Lagarde and Strauss KahnImage by International Monetary Fund via FlickrTall, elegant French Finance Minister Christine Lagarde is in pole position to succeed her countryman, Dominique Strauss Kahn, in the top job at the International Monetary Fund. We should have the results by 30 June. Lagarde was hesitant at first, but once she decided to go for it, she hit the campaign trail running: first garnering support in India, then at the G8 meeting in Deauville, with Russia coming out in favor, and now Brazil, just ahead of her Mexican rival.
Indeed, Mexico’s Carstens is the only other serious contender: he served as IMF deputy managing director from 2003 to 2006, then as Mexico's finance minister, and finally, since January 2010, as its central banker. With a Ph.D. in economics from the University of Chicago, he is a heavyweight in precisely the area where Lagarde is lacking: economics. She's a lawyer, albeit a remarkable one, who made it as the first woman head of the big Chicago-based firm Baker McKenzie (and a foreigner to boot - after 25 years in the US, her American-accented English is excellent).
Image by International Monetary Fund via FlickrWhy is this race so fascinating? First, because no woman has ever held that post since the IMF was founded in 1946. And having a woman like Lagarde following on a man suspected of rape seems to be a perfect answer. She is certain to put order in the IMF's rather unsatisfactory code of conduct, one (stringent) for the employees, and another ("vague") for the board of directors. A woman, at this point in time, is just what's needed!
For that matter, no woman has ever run the World Bank either: next time there's a change there, a woman candidate should be brought up... Both institutions created after World War II to bring some order to the world economy (largely as a result of Keynes' efforts), have traditionally been run by men, always an American at the helm of the World Bank and a European at the IMF - and the Third World be damned!
Strauss Kahn had started to bring change to the IMF's vote composition, giving hope to emerging economies that they would play a larger role. Under his stewardship, their share rose to 42 percent (from 40.5 percent, not such a big change...). This was mostly achieved at the expense of European Union countries who now hold about 31 percent, while the US retains close to 17 percent. For Lagarde to make it, these numbers signify she only needs a slight nudge from countries outside Europe and the US. While the US has not yet formally announced its support for Lagarde, Geithner has manifested approval and in any case, there is no reason at all why the US would not support a European: if it didn't, the pact would be broken and the US would risk "losing" the World Bank.
Lagarde in her campaign is careful to make all the right noises and assuring emerging market and developing countries that she will give them more IMF power.
Furthermore, the fact that she is a French citizen following on another French citizen is not disturbing anybody: it's happened before at the IMF with one French Managing Director following another (Camdessus following Larosière).
So is her nomination good and done?
Not quite. There are a few problems. She could be placed under investigation for ordering an out-of-court arbitration in which Bernard Tapie, a former business tycoon and friend of Sarkozy, obtained a € 403 million settlement from the French state.
There is increasing noise in the media about the fact that she hasn't been a particularly good finance minister and is one of the architects of the bailouts in the Eurozone (Greece, Ireland, Portugal) that many view as disastrous; that she is no economist, has never made her voice heard in France on such matters; that she is merely Nicolas Sarkozy's mouthpiece.
And emerging economies in all this? They might vote for her, but perhaps not for a full mandate. Brazil has been muttering about that, saying she should stay only to the end of Strauss Kahn's mandate...But that would leave her stranded with no job in 2013. She has made it quite clear that she wants a full mandate...
So the bets are on...If you could vote, who'd you vote for? Christine Lagarde, the brilliant corporate lawyer or Carstens, the central banker and ex-IMF deputy managing director?
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