The dark horse

Will Fischer spoil Lagarde's chances and help Carstens?

The governor of the Bank of Israel and former deputy managing director of the International Monetary Fund (IMF), Stanley Fischer, has announced his candidature for the top job at the IMF. By stating that the IMF’s next managing director should be chosen on the basis of the candidate’s professional qualifications rather than nationality or other “political factors”, Dr Fischer has identified his main target — France’s Finance Minister Christine Lagarde, a lawyer and politician rather than an economist, whose initial candidature was sold on the basis of her nationality and gender. Equally, he has strengthened the candidature of a fellow Chicago-trained economist — Mexico’s central bank Governor Agustin Carstens, also a former IMF deputy managing director. Ms Lagarde is widely viewed as the front runner in the race.

 

While Dr Fischer’s professional credentials are impressive, he could alienate many Muslim nations, especially Arabs, because of his association with Israel. Egypt and Indonesia have already announced their support for Ms Lagarde, though Palestine has come out in favour of Dr Fischer. Dr Fischer’s main qualification also happens to be his major disqualification. His reputation as an economist and an experienced IMF manager will be weighed against his notoriety as a man who pushed for policies that ruined many economies, including Russia and Indonesia. Finally, his association with Citibank may make it that much harder for the Obama administration to back him convincingly. For all these reasons, Dr Fischer may remain an also-ran.

On the other hand, Dr Fischer could strengthen voices in favour of a professionally-run IMF and further weaken Europe’s case. Many voices, including that of the IMF’s biggest critic in the US, Nobel Prize-winning economist Joseph Stiglitz, have spoken out in favour of the idea of the IMF being led by a professional of high standing, with no premium being placed on nationality. Neither Dr Fischer nor Dr Carstens would secure Dr Stiglitz’ approval but the field is now closed and the votaries of ending European domination may end up supporting Dr Carstens. If the US arrives at an understanding with both Mexico and China, it may lead to the creation of a wider non-European platform that would undermine the candidature of Ms Lagarde. In that eventuality, Dr Fischer could withdraw in favour of Dr Carstens, preventing Ms Lagarde from retaining the post within Europe. In short, the race for the IMF top job is wide open and Dr Fischer has thrown a spanner in Ms Lagarde’s works.

The fact, however, remains that in the first round of campaigning, Ms Lagarde has succeeded in stealing a march, though her initial candidature was triggered by Europe’s anxiety to keep the job with itself. The idea that the IMF should have a woman boss was a convenient afterthought. Interestingly, the BRICS (Brazil, Russia, India, China and South Africa) had strongly criticised the European Union for trying to pre-empt a merit-based selection and seeking to retain the IMF job within Europe. If they stick to their argument, they could also end up supporting Dr Carstens. A final twist to the tale could well be the speculation that US Secretary of State Hillary Clinton wants the top job at the World Bank. If the US chooses to keep that job, it may end up helping Europe retain the IMF job. Where does all this leave India? While India has indicated its preference for Ms Lagarde, the final decision would have to balance contending economic and geo-political considerations. India must keep its options open till it is clear which one of the contenders will serve its own interests better and will also help strengthen the IMF as a truly multilateral financial institution.