If the French judges don't trip her up, Lagarde might not have to stretch herself much. Since its inception in the mid-1940s, the IMF has always been headed by a European, and four of these 10 heads have been from France.
The dominance of Europe in this 65-year old institution baffles many people around the world. The IMF is the banker of last resort to economies in trouble, lending money when nobody else will, extracting promises of reform from hapless borrowers. Europe today is in big trouble, with bankrupt Portugal, Greece and Ireland opting for costly global bailouts.
Lagarde says a troubled Europe needs a European to head the IMF. Really? Was an Asian elected to head the IMF in the aftermath of the 1997-98 Asian crisis?
Brazil, Russia, India, China and South Africa (BRICS) have spoken to each other sporadically about the need to break up the IMF's European hegemony. But to do that effectively, these five emerging giants will have to put up a candidate that each will agree to support. Till Friday, people in North Block maintained that no such consensus candidate had been found. But it's possible that the BRICS nations might finally agree to back Mexico's central bank chief Augustin Carstens for the top job at the IMF. Another candidate, Kazakhstan's central bank head Grigory Marchenko, is a dark horse.
If the BRICS nations do manage to zoom in on a candidate that all support, it'll be a rare show of unity among the five emerging economies. Pulled in different directions in their own self-interest, these five have found it tough to agree on things. Commodity exporters Brazil and Russia, for example, can't converge with the interests of China and India, both of which need to import many commodities. China's refusal to let the yuan appreciate faster is an irritant for India which feels its exports would have done even better if the Chinese currency had hardened faster.
The practice of a European heading the IMF and an American at the helm of the World Bank started at the origin of these institutions, during a three-week meeting at the Mount Washington Hotel, in Bretton Woods, US, in July 1944, while WWII raged in Europe and Asia. With victory in sight, the Allies met to hammer out the post-War economics of the world. John Maynard Keynes spoke for Europe, Harry Dexter White headed the American delegation. After the talks and signing of papers, two things became clear. One, economic power had shifted decisively away from Europe to America, whose surging economy, untouched by War would bankroll Europe's postwar recovery. Two, as the two most powerful economies in the world, the US and Europe would lead the World Bank and IMF, respectively. Over time, the two Bretton Woods institutions have assumed good cop-bad cop personas. The Bank, which funds development projects all over the world, is seen as a sometimes-bungling do-gooder. The Fund, which comes in during economic crises and imposes conditions on indebted countries—like a recent austerity plan for Portugal—is almost universally despised.
After India almost went bust in 1990 and had to go to the IMF, the Left and other opposition parties raged against what they saw as a surrender to the 'Washington consensus.' Yet, India's recovery from trouble was remarkably fast, so fast indeed, that it ended up paying back the IMF with interest ahead of schedule. In public discourse, the IMF went from a monster with its foot on the economy's throat, to irrelevance, in five years or less.
In today's India, the IMF is perceived as a purveyor of largely-unread economic forecasts, bundles of reports and—for financial mandarins—the dispenser of sinecures in Washington with a lifetime, dollar-denominated pension afterwards. Yet, in post-reform India, even the lure of a Fund-Bank stint is fading. Babus have many more options to travel and post-retirement options are thick on the ground. India's case for a non-European (Indian?) as the head of the IMF largely rests on symbolism. China, on the other hand, fancies itself as a global power. It dreams of turning the renminbi yuan into a global reserve currency, that'll eventually topple the dollar from its perch. Having a Chinese—or a China-backed—head of the IMF would suit it just fine.
Russia's relations with the IMF are, mildly put, complex. After its economy imploded in the early 1990s, Russia became the biggest-ever borrower from the Fund, notching up loans of over $20 billion by 1999. As it battled to modernise its Soviet-era economy, ratchet up employment and hold inflation in check, it smarted against the IMF's diktats.
Now, after a decade-old commodity boom lifted it out of chaos and debt and turned it into one of the fastest growing economies in Europe, Russia aspires to more global heft. Having its own nominee head its one-time tormentor would be especially sweet for the Kremlin.
South Africa, meanwhile, has plans to nominate its own candidate for the top job at the IMF. This is likely to be its former finance minister, Trevor Manuel. What about Brazil? The fledgling administration of Dilma Rousseff has been hit hard by a series of problems—a slowing economy, spiralling inflation and corruption charges against a senior minister—which seem to have taken up all administrative bandwidth, leaving no time for the tussle in Washington.
Right now, there's very little time—and little chance—that the BRICS nations will manage to put up a consensus candidate to contest against Lagarde and Carstens. That fight will have to wait till later this year, when the post of the IMF's deputy managing director goes up for grabs. China is almost certain to make a strong pitch for it, so are South Africa and Russia. And if China makes a bid, can India be far behind?
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