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World: IMF Struggles To Find New Managing Director

  • Andrew Tully



Last week, the board of directors of the International Monetary Fund (IMF) conducted an informal vote to determine the support of three candidates to become its next managing director. The man who got the most votes is now seen as being out of the running. So are the other two. RFE/RL's Andrew F. Tully reports on the IMF's struggle to find a new leader.

Washington, 6 March 2000 (RFE/RL) -- Most observers agree that Caio Koch-Weser has no chance to become the next managing director of the International Monetary Fund (IMF).

Since November, when Michel Camdessus announced he was ending 13 years as managing director, Germany has pushed Koch-Weser's candidacy. And last Monday, the finance ministers of the European Union unanimously endorsed him. But the same day, the administration of U.S. President Bill Clinton said it could not support him. This was likely the fatal blow. The U.S. is the largest investor in the IMF, with a 17.3 percent share.

Last Thursday, Koch-Weser led two other candidates in an informal ballot of the IMF's board of directors. In second place was Stanley Fischer, Camdessus' deputy and now acting managing director of the IMF, and Eisuko Sakakibara of Japan. But board members representing 36 percent of the fund's member nations abstained. Details of the vote were withheld, but some news reports said the U.S. was one of the abstaining members.

Traditionally, IMF managing directors are elected unanimously. In fact, a vote is not held until a clear favorite among candidates emerges. Those who did not originally support that candidate eventually agree to support him.

Given this tradition, the consensus is that Germany will have to withdraw Koch-Weser's nomination. Ian Vasquez, a specialist in international said the IMF would feel "uncomfortable" under the direction of a man who was not widely accepted.

Another tradition is that the managing director be a European, while the president of the World Bank be an American. If the tradition prevails, then Fischer would be barred from the position. And Fischer, an American, is widely acknowledged as the best candidate for the job.

Clinton certainly is holding to this tradition. He says he wants to work with Europe to elect a European to lead the IMF -- as long as it is not Koch-Weser. Vasquez, a scholar at the Cato Institute, a Washington think tank, said he believes Clinton opposes the German because of the German's lack of political experience. He says running the IMF requires more than just a good grasp of economics.

Vasquez agrees that Fischer is the best candidate to succeed Camdessus. He says Fisher has for years been the IMF's leading economic policy-maker and is sensitive to the need for reform in the IMF.

But Vasquez tells RFE/RL that too much attention is paid to who will be the IMF's next managing director. He says whoever is the next leader of the fund must subordinate himself to IMF's member nations -- in particular the U.S., its largest shareholder.

"The biggest policy decisions and new directions that the IMF has taken over the years -- certainly since the 1980s and before -- have been made at the U.S. Treasury Department, whether it was during the Third World debt crisis or after the collapse of communism or more recently when Mexico -- Mexicans' currency fell."

Vasquez agrees with reforms at the IMF suggested by U.S. Treasury Secretary Lawrence Summers and other critics of the fund. Last Tuesday (February 29), Summers and one of his predecessors, George Shultz, testified before the Senate Foreign Relations Committee about changes they say are needed at the IMF. Summers restated his position that the fund should shift from long-term lending to short-term lending. Shultz said the IMF readiness to rescue governments encourages politicians to invest their people's money unwisely.

Moreover, Vasquez says, the World Bank and the IMF must abandon another tradition -- or "gentlemen's agreement" -- to dividing the leadership of the two institutions between the U.S. and Europe.

"This gentlemen's agreement is essentially another way of maintaining a closed -- not transparent -- system for an institution that has a tremendous influence on the world economy."

Robert Solomon, a widely published American economist, agrees that this arrangement is outmoded. He tells RFE/RL that it dates from the early days of the two institutions a half-century ago. For example, Solomon says, the World Bank presidency was reserved for an American because the bank was expected to issue securities to help developing countries. At that time, much of the world was rebuilding after World War Two, and the only country that could realistically issue the securities was the U.S.

"That's an outmoded notion. You can issue securities anywhere in the world now. There's no reason in the world, in my view, why we -- the U.S. -- should have a monopoly on the World Bank and therefore no reason why the Europeans should have a monopoly on the managing directorship of the IMF."

Solomon says there may be a way to put the right man at the top of the IMF and still satisfy tradition. He notes that the current president of the World Bank, James Wolfensohn, is a native of Australia and a naturalized U.S. citizen. Fischer, meanwhile, was born in Zambia and also is a naturalized American.

"It just so happens that they were both born abroad. So maybe that makes it easier for the world to accept, at least temp -- for a short while -- that you have an American in each job."

If that does not work, there are other candidates who are European. One is Andrew Crockett, a Briton who runs the Bank for International Settlements, and Gordon Brown, Britain's chancellor of the Exchequer, or finance ministry. Jean-Claude Trichet, the head of France's national bank, is another possible candidate. And there are two Italians, Treasury Minister Giuliano Amato and Mario Draghi, one of his subordinates.

But it appears that the world's attention is more on who will not be the next managing director of the IMF.

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