Blog

21 may 2011, after dsk

Though not yet in proven guilty of anything, dominique has left the imf, making choosing its next head a vital & immediate task. Though flawed in so many ways, the importance of the institution grew tremendously during dsk's time, from one dwindling into irrelevance into both intellectual anchor of the global economic crisis and saviour of the euro zone. This latter role turned europe from imf creditor to debtor: just its outstanding loans to greece and ireland now total more than its other 20 programmes combined; and it has just agreed another for portugal. This is a fundamental shift that has given a whole new aura to the challenge to us-eu dominance in the imf that was anyway building from the rest of the world. The decision on its head though is still going to be europe and america's, as despite several small shifts, they still hold the greatest quota (meaning votes), and the G7 a plurality. To date, europe has always used this to appoint, though never in such a polarised situation where the eu wants a european, and the rest of the non-us world a non-european. Washington, the largest single shareholder, is the swing vote. I would be amazed if it was not indeed a european that quickly emerges, and now that the best candidate (super mario) is headed to the ecb, la garde looks a strong favourite, the advantage of womanhood probably outweighing the disadvantage of being french. America though will extract a price for all this. As an optimist, I hope it will be rather more significant reform towards the imf better reflecting real global economic power, and, as votes come with a bill, reward china in return for weighing it down with rather more responsibility for the global economic architecture everyone needs to buy into if it is going to work better going forward.