Some thoughts on a new managing director of the IMF

Guest comment by Gabriele Köhler

There needs to be a transparent selection process for the next managing director of the IMF. Most commentators agree that transparently agreed technical qualifications must drive the selection criteria. However, the real issue is the far more controversial question of the managing director’s political and policy orientation.

At this time of resurgent austerity politics, it is vital to discuss how to make the IMF an institution that puts poverty eradication, employment, decent work, and the regulation of global financial flows back as its overarching rationale, in tune with its intent as conceived in 1944. The Articles of Agreement state as the purpose: “To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.” (Article I point 2).

In light of this, it is vital to discuss how to change the “operating logic” of the IMF so as to enable governments – in South and North – to re-orient their fiscal budget expenditures towards expenditures on education, health, social assistance and social insurance, and care services, and to ensure that these services and transfers are of high quality and guaranteed for all citizens – and for migrants. It is vital for the IMF to use its commodity price stabilisation mechanisms to enable food price regulation at global, regional or national levels. It is vital to deepen the timid IMF discussions on tax administration and compliance and to move these towards structured tax reforms for progressive taxation, which would enable countries to universalise high quality social services - promised since the 1940s - and to implement innovative ideas such as the global social protection floor. For all this to be possible, it is also vital to re-assess debt sustainability from a qualitative rather than a quantitative approach fixated on artificially-pronounced debt ceilings.

The selection of a new IMF managing director is a good opportunity to advance such policy reorientations: many of the “emerging economies” – such as for example Brazil, Mexico, South Africa, India - have installed progressive socio-economic policies and illustrated how government deficits can be useful and sustainable if the expenditures are oriented to social goods and services, which have made a tangible difference for millions of people in their respective countries. They have also demonstrated how social expenditures, such as on social assistance, food price support, school meals, or employment schemes, can re-kindle post-crisis economic growth. They could share this experience with South and North.

So, an IMF managing director from the South could help with policy advances - provided she is attuned to this new, socially-oriented discourse, and can lead the IMF members in that new direction. A managing director from the North or the East with a human development policy leaning could be equally good, as long as she, or he, is committed to the interests of the global South, and to guide the member states in the direction of progressive policy decisions.

Gabriele Köhler is Development Economist and Visiting Fellow, Institute of Development Studies, Sussex (Contact: office@gabrielekoehler.net).

Trade unions: G8 Summit must deliver on jobs

This week’s G8 Summit of World Leaders must deliver leadership to end the global jobs crisis, according to the world’s trade unions. Over 30 million people who lost their jobs due to the crisis are still unemployed. “Worldwide, employment has still not recovered from the 2008 financial fiasco, and too few governments are taking the jobs crisis seriously,” said ITUC General Secretary Sharan Burrow, adding “the G8 and the G20 must lead the way to a surge in employment rather than the narrow and destructive focus on spending cuts which some countries are now following.”

The unions are calling on the G8 governments to meet their development aid promises, especially to Africa where the aid shortfall was a massive $14bn last year. They are also pointing to the backlash against poverty, corruption and incompetent economic strategies which triggered the “Arab Spring” and is likely to spread unless action is taken to generate decent jobs for tens of millions of young people around the world. “The backlash against dictatorships in the Arab countries arose out of the desperation of millions of young people facing a lifetime of unemployment. Many other countries, including democracies, have massive youth unemployment, and much wider social unrest is just around the corner unless governments face up to the task of job creation,” said TUAC General Secretary John Evans.

The trade unions are also insisting on a renewed push to tackle climate change, and for special action to assist Japan’s recovery from the devastating human and economic impact of the March 11 earthquake and tsunami.

For more information, see statement adopted at the OECD-TUAC meeting in Paris on 23 May 2011.

NGOs demand fair selection process after Strauss-Kahn resigns

With the resignation of the International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn, a global coalition of NGOs has called for an open and merit-based process to elect the next IMF head. The early departure of Strauss-Kahn means the 187 member governments of the IMF will have to select a new managing director during a time of grave economic uncertainty. It also reopens the debate over an anachronistic and unfair selection process. The NGOs, including the Bretton Woods Project, Oxfam, and the Third World Network, are calling for an end to the have end to the “gentlemen’s agreement” between Europe and the US, which ensures that the IMF Managing Director is always a European, and the President of the World Bank an American.

“The next IMF managing director must be chosen through an open, transparent and inclusive process, where selection is based on merit, not nationality, and with an effort to facilitate a leadership role from outside the European region,” said Bhumika Muchhala of the Third World Network. “It is time for the European and US governments to finally end the sordid tacit deal between the two regions that has maintained a de facto Northern leadership at both the Fund and the Bank.”

The NGO coalition called for an end to behind the scenes deals, a commitment to make sure votes are cast in public, and a requirement for the winning candidate to have the backing of a majority of member governments. Oxfam spokesperson Sarah Wynn-Williams said: “The only way to give the new IMF head legitimacy and authority is through open voting, with the winner backed by a majority of countries, not just a majority of shares. The time has come for the IMF to accept an open and merit-based approach to choosing its leaders.” Jesse Griffiths of the Bretton Woods Project said: “The head of the IMF must be – and be seen to be – independent of powerful governments, and well versed in the problems of low- and middle-income countries, where most IMF operations take place. They should display a commitment to reducing levels of global inequality and poverty.”

In 2009, the IMF agreed to “adopt an open, merit-based and transparent process for the selection of IMF management.” This confirmed a 2009 G20 commitment made in Pittsburgh that “the heads and senior leadership of all international institutions should be appointed through an open, transparent and merit-based process.” However, since then, two Deputy Managing Directors of the IMF have been appointed without such a process, both going to G7 country candidates. In October 2010, Naoyuki Shinohara, a Japanese national and was appointed, and in February 2011, Nemat Shafik, a British-Egyptian national and permanent secretary in the UK Department for International Development was appointed. At the spring meetings of the IMF and World Bank in Washington in April, campaigners from more than 20 organisations published a paper entitled Heading for the right choice? A professional approach to selecting the IMF boss. There is also a new website (www.imfboss.org) which is tracking the IMF leadership selection process.