Tharman should run for top IMF post

The Business Times

Christine Lagarde is more than halfway through her tenure as the managing director of the International Monetary Fund (IMF). She is the 11th consecutive European in the job. There is no shortage of talent as to who will succeed her in July 2016.

This time, ample notice is required to prepare an open and transparent selection process. There must be no European monopoly on the post. I would like Tharman Shanmugaratnam, the Singapore finance minister, to be a candidate. He is thoughtful, technically competent and well respected - and he would hit the ground running.

The IMF needs a managing director with equal doses of technocratic and political skills. When Dominique Strauss-Kahn (DSK), the overly high-flying previous incumbent, departed in May 2011 because of his extra-curricular activities, a feeble attempt was made to open up the appointment to a global contest, but the outcome was a foregone conclusion. A Frenchwoman followed a Frenchman. A French politician with presidential ambitions (sadly thwarted) was followed by another French politician with similar ambitions (always denied of course).

For 38 of the 68 years in which the IMF has had a managing director, a French person has been at the helm.

I love the French. And I am all for women in top positions. But sometimes you can go too far.

An insider

In the previous round, OMFIF (Official Monetary and Financial Institutions Forum) backed as a candidate Zeti Akhtar Aziz, the highly accomplished governor of Bank Negara Malaysia, but she showed no inclination to join the contest.

Mr Tharman is an IMF insider, the chairman (since 2011) of the International Monetary and Financial Committee, whose first chair was Gordon Brown, the former UK chancellor of the exchequer and prime minister. Mr Tharman is Singapore's deputy prime minister and a previous chief executive of the Monetary Authority of Singapore (before he entered politics). He's a member of the prestigious Group of Thirty. You cannot get a better CV than that for the job.

In the past, when asked about the possibility that he might go for the position, Mr Tharman has shrugged his shoulders or murmured something self-deprecating. But if the possibility came into view, the Singapore government would no doubt take it very seriously.

The IMF has just had its spring meeting in Washington. The world economy is in better shape than when Ms Lagarde took over. Losing DSK was a shock. The IMF is now on a more even keel. Its analysis of the world's experiments with austerity has been criticised, as has been its forecasting record. But that is not new.

The IMF has often got its macroeconomics wrong. Yet it faces challenges, as does the global economy. The US Congress, in its usual erratic manner, is holding up long overdue reforms, including quota rebalancing agreed by the rest of the world. The refusal to vote funds for reforms is entirely due to quarrels between President Barack Obama and Congress. Any movement is unlikely before November's mid-term elections.

The United States needs some stiff talking to, now and in the future. This is where people like Mr Tharman

can play a role. Someone has to tell the US that its days of hegemony are over in the global financial field, just as they are in the international political arena. Syria and Crimea have shown that the US lacks clout. The world may, or may not, be a better place for it, but that's a fact.

The IMF affords Ms Lagarde a bully-pulpit to tell the world how irresponsible the Americans are, in the hope of inspiring some activity in Washington. Thus far she has held her fire. This may be a shrewd calculation as to timing.

In the case of DSK, his refusal to crack the whip at the Greek government in 2010 and his softly-softly approach on the euro were attributed to a desire to keep his presidential hopes bright for the 2012 election eventually won by Francois Hollande.

Ms Lagarde's relative hesitancy may reflect desire to keep on the right side of an important French ally. France and the US are having an unusual honeymoon since the British failed to march into Syria. An old friendship has been revived. It may be Ms Lagarde does not want the opprobrium of disrupting the mood music. Perhaps, at a time of her choice, she will act decisively. Equally likely, time for IMF reforms may run out.

Succession plan

Whatever the case, the IMF and its friends must begin thinking about the succession. The reasons why the managing directorship should no longer go automatically to a European are even more obvious than three years ago. The emerging economies have traversed the Great Recession in better shape than the developed countries. They had better financial regulation. But they have been subjected to asymmetric shocks due to quantitative easing (QE) from the industrialised countries. First QE and now tapering have convulsed the emerging market economies. As Brazil has complained, the trade wars of earlier decades have given way to exchange rate protectionism.

Raghuram Rajan, the governor of the Reserve Bank of India, has urged developed countries' central banks to take the emerging economies into their confidence to alert them to forthcoming policy shifts. This appears unlikely.

The IMF has not been as alive to the problems of the majority of its members as it should have been. It continues to be a US-Europe club.

Let's hope that, as the horse trading starts on Ms Lagarde's successor, there will be other candidates from around the world. The important thing is to begin the global discussion on how the IMF can be better run - and who should run it. Summer 2014 offers the right opportunity. This discussion should start now.

Lord (Meghnad) Desai, Emeritus Professor of Economics at the London School of Economics and Political Science, is chairman of the advisory board of the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank on global financial issues headquartered in London.

This article was published on April 23 in The Business Times.

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