde's argument, on the face of it, seems persuasive. This should be a meritocratic appointment, she says, rather than a political one. Against that, however, one of the merits that the successful candidate will need to be able to demonstrate is an ability to command the support of the world's emerging economic superpowers – particularly the Bric nations. And because of her nationality, Ms Lagarde does not appear to command that support – the Brics describe the convention of appointing a European to head the IMF as "obsolete".
Now, one might argue that the Brics' insistence that this is the moment to break with convention is as dogmatic as automatically appointing a European, but if that is the way they feel, it makes a difference to the process. There's the democratic consideration: that the IMF's leadership ought better to reflect its membership, especially since it has not previously recognised countries now contributing so much to the global economy (and which will be contributing even more by the end of the term of office of the next IMF boss). There is also the practical consideration: that the Brics have the economic firepower to do their own thing if they believe the IMF is a club of which Europe has no intention of ever giving up control.
What of the European argument that this is a one-off – that with the eurozone sovereign debt crisis presenting the most pressing issues for the IMF, it makes sense for the fund to be led by a European well versed in its intricacies?
Well, one imagines Europe will always be able to find an excuse for appointing one of its own. This argument looks especially specious, however (which may be why Ms Lagarde did not make it yesterday). If the European argument is that one needs to hail from the location of the crisis in order to deal with it effectively, how will the IMF, under European leadership, manage to cope with problems in other parts of the world? Indeed, appointing a European because the European mess requires it looks like a particularly perverse reward for failure.
In short, the Europeans (and the French, in particular) have had a long-enough stint exercising their right to run the IMF. Even leaving aside the fact that they have not always done the job terribly well, the sheer scale of the Brics' economic power commands that authority is shared. Now is the time to do so.
All that said, the Brics have a problem. They may have put on a show of unity in attacking the European prerogative, but they will also have to come up with a credible candidate to counter Ms Lagarde. Nationality matters, but so do the sort of credentials that the Frenchwoman possesses. And in agreeing on that candidate, the Brics, which are a much more disparate group than the EU, may face a bigger challenge even than overturning convention.
So far, the much-admired Agustin Carstens of Mexico is the only declared candidate from the developing economies. He must now build the same coalition of support that Ms Lagarde can depend on. And if he can't do that, the Brics must find someone else.
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