NGOs Call for IMF Head to Be Chosen by Double Majority

WASHINGTON, May 24 (IPS) – More than 100 civil society groups called Monday for the next managing director of the International Monetary Fund (IMF) to be approved by a majority of its 187 member countries, as well as a majority of the voting shares that are heavily weighted in favour of the world’s wealthiest countries.

In a letter addressed to the IMF’s Board of Governors, the non- governmental organisations (NGOs), including the Bretton Woods Project (BWP), Oxfam, and Third World Network (TWN), said such a requirement was the best way to ensure an “open, merit-based, transparent process” for determining the successor to the former managing director, Dominique Strauss-Kahn.

“European countries are vastly over-represented on the Board, and the IMF’s archaic voting system discriminates against large developing economies,” said Oxfam spokesperson Sarah Wynn-Williams.

“The IMF will undermine its legitimacy if it fails to have a selection process that better reflects the weight of countries in the global economy,” she added. “Only a truly fair and democratic appointment system can ensure the IMF retains its legitimacy in the eyes of the world at this difficult time.”

The letter was published as the battle over Strauss-Kahn’s successor, which was launched with his May 14 arrest by New York City Police on charges of sexual assault against a hotel maid and subsequent resignation, gained momentum Monday with the announcement by Mexico that it will nominate its central bank governor, Agustin Carstens, for the post.

Carstens, who served as the IMF’s deputy managing director for three years, is widely considered one of the stronger possible candidates from major emerging economies, including, among others, Montek Singh Ahluwalia from India, Arminio Fraga from Brazil, Trevor Manuel from South Africa, Tharman Shanmugarathnam, from Singapore, and Il Sakong from South Korea.

Another possible leading candidate, Turkey’s Kemal Dervis, took himself out of consideration last week.

At the same time, the presumed front-runner and apparent European favourite, French Finance Minister Christine Lagarde, told an interviewer on CNBC that speculation that she would be offered the job was “clearly premature”.

“(I)t is for others to decide,” she said, adding that France was committed to an “open, transparent and merit-based” selection process as prescribed in the Group of 20 (G20) communiqué issued at its Pittsburgh Summit in 2009. The G20, which includes the world’s largest economies, collectively controls virtually all of the Fund’s voting shares.

Since the IMF’s founding in 1945, its top post has been held by a European as a result of a so-called “gentleman’s agreement” with the United States which, in turn, has chosen the president of the Fund’s sister agency, the World Bank.

Under the IMF’s charter, a simple majority of the voting shares cast is all that is required to elect the managing director post, although it has historically been determined by consensus.

While, in theory, voting shares are supposed to reflect each country’s relative weight in the global economy, political factors – notably Europe’s resistance to giving up its power on both boards – have resulted in over-representation by Western economies, which consequently dominate policy making in both agencies.

Collectively, Europe holds 35.6 percent of total voting shares, while Asian nations, including giants China, Japan, India, and South Korea, hold only about 20 percent.

Although China accounts for an estimated 13 percent of global economic production, its current voting share is less than four percent – even less than Japan’s six-percent share, despite the fact that the size of it economy surpassed Japan’s two years ago.

The U.S., the world’s largest economy, holds nearly 17 percent of the voting share, so that, in the still-unlikely event that a consensus cannot be reached, the combined voting power of Europe and the U.S. could prevail in any final contest.

The administration of President Barack Obama, however, has not yet indicated that it will automatically back a European candidate as the U.S. has in the past. Many analysts believe that Washington’s position could well prove decisive in the ongoing jockeying for the succession.

The administration has argued that international organisations, notably the IMF and the World Bank, need to be refashioned in ways that take account of the importance of key emerging economies.

On Friday, Treasury Secretary Timothy Geithner suggested the administration was open to the election of a non-European when he said Washington was “prepared to support a candidate with the requisite deep experience and leadership qualities, and who can command broad support among the Fund’s membership.”

The latter criterion appeared to echo the major recommendation in the NGO letter.

“(T)he candidate must gain the open support from at least the majority of IMF member countries, with no single bloc wielding excessive power,” the letter, which was also signed by the Jubilee Debt relief campaign, ActionAid International, Eurodad, and Friends of the Earth, urged. “The best way to ensure this is for the winner to be required to gain the support of a majority of both voting shares AND member countries.”

“The sordid backroom deal between yesterday’s powers that has pushed Lagarde forward makes a mockery of European commitment to reform,” said Jesse Griffiths of the Bretton Woods Project. “It is now up to other countries to rescue the process.”

The letter also called for a public application procedure, public interviews, an open-voting process in which all member countries participate, and publication of the job description and qualifications, including requirements that the new director be “well-versed in the particular problems of low- and middle-income countries (and) …the key global economic problems of poverty, growing levels of inequality and joblessness.”

The notion that a European should determine the next IMF chief has come under heavy fire not only from the NGOs and emerging countries themselves, but also from a number of independent voices, some of them, such as the New York Times, with influence with the administration.

Nancy Birdsall, who heads the influential Center for Global Development, endorsed the double-majority requirement in a blog post Monday and suggested that she would be sceptical of any candidate who was a sitting minister, such as Lagarde, of a powerful member of the IMF because they are unlikely to be seen as independent of a national or regional interest.

“Won’t (Lagarde) represent, whether she wants to or not, the stench of colonialism wafting around the IMF?” she asked.

Moises Naim, a former executive director at the World Bank from Venezuela, as well as former editor of Foreign Policy magazine, published a blistering op-ed in Sunday’s Washington Post, entitled “Time to Overthrow the IMF’s Colonial Masters”, in which he ridiculed the argument that only a European could deal with the current financial crisis that is roiling the continent.

“Funny how such consideration never seemed to come up when Asia and Latin America had their own financial crisis in the 1990s,” he wrote. “Somehow, it didn’t much matter then that the IMF was run by a Frenchman or a German lacking extensive contacts in those regions.”

Complaining, like Birdsall, of a “stench of colonialism …wafting” around the IMF at the moment, he argued that, “Europe can do no better than having as the IMF chief one of the many highly trained and deeply experienced economic players from a developing country that has already successfully managed a crisis.”