The inconvenient truth

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Christine Lagarde, the French finance minister, was yesterday chosen as the new head of the International Monetary Fund after Dominique Strauss-Kahn, a fellow Frenchman, stepped down from the post earlier last month, due to sexual-assault charges. While many highlight the fact that Madame Lagarde is fluent in English and well-respected in the world of politics, some publications, like this magazine, think that this is not enough for the IMF’s top job and feels deep disappointment by the decision taken by mostly European countries, the US and China.

A good one and half month passed since the resignation of Dominique Strauss-Kahn, the former head of the International Monetary Fund, who is now facing a possible 20+ years in prison for alleged rape. Of course, mainly because of this no one can praise Mr Strauss-Kahn on the personal level, but on the professional side, the facts lie with the former boss. Firstly, because he was actually an economist (Université Paris X); and not a bad one either. Secondly, because under his leadership the IMF regained its long lost reputation as a credible international organisation. Thirdly, because world leaders listened to his arguments. And fourthly, because he had more than 30 years of political experience under his belt. So it should not come as a surprise that these achievements (and professional legacy) are hard to level, especially for Christine Lagarde, the current French finance minister, by far the least qualified alternative from the two managing director aspirants. Why?

First of all, almost all the other serious candidates (Agustín Carstens from Mexico and Stanley Fischer from Israel) were Central Bank chiefs in their respective countries; both men were former IMF employees (deputy heads of the organisation); and both were trusted economists, Carstens received his PhD from Booth School of Business (University of Chicago) and Fischer received his from MIT, that is, from two of the leading business schools in the world. In this regard, Madame Lagarde has no Central Bank experience, no IMF experience and no PhD (or any other degree) in economics. That is why I strongly assume that nine out of ten people would not recommend her for the top job at the organisation because she is simply not fit for it. In my view, the managing director of the IMF should have a genuine background that both Mr Carstens and Mr Fischer (as well as Mr Strauss-Kahn) possessed. So what exactly has Christine Lagarde compared to the above mentioned two credible contenders? 1) French passport; 2) EU citizenship; 2) Good connections. And that’s about it!

It would be, however, somewhat unfair on my side to totally sideline Madame Lagarde’s valuable skills and professional experience. Before becoming a politician the French finance minister studied law (specialising in anti-trust and labour) at Université Paris X (where Mr. Strauss-Kahn obtained his PhD in economics) and also political science at Science Po (Aix-en-Provence campus). She was head of Baker & McKenzie, an international law firm, for 5 years; she was the first woman to hold this position. And from 2005 onwards she was Minister of Commerce and Industry (2005-2007), Minister of Agriculture (2007) and Minister of Finance (2007-2011) in the UMP-lead French government. Needless to say, this is a very impressive career by any standards. However, I firmly believe that the appointment of Christine Lagarde as the next head of the International Monetary Fund was and will be, a grave mistake.

In support of my argument I now enlist four reasons on why Madame Lagarde is unfit for the job. Firstly, she is not an economist. Of course, it is not carved in stone that leading pre-eminent financial institutions in the globe requires a sound understanding of economics but I think, it would be better and more reassuring to know that the managing director of the IMF can decide important matters alone without the help of aides. Secondly, the argument of most European states that a European should manage the IMF because of the ongoing financial crisis is utterly flawed. Precisely because of her nationality and heritage Madame Lagarde will not be objective when dealing with the European continent; whereas an IMF head should focus on the global implications of a crisis and a decision without any positive or negative bias in either ways. Thirdly, the new head of the IMF might soon appear in court due to her alleged involvement (abusing office) in the Bernard Tapie case. And fourthly, we are living in 2011, not 1945, so it absolutely unacceptable that the IMF and both the World Bank and the UN resemble an almost ancient regime, in which the developing world does not have any say. Or as Martin Wolf, associate editor of the Financial Times, rightly noted in his article about a month ago: „Regimes that do not bow to the winds of change get blown away. The Europeans need to recognise that truth in time. They will not do so. But it will prove a big mistake.”

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