Not Much Room at the Top: The Two Most Powerful Jobs in Global Economics-Leadership of the IMF and the Presidency of the World Bank-Are Still Old-Fashioned Stitch-Ups

Article excerpt

Alistair Darling is unlikely to remember 10 July and his first appearance as Chancellor on the European stage with much affection. He arrived in Brussels with grand plans for an open and transparent process to choose the next managing director of the International Monetary Fund. But he had not reckoned with the political cunning of Nicolas Sarkozy and the curious ways of the European Union. By the time Darling had had his say, the French nominee for the position, the urbane and highly convincing former finance minister of France Dominique Strauss-Kahn, had already been selected as the ideal man for the job, in a typical Brussels back-room deal.

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The emergence of the Socialist Strauss-Kahn as the European candidate was, at its core, a power play by the European Union. It was determined to avoid the messy infighting that occurred three years ago when the former Spanish finance minister Rodrigo Rato was chosen as Europe's candidate. That process was so discredited that it all but wrecked the precedent, first set at the Bretton Woods conference of 1944, that a European head the IMF and an American lead the World Bank.

In recent times, this convention has fallen into serious disrepute. In 2006 the US foisted upon the World Bank the damaged figure of Paul Wolfowitz. He proved a hopeless bank president. In quick succession, he alienated the bank staff and chose to favour poor countries in America's sphere of influence over those outside when handing out punishments for corruption. Most tellingly, he arranged a fat pay and promotion deal for his Arab-born girlfriend Shaha Ali Riza.

The precise reason for the speedy European stitch-up over the IMF leadership was to avoid the open process that Darling, the US Treasury and some of the fund's biggest clients had wanted. The clearer the process, the more likely it was that the old European stranglehold on the IMF--jobs for the boys and girls in Washington--would be loosened.

For more than six decades the Americans and the Europeans have dominated the IMF. This was not unreasonable when those power blocs were the fund's biggest clients. But a new century has produced different challenges for the fund. With the increasing sophistication of financial markets, western countries can find all the loans they need elsewhere. To cap this, once-cash-short nations such as China, India and Russia have become the nouveaux riches, accumulating huge pots of foreign-exchange reserves on the back of phenomenal trade surpluses. …