Developed, emerging economies tussle for IMF director job


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The International Monetary Fund has long drawn fire from emerging markets and the third world, a result of its track record of imposing harsh austerity measures on relatively poor but indebted nations. Backed by the globe's largest economies and drawing its leadership from their professional classes, it's currently on the receiving end of a great deal of bitterness and bile from nations like Greece, Ireland and Portugal.

Its former managing director, Dominique Strauss-Kahn, resigned the position after becoming embattled by accusations of sexual assault. A housekeeper at a New York hotel came to the NYPD, saying the IMF director had sexually assaulted her in his bedroom when she entered to clean; since then, other women have come forward, stating that Strauss-Kahn also attacked or harassed them.

Leaderless, the IMF now represents a clear arena for a power struggle between the new and old economic guard. The leading candidate for the top spot - French finance minister Christian Lagarde - creates a certain continuity between old and new. Both Lagarde and Strauss-Kahn are French, from that nation's political elite and generally represent the interests of the IMF's European members.

Not everyone agrees with this plan, however.

"For too long, the IMF's legitimacy has been undermined by a convention to appoint its senior management on the basis of their nationality,"  said finance ministers Pravin Gordhan of South Africa and Wayne Swan of Australia in a joint statement. 

On the other side of the Atlantic, the Mexican government put forth its central bank governor, Agustín Carstens, to take the directorship.

The contest will be fought over ideology and history as well as qualifications, given the IMF's historical role as the arbiter of fiscal discipline on indebted and developing nations. In the wake of the 2008 financial crisis, countries like Brazil and Argentina, which had their own bruising encounters with the international financial community, sharply criticized the apparent hypocrisy of the United States, Britain and the European Union. 

In the past, poorer countries were told to follow orthodox economic principles and 'take their medicine' in a debt crisis, slashing spending and social programs and raising taxes to close budget holes, while allowing ailing companies to fail. The world's great powers did exactly the opposite - which seems to have been more effective than the traditional harsh remedy.

Whoever takes the top seat at the IMF, further controversy over austerity and debt will surely ensue.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , Bonds , Credit and Debt , Economy
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