Affirmative action, IMF style.
Fund and Games
By ALEXANDRA STARR
The New Republic
Issue date: 03.27.00
Post date: 03.16.00
When Michel Camdessus announced his plan last November to step down as managing director of the International Monetary Fund (IMF), there was no shortage of distinguished candidates to replace him. Giuliano Amato, a former Italian prime minister and current treasury minister, won accolades for his budget reforms; Leszek Balcerowicz, the deputy prime minister of Poland, designed his country's transition to the free market and has firsthand knowledge of what it's like to deal with the IMF as a client. And most distinguished of all was a man already at the organization: American Stanley Fischer, widely regarded as one of the world's most brilliant macroeconomists. Colleagues launch into panegyrics when they describe Fischer's decisiveness, his tough but fair style, and his willingness to stand up to Third World despots and U.S. Treasury officials alike. And, as acting managing director since Camdessus left last month, Fischer would only have had to move down the hall.
But Fischer and the others lacked the qualification that mattered most: a German passport. For years, the top jobs at the world's major international institutions have been apportioned according to a strict, if unwritten, system: the presidency of the World Bank goes to an American, the secretary general of the United Nations is plucked from the Third World, and the number-one slots at NATO and the IMF are reserved for the major European powers. In practice, the managing director of the IMF has usually been French. But this year, with a Brit heading up NATO, an Italian as president of the European Commission, and a Frenchman slated to lead the European Central Bank, German Chancellor Gerhard Schröder decided to claim the IMF for Deutschland. Which was unfortunate, since Germany doesn't have a very good candidate--at least not one Schröder is willing to nominate. But Germany turned its mediocre candidates (the second of whom seems certain to get the position) into a test of national pride. And so perhaps the most important international economic job in the world has been sacrificed on the altar of diplomatic affirmative action.
Schröder's first choice, German Deputy Treasury Secretary Caio Koch-Weser, was a longtime World Bank bureaucrat with experience in development rather than international finance. And U.S. Treasury Secretary Larry Summers, who overlapped with Koch-Weser when Summers was the bank's chief economist, reportedly felt that the German hadn't even been particularly good at development work. Yet, despite heavy hints from the United States, Schröder persisted in pushing Koch-Weser forward-- forcing the Clinton administration to make an international scene by publicly opposing him. And the U.S. announcement had its intended effect: after he failed to win a majority in an IMF board straw poll, Koch-Weser withdrew his name from consideration.
But, though it went to the mat to kill Koch-Weser's candidacy, the Clinton administration ultimately proved to have only half a spine. Even as it became obvious that most experts, and even most diplomats, believed Fischer would make the best IMF managing director, President Clinton effectively sank his candidacy by announcing, "I will not support an American candidate, even though I have enormous respect for Mr. Fischer." And when Schröder produced yet another unscintillating choice, Horst Köhler, the United States quickly gave him the green light--practically ensuring that Köhler will get the job.
Currently the president of the European Bank for Reconstruction and Development, Köhler, like Koch-Weser, is more a development man than a finance expert. He is also legendary for having the kind of temper that alienates subordinates. "I suppose it's difficult to object to his candidacy on the grounds you wouldn't want to work for him," wailed one IMF employee, who proceeded to do just that. The biggest worry is that Köhler will drive Fischer away. Though Fischer says he will stay on, some fear that run-ins with the German will change his mind--thus depriving the fund of the brains behind most of its recent bailouts.
Were the IMF just your average international bureaucracy, all this would be merely distasteful. Indeed, the national spoils system came into being when the fund was just such a lesser player--and when cold war politics, not economic criteria, drove relations between the First World and the Third. But today, when national governments take their lending cues from the IMF's economic analyses and the organization takes the lead in responding to currency crises that threaten the world economy, viewing IMF directors as national representatives and thus risking mediocrity is reckless. It's also incoherent--since, for many of the men and women who work for international organizations, citizenship is no longer an indicator of general outlook or anything else. Fischer, for instance, was born to Jewish parents of Eastern European descent, spent most of his youth in Zambia, and studied in Britain before moving to the United States and becoming an American citizen. Similarly, Jim Wolfensohn, the "American" president of the World Bank, was formerly a citizen of Australia.
Perhaps even more troublesome is the way the IMF selection process ignores the Third World nations the fund is supposed to serve. Early on, Third World leaders made it clear that Fischer was their top choice, which is remarkable given that he designed many of the tough economic-austerity packages with which they were forced to comply. (And it's even more remarkable given his ethnicity: it's not every day that Libya, Syria, and Iraq rally behind an American Jew.) But the Third World's opinion held little water in First World capitals.
That's particularly unfortunate because the IMF is an organization under fire. A number of respected economists have questioned some of the central assumptions behind its austerity packages, arguing that they do more harm than good. And a U.S. congressional commission recently recommended that the fund completely revamp the way it does business, limiting its lending to only those countries in the worst shape. To regain its intellectual and political authority, the fund will need wise leadership. Too bad the West didn't care enough to give it any.
ALEXANDRA STARR is a freelance writer in Washington, D.C.
(Copyright 2000, The New Republic)
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