A European Should Not be Managing Director of the IMF

Memo to Europe:  The World Has Changed, Get With the Program

French Finance Minister Christine Lagarde has indicated she would like to become the next Managing Director of the IMF, and it appears she has evolved into the leading candidate as far as the European community is concerned.  As far as the rest of the world, not so much.

Historically the U.S. and Europe have divided the leadership roles of the two major world financial institutions among themselves.  The World Bank, which is focused on providing capital for the developing nations is usually headed by an American; the IMF which focuses on financial aid and restructuring advice to nations whose fiscal situation needs outside intervention is usually headed by a European.

This allocation of the top posts of these international organization is no long a valid process.  In the last two decades Asia and South America have emerged as world economic powers.  In case no one has noticed, China now has currency reserves that is measured in the trillions, and India and Brazil are near the top in growth rates for major economies.  The U. S. is struggling with low growth, high unemployment and  deficit spending that in the long run could hamper the U. S.’s position as the world dominant military and economic leader. 

The European record is even bleaker.  While Germany continues to be a success story, much of the rest of the continent is an economic basket case.  Greece, Portugal and Ireland have had to be bailed out, Spain is waiting in the wings, and more importantly the policy adopted by the Europeans towards the weaker countries has been Exhibit A in how not to promote economic recover.  See The Dismal Political Economist’s reports on

Europe’s March to Non-Lethal Suicide

The Non-European, Non-U. S. world has grown in economic power to the point where they are now a player, and by this we mean that those countries have the economic prowess where they are now a major force in the world economy. They need to move into leadership positions.  Ms. Lagarde may well be qualified to head the IMF, but having an individual from Asia or South America would bring those areas into more prominence in the world economic policy arena, and since they are coming anyway, let’s hurry up and get them in.