CCTV News: Contest for the IMF
I was on CCTV News Dialogue last night, talking about the competition to select the new head of the International Monetary Fund (IMF), and whether developing countries like China will have a greater say in the outcome. You can watch the episode here. The main points I made were as follows:
- For the Europeans, this election has more than just symbolic significance. They are in the middle of a serious debt crisis, and the IMF is in the thick of the negotiations on how to resolve it. That is why all the European coutnries rallied very early around a single European candidate who had their confidence to solve the crisis.
- In contrast, developing countries may have agreed on the idea that a candidate from one of the emerging markets should have a chance, but there was no agreement on who exactly that should be. Brazil, India, China, etc. all want to stake their own claim, and there is no immediate crisis forcing them to compromise.
- Lagarde is the odds-on favorite because she is seen as a strong negotiator who can help resolve the immediate crisis in Europe — which everyone, including the emerging economies, want to see happen. However, Lagarde is a lawyer, and Carstens has been arguing that once we get beyond the Eurozone crisis, the IMF needs an economist like him to deal with complex, longer-term issues like volatile global commodity prices and inflation and slowing growth in emerging markets. Stanley Fischer, an extremely well-regarded economist, also fits that bill (although I read that, as of today, he has dropped out of contention).
- I have to wonder, seriously, whether China would really want to claim the leadership post at the IMF at this precise moment. Whoever runs the IMF will have the harsh task of badgering or even compelling European countries that are really hurting — like Greece, Spain, Portugal, and Ireland — to adopt painful austerity measures. Do the Chinese, whose rise is already generating a certain amount of concern and envy, really want to be seen as taking the stick to the Europeans? It sounds to me like a “soft power” nightmare. That’s one reason why I think China and the others haven’t pushed their claim too hard right now. Down the road, however, I could see them pushing it far more assertively.