The Next Head Of The IMF

Originally published on May 19, 2011 10:59 am

A London bookie is taking bets on who will replace Dominique Strauss-Kahn. The top two favorites are officials from Turkey and India — which is striking, given the fact that the IMF has been run by Western Europeans for its entire, 65-year existence.

Striking, but not particularly surprising.

The IMF got a black eye in the developing world after the Asian financial crisis of the late 1990s. Critics argued that the IMF's response put the interests of the U.S. and Europe ahead of the developing countries in the grip of the crisis.

What's more, the world economy the IMF grew up in — one dominated by the U.S. and Europe — is changing fast.

By the middle of the next decade, the dollar will no longer be the world's dominant currency, and most of the planet's economic growth will come from six emerging countries, according to a new World Bank report. (The six, if you're curious, are the BRIC countries plus Indonesia and South Korea.)

So naming an IMF chief from an emerging economy would signal that the organization is moving away from its 20th century roots in the U.S. and Europe, and into an era where the dominant economic narrative is likely to be the rise of the developing world.

Still, power in the IMF is awarded based on contributions to the fund. And the U.S. and the big European economies are still the biggest contributors. So if they want the job to go to another European, it will.

Update, May 19th:

Strauss-Kahn resigned.

And the odds have changed. Christine Lagarde, the French finance minister, has moved way up to become the favorite in the London betting, according to the bookie.

The NYT is calling also Lagarde the front-runner to replace Strauss-Kahn. She would be the first woman to run the IMF. From the NYT:

In an interview with Christiane Amanpour on ABC last year, Ms. Lagarde observed that women "inject less libido, less testosterone into" the workplace than men, a remark that seems prescient in light of Mr. Strauss-Kahn's scandal.

Also, the IMF is largely focused on Europe at the moment, as the bailouts of Greece and Portugal grind on. The FT quotes Angela Merkel on the issue:

Naturally the developing countries have a claim on the highest position at the IMF or World Bank, but the current situation, given the considerable problems of the euro, speaks for a European candidate.

For more:

Simon Johnson, a former IMF economist, handicaps the top contenders, and walks through the Europe v. developing world issue.

Felix Salmon goes all-in for Christine Lagarde.

Planet Money explains a more basic question: What is the IMF, anyway?

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