A few weeks before Barack Obama took office as president of the US, one of his closest advisers was quoted as saying “you never want a serious crisis to go to waste”.
Rahm Emanuel’s words in November 2008 should be the refrain that underscores the search for the new head of the International Monetary Fund (IMF).
Undoubtedly, the abrupt departure of Dominique Strauss-Kahn as the managing director amounts to a major crisis for the IMF, but at the same time his exit presents the world with the opportunity to make a true attempt at reforming this institution.
Many would remember that when Emanuel made his remarks, Lehman Brothers had collapsed two months earlier, and US taxpayers had subsequently been forced to bail out Citigroup and American International Group as the financial crisis rocked global markets.
When asked to explain himself, he said that “things that we had postponed for too long, that were long term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before.”
By that logic the latest upheaval presents the IMF – and by extension the World Bank – with an opportunity to take a bold step towards much-needed transformation.
Both the US and Europe have had an unfettered say in the running of the IMF and the World Bank since the institutions were created following World War II.
The transformation will start with the abandonment of a flawed policy that has persisted since 1945, whereby the US and Europe divvy the leadership of the IMF and the World Bank among themselves.
The case for someone from the developing nations to lead the IMF is strong. It is an acknowledged fact that the centre of economic gravity is shifting much faster than the architects of the old global financial order could have ever imagined.
Brazil, Russia, India, China and now South Africa constitute the Brics, a grouping of some of the world’s largest and fastest-growing emerging markets that need to have a strong voice in charting a new and equitable global economic order.
Change is warranted if the world is to avoid a repeat of the financial meltdown that ensued as Washington and the capitals of Europe turned a blind eye to mindless risk-taking by some of their banks.
It is quite disconcerting to see that Europe is already trying to justify installing another European candidate as the head of the IMF solely on the basis of the euro zone debt crisis. The fact that Strauss-Kahn was a key figure in trying to ameliorate the euro zone mess is irrelevant.
For many years both the IMF and the World Bank have treated Africa, in particular, in a naive and parochial manner, resulting in untold harm as those countries that found themselves at the receiving end of either institution’s largesse struggled to meet tough policy prescriptions.
It is such sentiment that is likely to raise the ire of the developing nations if the US and Europe fail to recognise the need for other countries to have a real voice within institutions such as the IMF, and even the UN’s Security Council.
One hopes that the Brics will speak with one voice, and soon close ranks behind a single candidate for the IMF post, but I have serious doubts about that happening. Trevor Manuel, South Africa’s former finance minister, will make a fine candidate from the Brics, but we have to first convince Brazil, Russia, India and China of that.
If anything, the IMF case provides the Brics with their first real test of whether they can ever speak with one voice. There are clearly competing national interests, but for the bloc to be taken seriously, it has to find a way to quickly build consensus on a possible candidate.
Europe has been very quick to do that, with Italy, Sweden and Germany – albeit tacitly – coming out in support of French Finance Minister Christine Lagarde as a possible replacement for Strauss-Kahn.
It is quite instructive to note that it has taken the downfall of Strauss-Kahn to reignite the debate about transforming the IMF, whereas many had hoped that the global financial crisis of three years ago would have by now served as the catalyst for change. A definition of a crisis is change screaming to happen. - Ellis Mnyandu