It will be interesting to see what role President Dmitry Medvedev decides to play Thursday at the Group of Eight summit in Deauville, France. Of the many issues on the crowded G8 agenda, the one that is not even to be formally discussed could show Medvedev’s true colors.
This is the question of who will succeed Dominique Strauss-Kahn as the new
managing director of the International Monetary Fund. Even though Strauss-Kahn
was widely expected to resign next month anyway, the succession issue has taken
on a sudden urgency. Strauss-Kahn stepped down last week after being charged
with sex crimes that he denies.
In any case, the maneuvering by Europeans to secure what they regard as their
rightful position at the IMF’s helm has begun. Last Friday, the IMF announced
that a selection process for the leadership post was under way, and it will be
up to the membership of 187 countries to select a candidate. The IMF noted in a
statement that it was committed to “an open, merit-based and transparent process
in selecting a new managing director,” echoing the conclusions of a 2008 report
by then-South African Finance Minister Trevor Howard that the covert process
that led to Strauss-Kahn’s appointment in September 2007 would no longer be
tolerated.
Now evoking specious arguments as to why it is not opportune to apply what
was earlier agreed upon and consider qualified non-Europeans for the post, the
Europeans will be anxious to coalesce around a mutually acceptable candidate for
the post before they debark at Deauville. They would like to create a fait
accompli to get the United States on board before the BRICS and other emerging
market countries can organize support for a viable alternative.
The Deauville group may still have some relevance, harking back to their
domination of global economic affairs resulting from their original mandate as
the G5 currencies constituting the IMF’s special drawing rights. This derives
from a historical anachronism that gives the Europeans more than 33 percent of
the vote in IMF decisions even after minimal reforms agreed upon with such
fanfare in 2008 following the controversy surrounding the appointment of
Strauss-Kahn.
They are likely to pull this off unless Medvedev improbably sticks a spoke in
their wheels. Medvedev, representing a historic European power, stands with one
foot in the European camp and the other with his BRICS partners. Where is
Russia’s interest in this affair? It may be useful to recall the Russian
position at the time of the last change in IMF management.
In August 2007, Russia’s long-serving and highly respected representative on
the IMF’s executive board, Alexei Mozhin, nominated Josef Tosovsky, the former
Czech central banker, as Moscow’s candidate to become managing director.
At the time, Mozhin was quoted in the Financial Times as saying, “There is
nothing in Mr. Strauss-Kahn’s curriculum vitae which could make it clear he has
the necessary technical skills to do the job.”
This position was backed by Finance Minister Alexei Kudrin, whose ministry
noted in a statement that Tosovsky possesses “serious practical experience in
the sphere of international economic cooperation and is an acknowledged
specialist in financial stability issues. He is a perfect candidate for the post
of the IMF managing director.”
In retrospect, the Russian position was as wise as it was prescient. Maybe
the IMF would not be as big or politically prominent as it had become under
Strauss-Kahn, but it might have remained more relevant to long-term solutions
for the global economy.
I believe that too many people are rushing to heap praise upon Strauss-Kahn’s
stewardship of the IMF in managing the crisis. This may turn out to be rash. We
do not yet know how the sovereign debt crisis in Europe will unfold. It could
well be that the IMF, rather than coaxing creditors and debtors to come to a
pragmatic solution supported by their respective taxpayers, helped secure even
higher levels of debt that will ultimately prove financially and politically
unsustainable. And having a politician as managing director, however astute,
from the same region as the IMF’s major borrowers may have been the ultimate
conflict of interest for the IMF as mediator.
This is also why a serving European politician could be a part of the
problem, not the solution.
The traditional prerogative of the Europeans to pick one of their own as the
IMF managing director may have made sense when those countries, along with North
America and Japan, were the center of global finance. But the center of
financial gravity has clearly shifted to the east and the south. This move has
barely been reflected in country voting shares in the IMF: China has a quota
less than Britain or France, and India’s share is less than that of Italy.
Moreover, perhaps the Europeans could be forgiven if they had provided
better-quality managing directors in the recent past. Unfortunately, the three
politicians of the past decade — in the end — have proved a disappointment. Of
course, their illustrious predecessors in the heyday of the IMF, Jacques de
Larosiere and Michel Camdessus, were hard acts to follow. They were also both
French and superb technocrats — not ministers.
In the meantime, Russian support for a recent CIS proposal to nominate Kazakh
central bank chief Grigory Marchenko as IMF head is hard to take seriously since
he doesn’t stand a chance even though he does appear to be a qualified
technocrat. Maybe it was just a feint to distract from the European
steamroller.
The next few hours could be critical. Much will depend on how the United
States and China see the situation. For different reasons, neither is likely to
be enthusiastic about a European candidate if other highly qualified,
non-Europeans are available. Surely like last time in 2007 Russia wants to see a
stronger IMF that can deal with the financial problems of the 21st century.
The Europeans hope to secure their lock, yet again, on the IMF leadership at
the Deauville summit. Will Russia play along or try to champion a viable
alternative as it bravely tried to do in 2007? This is a chance for Medvedev to
demonstrate leadership in the global arena.
Martin Gilman, former senior representative of the International Monetary
Fund in Russia, is a professor at the Higher School of Economics.