by Moyara deMoraes Ruehsen
UPDATE: Yesterday, the IMF’s board blocked Bank of Israel governor Stanley Fischer from the race for the top IMF job. -Ed.
With her distinctive silver coiffure and impressive couture wardrobe, it is hard not to take notice of Christine Lagarde, France’s highly-respected Finance Minister. But let us not forget that beneath that elegant exterior is an impressive mind, a wise and experienced manager with proven leadership skills, an astute negotiator with keen diplomatic instincts, an eloquent and insightful orator, and most important of all: a person of integrity.
It is no accident that when Dominique Strauss-Kahn was forced to resign his post as IMF managing director, Christine Lagarde was immediately touted as a possible successor. Considered a “rock star” of finance for her handling of the financial crisis in France, the enthusiasm for her candidacy was palpable even before she officially threw her hat into the ring. It is regrettable that most of her public supporters cite her gender and nationality.
The female factor is on everyone’s mind in view of the attempted rape charges filed against the outgoing director, coupled with a perception (true or not) of a male-chauvinist culture at the Fund. And her European nationality is a factor for both the old school policy makers, who wish to honor the long-standing gentleman’s agreement that the head of the Fund be a European, and for European politicians, who want a European at the helm to oversee the ongoing sovereign debt crisis in the peripheral eurozone economies.
Does this imply that maybe she is not the most qualified candidate, but because she is a woman and because she is European, she should be selected? This is patently insulting to all female leaders. When German Chancellor Angela Merkel called her “an ideal embodiment of economic experience and political experience,” and Hillary Clinton expressed her admiration for her, their comments drew little attention, perhaps because they came from other women. As the only female candidate in the race, if she wins, will sore losers grumble that it was because she was a woman?And what of her European nationality? When the IMF and World Bank were created after World War II, there was an unwritten gentlemen’s agreement that the head of the Bank would always be an American and the head of the IMF would always be a European. But for many years the world’s emerging market economies have been calling for greater representation, singling out the IMF directorship as one that should go to an emerging market candidate.
The only authentic emerging market candidate being given serious consideration is Agustín Carstens, Mexico’s central bank governor, and deputy managing director of the IMF from 2003 - 2006. Other serious contenders from Turkey and South Africa dropped out early on or refused to accept their nominations. Stanley Fischer, a former 1st deputy director of the IMF who threw his hat into the ring at the 11th hour, is currently Israel’s central bank governor, and although he was born in Africa, he also holds U.S. citizenship and lived most of his life in the United States.
The job description for the post emphasizes that the selection process will be merit-based and transparent, and open to “a national of any of the IMF’s member countries.” The description goes on to say that “the successful candidate for the position will have a distinguished record of economic policymaking at senior levels…capable of providing strategic vision…building consensus…and be an effective communicator.” Given these criteria, Madame Lagarde certainly outshines Señor Carstens. And though Stanley Fischer could also fit this description, Mr. Fischer has two counts against him. First, he is tainted by his prominent role in the IMF’s much-criticized rescue plan for Asia in 1997 and 1998, and second, the IMF’s bylaws currently require that the Managing Director be no older than 65. Mr. Fischer is 67.Madame Lagarde is determined to win the job on her own merits. Hoping to dismiss the issue of her French citizenship (four of the past ten directors have been French), at the start of her campaign she announced, “The fund does not belong to anyone. Management does not belong to any single nation or region. Equally, you should not be banished or punished because of your nationality.” Although there remains the question of whether she can address the ongoing European debt crisis with objectivity, her record speaks well. She has no patience for fiscal profligacy and does not beat around the bush. Last month, she reiterated her stance when she insisted, “We [the ECB, the European Commission, and the IMF] are delivering on our side. Greece has to deliver as well. Restructuring is off the table. I have said that over and over and over and I stick to the same line.” She has paid the price for her unique, non-European brand of frankness, generating much flack in the media, especially the French media, which she is admirably able to shrug off.
Regarding the critique that Christine Lagarde is a non-economist with no banking experience, perhaps this can work in her favor given the dismal record of the profession leading up to the 2008 financial meltdown. While most of the former directors have had traditional PhD’s in economics, the director’s job is a manager and negotiator, not a technocrat. The job description calls for “a distinguished record of economic policy making,” and Madame Lagarde has at least as much significant experience with economic policy making at the international level as any of her competitors.
Though Madame Lagarde’s degree is in law, she successfully completed graduate-level courses in economics, and is more eloquent and articulate in describing and debating economic issues than most economists. In addition, Madame Lagarde has impeccable management experience.
Nineteen years after joining the Paris office of the prominent international law firm of Baker & McKenzie, she “rose by the elevator of her own talent” to become chairperson of the Chicago-based firm in her mid-40’s. Her former male colleagues have since been singing her praises. Mitchell Gitin wrote in a letter to the Financial Times that “she was a transformational and inspiring leader at a time when the firm needed one, and had a genius for forging consensus and achieving radical change when it was required.”
Christine Lagarde is highly respected by many prominent PhD economists. Kenneth Rogoff, the former chief economist of the IMF, called her “enormously impressive.” In 2009, the Financial Times newspaper voted her European Finance Minister of the Year. This year she chaired the G20, G7 and G8 finance ministers meetings, and although the rotating chairmanship is assigned arbitrarily, she commanded the respect and admiration of her exclusively male colleagues.
Madame Lagarde’s lack of banking experience is probably an asset, not a liability. She was as strident as a schoolmarm when scolding the naughty banking boys who paved the way for the 2008 financial meltdown. At the World Economic Forum in Davos six months ago, she admonished (to much applause) the head of Barclays Bank after he expressed a “heartfelt thank you” to the banking regulators and the G20 economic ministers for rescuing the banking sector during the 2008 crisis. She famously declared, “The best way for the banking sector to say thank you would be to actually have good financing for the economy, sensible compensation systems in place, and reinforcement of their capital.”
This race for the top spot at the IMF, scheduled to come to a conclusion on June 30, is generating more publicity than any before it. That a woman happens to be the most qualified and suitable candidate for the position is a victory for all women and for the traditionally male-dominated world of economic policy making.
Let us hope that Christine Lagarde is chosen for her indisputable merits, without any backlash from the old boys’ network of PhD-holding economic technocrats or emerging market countries crying out for more representation. She has the opportunity to change the corporate culture at the IMF and to end the monopoly of conservative, Chicago-school economists, who since the Asian financial crisis in the 1990s have been lamentably behind the times.
Christine Lagarde is ready to reach out to the world’s emerging market economies, recognizing that they deserve a seat at the table. As she recently acknowledged, “with an institution with so many different people with different backgrounds, there’s a need for respect and tolerance.” It is no accident that she has focused her campaign on the BRIC (Brazil, Russia, India, China) economies, paying visits in the past two weeks to officials in Brazil, India and China to gain their votes and reassure them of her commitment to making the IMF more responsive and representative of all of its member nations. Let us hope that her efforts yield a successful outcome.
About the Author
Moyara deMoraes Ruehsen is a Brazilian-American economist and Associate Professor in the Graduate School of International Policy and Management at the Monterey Institute of International Studies. She has three graduate degrees (two Masters degrees and a PhD) from Johns Hopkins University and teaches courses on Emerging Market Economies, International Finance, and Money Laundering.