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Can the BRICs Take the IMF?
The Emerging World's Chance to Break the IMF's Status Quo
SEBASTIAN MALLABY is Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations. His latest book is More Money Than God: Hedge Funds and the Making of a New Elite.See more by this author
The contest for the top job at the International Monetary Fund will provide part of the answer to an ongoing question that has accompanied the rise of the world's emerging powers: geopolitically speaking, what do they want? The IMF search may reveal that the world's top emerging-market countries are serious about securing a place at the global top table -- or it may show that anonymous seats in the outer circle are all they are after for now.
The IMF has been run by a European ever since its creation in 1946, part of a deal in which the United States has been free to choose the president of the IMF's sister institution, the World Bank. Over the past decade, if not longer, there have been murmurs of revolt against this anachronistic entitlement. When the top job changed hands in 2000, for example, the IMF's American deputy managing director, Stanley Fischer, made an unsuccessful bid for promotion that was backed by some emerging-market governments. But in each moment of transition at the IMF, the talk of a geography-blind, merit-based appointment has been trampled. European members have swiftly united behind a candidate, and the rest of the world has been too divided to resist.
Given fast changes in the global economy, the current moment of transition ought to be different. Countries in the mature, developed world are performing sluggishly, while growth, ideas, and capital are increasingly coming from the emerging powers of Asia, Latin America, and Africa. Even more relevant, at least when it comes to the IMF leadership, is the astonishing transformation in the geography of crises. In the past, hiccups in the rich world tended to trigger full-blown financial collapses in unstable emerging markets; for example, Mexico's default in 1982 in the wake of the U.S. recession at the start of the 1980s. But the recent credit collapse began in the United States, then spread to Europe; emerging markets have proved resilient. If the IMF used to be run by the rich world on the theory that crisis-prone poor economies can't set the terms of their own bailouts, then it indeed is high time for a handover. After all, most of the IMF's bailout assistance is currently flowing to Ireland, Greece, and Portugal.