Damage from insisting on a European chief will be long-lasting
By Jonathan Eyal
ALTHOUGH none will say so publicly, European governments are mightily pleased with their latest diplomatic triumph: At a summit of the Group of Eight (G-8) industrialised countries over the weekend, they virtually secured the election of Mrs Christine Lagarde, the current French finance minister, as the next leader of the International Monetary Fund (IMF), replacing Dominique Strauss-Kahn, who is currently awaiting trial in the US for the alleged rape of a hotel maid.
Europeans are certain to make much of the fact that the new IMF boss will be the first woman to hold this pivotal job. But no amount of window-dressing can mask the stench of colonialism that wafts from this entire affair.
For by insisting on their supposedly ancient privilege to appoint one of their own at the helm of the IMF, the Europeans have proven that their promises to reform global financial institutions are just humbug. This is something which the world's emerging powers will do well to remember.
Few who meet Mrs Lagarde fail to be impressed by her personal qualities. She possesses a formidable intellect and personal charm. She had a stellar career, as an international lawyer and senior politician. And frivolity is most definitely not her style: A vegetarian and teetotaller, she will bring to the IMF a much-needed dose of professional sobriety.
But that's hardly a decisive argument in favour of her appointment. Although the leader of any international body must be of high moral integrity and competence, his or her nationality also matters.
Most international organisations rotate their leaders among countries or continents because this is the surest way of convincing nations that they have a genuine stake in these institutions. There is no question, for instance, that the United Nations' engagement in African peacekeeping operations would have been perceived differently if the UN had not been led by two successive African secretaries-general.
Yet that's not a logic ever applied to the IMF, which remains the exclusive preserve of Europeans. So an organisation that is actually owned by its 187 member-nations permanently discriminates against 93 per cent of humanity. Out of the IMF's 10 managing directors, no fewer than four - including the last one - have been French.
The hypocrisy surrounding this election is breathtaking. In its regular work, the IMF demands that countries reach economic decisions in a transparent, meritocratic manner. Yet when it comes to its own internal management, decisions are still taken by a small cabal.
According to the IMF's own statistics, the European Union's share of global output will shrink from 25 per cent at the beginning of this century to only 18 in 2015. But Europe still controls 32 per cent of the IMF's votes. Together with the US, it can command about half of all ballots.
Europeans used to claim for decades that the nationality of the IMF's boss makes no difference, since decisions to lend money are, supposedly taken on merit. That's why a French managing director had no problems in telling South Koreans or Indonesians to swallow his prescribed economic medicine in the 1990s, and why his German successor did the same in Latin America in the next decade. But now, when Europe is in the throes of a major financial crisis, 'it is important that the person leading the IMF should come from this continent', says German Chancellor Angela Merkel. Asians and Latin Americans are, evidently, different kinds of human beings.
Why are the Europeans fighting so hard to preserve their IMF monopoly? Pride is one explanation, but not the most important one. For the simple fact remains that Europeans are now desperate to squeeze anything they can from the existing world system, as long as it lasts.
The assumption is that the IMF exists to bankroll poor countries. In fact, an astonishing 79.5 per cent of the IMF's current loans are to Europe. In effect, the IMF is now a European bailout fund.
And matters are only likely to get worse, as Greece is again tottering on the verge of bankruptcy, and other European countries, such as Spain or Italy, may require fresh cash to stay afloat. A non-European IMF head would have applied traditional remedies, by refusing further credits unless painful reforms are implemented, and by demanding that countries that underperform should leave the euro zone in order to make their economies competitive again.
But a European IMF boss will do nothing of the kind: Mrs Lagarde is likely to continue with the policies of her predecessor, by offering further money in order to keep the current EU arrangements intact, despite evidence that these are not working. Greece, which met none of the economic conditions imposed on it, is guaranteed another loan next month.
Meanwhile, other regions of the world will suffer. The biggest task facing the IMF is not Europe but the Middle East, which, for the first time in decades, has the chance of breaking out of the cycle of poor governance and poverty. Mr Kemal Dervis, a Turkish economist and international civil servant, would have been perfect for this role. So would Mr Leszek Balcerowicz, who helped oversee Poland's transition to a free market economy from communism. But neither was regarded 'European' enough, while an Asian candidate was not even considered.
The US also played a role in this disgraceful affair. For, as part of the same deal that promised the IMF job to the Europeans in perpetuity, the Americans were given exclusive leadership of the World Bank. It clearly did not suit Washington to break such arrangements.
The damage will be long-lasting. For years, the West has argued that China should act as a 'responsible international stakeholder'. The appeal was always condescending, but is now exposed as also meaningless. There is little point in being 'responsible' if a country's stake in the international system remains unfair. Europe and the US should not, therefore, be surprised if the Chinese, Indians or Brazilians start elaborating their own informal financial arrangements outside international institutions which are clearly incapable of reform.
At the moment, however, it would be nice if all governments just ask Mrs Lagarde to promise that she will actually finish her five-year mandate.
For all the past three heads of the IMF resigned before completing their terms. Perhaps that's another European trait.