Ex Director, Maastricht University India Institute, Maastricht University

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High time that IMF be headed by a candidate from emerging economies?

Traditionally IMF head has been a European. Now could be a good time to democratize this international institution and make it relevant in the changed/changing economic environment in which the pivot of global finance and economy is shifting towards newly emerging economies.

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    May 17 2011: Wonderful background article by David Woodward on the Democratization of the IMF..lots of great background, statistics, facts and excellent analysis


    Here is one quote that underscores the importance of Sanjay's question.

    "The resulting concentration of power in the hands of the developed country governments, in an institution whose policies almost exclusively impact on developing countries, has seriously limited the Fund’s effectiveness, legitimacy and credibility."


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    • May 15 2011: Jafia,

      I think we are witnessing a fundamental change in the global setup, thus it may just be a matter of time. So be ready for surprises in the time to come :)
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        May 17 2011: Yes, but Sanjay, do you believe it is possible this de facto World Government ( The IMF and all the others, UN. World Bank, Nato etc.etc) will actually democratize and become truly inclusive or do you think it more likely that the emerging economic and therefore political power of asian, african and arabic nations will result in the creation of opposing entities? I believe the latter. I belive the UN, IMF,World Bank etc. are so entreneched in their own present power structure and the vested interests that support that that they will not see the light and democratize in time. I believe that very very soon..the price of oil will no longer be $us. I believe these nations will form theieown currency under a strong central bank that will dominate the $US and $EU. I see a major face off, politically, economically and sadly militarily between the US/EU and the rest of the wolrd in which the US EU will be the losers. ( Of course that is mostly intuitive on my part..I have no expertise in global economics, global politics..but everything I read in my search to understand the place of oil in the plutonomy leads back to to the very real possibility that there will be a policitcal and economic face off long before there is a true democratization of these instiutions or a true changee in EU and US policy. If the democratization you are advocating at the IMF does not ocurr there and at all these other "shadow global governments" there will be a strong coalition of Eastern . middle eastern, and african nations ( I would put Russia on the other side too)...a world wide face off between East & West.
        • May 23 2011: Hi Lindsay,

          Might sound a wishful thinking but it's not. I am positive it will change. Put it differently, there is only one way out and that is change :)

          Simple reason is: time changes, situation changes, people change and thus all man-made creations need a reshaping suiting to the times OR ELSE they run a high risk of being de facto defunct. Good examples: League of Nations, G7, G8, recent debates on the reform of most of these outdated structures etc....If this were not the case, we would not have the UN instead of League of Nations, and G20 instead of G8. If you look at the definition of G8, you can see it is not what it used to be - neither the richest, not the most powerful not a proportionate representation of larger mass on the planet - all that not anymore. Same goes for the veto powers in the security council in the UN. Another one, people are already mulling over the pros and cons of an Asian Economic Union.

          Human mind is by nature programed to be biased . It likes to see what it wants. But as life tells us, reality does not evolve around one's desires. So it is always confrontational for one or the other parties.

          Very interesting phase we are living in :) Many interesting stories to unfold in the coming times.....
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      May 16 2011: Jafia , I earnestly hope that you are wrong about the desire to suppress others too. If the so called first world has any brains it will recognize that it is time for leadership to change hands or at least be more widely shared. I think the BRICK (Brazil, Russia, India, China and Korea) countries have a good amount of leverage to push forward their agendas- and unlike the past a strong will to use it. I am encouraged that the G20 arose from the G8 and I read that in recent conferences China in particular has insisted on a fair hearing.
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      May 17 2011: Hello Richard, yes a sound principal for challengeing the de facto global governance by all these unauthorized unelected global governors...a sound principal on which to found a true global democracy.NOTHING ABOUT US WITHOUT USI'll print the t-shirts..let me know your size everyone.
  • May 26 2011: Hi all,
    Nice to see all nice comments and ideas. I just read this article by Roubini; thought you might like it in connection with the question. Something more to think about who can help as leader in this organization.

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      May 27 2011: Sanjay

      .thanks.great article.

      those little piigs got no market.

      ..will be interesting to see what happens.and how it effect the EUand the IMF

      want to make a bet????

      The World Bank will be in this somehow.

      (Sanjays link is about the apparently irresolveable debt crisi in the PIIGS..Portgugal, Italy, Ireland, Grece and Spain)
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    May 25 2011: A few days ago, I read that Austaliia was one of the countries calling for a leader for the IMF that did not come from Europe. Today I read that the US critiscized Australia for their treatment of immigrants. I do not remember the US ever critisicizing Australia before and I wonder if this might be linked.
    If it is a silly idea, just ignore this.
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      May 25 2011: I am suspicious about the current scandal of ex IMF head. My gut feel is it's a plot & as usual media got a good product to sell so they are creating stories and pumping out money out of it!!!
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      May 25 2011: catch Presidents speech before Parliament..he speaks to a fudamental retsructuring of how we treat un developed and devloping nations..

      Didn't mention the IMF or World Bank by name but very encouraging that tese two institutions will have to redaically reorganize themselves and change their whole orientation to the osuthern hemsiphere,

      Riht mow the head is irrelavant as long as the funadmental structure and policy remain sin place.
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        May 25 2011: I agree most important thing to be changed is basic fundamentals.
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        May 25 2011: But isn't it the head that steers the beast? Without good leadership nothing can change, can it?
        (I ask as a learner.)
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          May 25 2011: Good leadership only works if the machinary is right. Power is something that makes even a good leader to be greedy and derailed. Once fundamentals are right than you are offering the right machine then the Good Leader will need a good team to execute.

          Just hypothetical example , say if we send someone very good to lead Libya in it's current condition with out changing the fundamentals of it's country and goverment , what will be the result after sometime , you think ?

          Leader's job is to give direction and vision (at times s/he might apply "lead by example" but that's not necessary). For execution of he needs a good team that trusts her/him and follow. Well you might say , thats leader's job to influence , yes it is that's why Leaders hand pick their teams both in political and business arena once s/he is in helm to execute her/his vision the way s/he wants.

          (I am also a learner Debra..........)
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          May 25 2011: Deb I am a learner too and i htink it is important for us lal to try and understand what the IMF and Wolrd Bank really are. It has beena jolting expereince for me..I was taught they were scared almost..doing good work in the wolrd..trying to eradicate poverty...

          so you & salim & I and others here who also din't know that much about the iMF are doing good work here and this conversation is achnace to bring these important wold isues tot he attention of the Ted Community.

          Many nay excellent links have been provided above. The woodward one is excellent if you didn't already read it.

          PrseidentObama's speech today, an inspiring speech that has given me much hopem, seemed to refernce the need to rebuld these institutions from scratch..

          No leader could make a difference at IMF..because of its very structure and how votes are cast etc. not toention its entire charter and focs for donkey's years.
  • May 24 2011: wonder if you have seen this article

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      May 24 2011: Excellent article, Sanjay. Seems like everyone at this "round table" is in agreement that the IMF has to change and that the change has to be a fundamental shift away from EU control

      . Your question seems to assume that the overall revamping in strategy and purpose , the overall rehabilitation of the IMF would naturally follow from that. But without a formal reorganization control would not change because of the way the voting blocs work. Also without a concurrent simultaneous revamping of the World Bank ( they are twins joined at the hip) I'm not sure how much a change in head alone will benefit the developing and undeveloped nation sof the world.

      Or have I assumed too much here? I assumed that the purpose for seeking a non EU leader for the IMF was to effect a radical and desperately needed change in how the IMF treats undeveloped and developing nations. Was that not the point of your premise?
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        May 25 2011: wow Lindsay "they are twins joined at the hip" a poetic symbolisation it is !!! Impressed I am :)
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          May 25 2011: do you agree?

          I see them as really different subsidiearies in the same big corporation..same phiosphies, same goals,,idistinguishable really and very much in synch with each other.

          am i wromg?
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    May 17 2011: Here is the list of candidates for the head of the IMF according to the BBC news service:

    Mohamed El-Erian, Egypt
    Stanley Fischer, Israel
    Gordon Brown, UK
    Kemal Dervis, Turkey
    Peer Steinbruck, Germany
    Montek Singh Ahluwalia, India
    Christine Lagarde, France
    Agustin Carstens, Mexico
    Trevor Manuel, South Africa
    Axel Weber, Germany

    I would be very interested to know your perspectives on them and whether anyone here has a preference
    • May 23 2011: Hi Debra,

      BBC also cannot help but suffer from shotsightedness. The best way to choose would be to ask a question: why Europe led IMF so far? If the answer is the same as it was before, then let it continue. If not, then delete all the names form the list. No bias no napotism :)
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        May 24 2011: Thanks for addressing my question, Sanjay. I assumed that developing nations would want to eliminate the old guard candidates. My question is: can the developing nations back a candidate from any of the BRICK nations or Turkey, Mexico or South Africa -so that there is a common will or is this simply a "I want mine" situation? Obviously, I believe that the most leverage would be derived from unity or consensus.
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    May 17 2011: The IMF is part of a de facto World Government without accountability to the peoples of the world. It is the EU counterpart to the US dominated World Bank.Your question, Sanjay, assumes that these organizations exist and were created to serve the peoples of the world and not to facilitate and further the interests of specific alliances. A milennium iniative to create a world government was in part prompted by the workings of the UN,the IMF, World Bank, Nato,etc.as a de facto world government making global political, economic and military decisions without accountability to the peoples of the world

    .",Global policies are discussed and decided behind dosed doors by exclusive groups, such as the GS, OECD, the Bank of International Settlements, the World Bank, the International Monetary Fund, the World Trade Organisation and others. These agencies are reinforced by informal networks of high officials and powerful alliances. Together they have created what can be seen as dominant and exclusive institutions of world government. All too often they are influenced by transnational corporations which pursue their own world strategies These agencies of actual world government must be made accountable. If there are to be global policies, let them be answerable to the peoples of the world. We want to know what decisions are being taken and why. We want the decision takers to know they are answerable to the public in every country which feels the breath of international bodies.".http://www.iheu.org/node/352

    So in a way the desire expressed in your question Sanjay,is asking the IMF to rebuild and recast itself from the ground up to benefit of all peoples of the world when in fact they exist to keep the rest of the world accountable to the interest of a few. to the interests of the global plutonomy. The IMF was created to be governed by EU interests. It wasn't formed to be a world body in service to the interests of the world. So how would that democratization come about?
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    May 17 2011: Sanjay..interesting analysis of how todays events may create opportunity to end European control of IMF..lloks like China is favored? http://www.reuters.com/article/2011/05/16/us-strausskahn-successor-idUSTRE74F7Y420110516
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    May 16 2011: Looks like there may be an opening..who should we put in?
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      May 16 2011: Lindsay's question is a good one. Do you have names you trust and endorse that we could begin to mention in conversations and blogs to support you?
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        May 16 2011: i was just being silly ( referring to the scandal in the news)..but I do hope this might be a place to review together what he IMF is supposed to be, whether it does its work well etc. and how it is governed. ( I know nothing about the IMF). I have questions too..e.g. President Obama, though the IMF made a $40 billion ( have to check the number) loan to Petrobras for their off shore oil drilling. I hope it is truly about something intended to bring tsruggling nations to econmc stabilityand give them a place in wolrd markets and not just afront for America;s or Europes foreign poltical and economic ambitions.
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          May 17 2011: The scandal aside, I think that the people on this site from the developing nations might have insight into good candidates that we might never hear about. If they could suggest names we might get to know the candidates that they think are worthy and begin to encourage those names to be better known in our own nations.
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    May 16 2011: Do you think it will really make a difference when invisible steering is in the hand of someone else more powerful.....
    We had U Thant, Kofi Annan & now Ban Ki Moon heading UN did that make any difference at all ?
    • May 16 2011: Hi Salim,

      Good point, but regarding the UN heads from non-mature economies, we know that the most crucial issues rest ultimately in the hands of veto powers no matter who heads the organization. Current frustration over climate change, aid-debt-trade dilemma are simple examples of how these issues go in non-decision bin as/if they do not serve the interest of the big-5, hence the quest for reform and democratization.

      But our question talks about financial institution i.e. IMF (or World Bank for that matter). We know that the World Bank heads come from the US and IMF from Europe. With the passage of time, we see the gravity of global economy shifting to the emerging economies (be it manufacturing, consumption, reserve surplus, sovereign wealth funds, FDIs, innovation, employment, GDP growth rate, and so on) it might not be very constructive if the member states with little or no money dominate and act as financial managers for those with money.
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        May 17 2011: Your invitation to this conversation has given me a good cause to try and understand who all these international institutions really are and who they really serve..were formed to serve. The world leaders in ethics and humanitarian values who were the framers of the Global Democrcay Project ( see my link and quote above) have really helped me frame the IMF, the UN, the World Bank in a very different context.To put it in extremely simple terms for the purpose of illustrtation non- EU countries seeking a leadership role in the IMF is sotr of like townies going to an exclusive country club to negotiate its use as a public park. ( That's as far as I have gotten in my understanding of the IMF and your question..and it fits and makes comprehensible so much else I have run into in my reserach on oil prices and US policies)
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          May 23 2011: Hi Lindsay
          You exactly came to the point to which I wanted to focus. Thanks

          Being from a country where the funds from World Bank & IMF has been flowing since decades for so called eradication of poverty for decades with no change .... Until Dr. Younus came up with Micro-Credit concept though that also debateable for some other reason , but definitely that had some impact in generating money flow at village level. That means until something happens intrinsically , extrinsic factor has nothing to do but develop dependency on it as it is designed to do so....... just one example

          The World Bank , Food for Work starts just during the harvesting time of farmers in my countrty. What does it mean ? It means after investing their hard labour, merit & small money they have when farmer is about to get a bit of return (i can't term that as profit, it's so marginal) , Food for Work program keeps price down , farmers loose what they invested and push them further down the poverty line.

          I wonder a CEO from developing country or poor country how can change this game ?
        • May 23 2011: Dear Salim,

          Good point you made. But I guess the discussion is about those countries who have demonstrated that they can raise the quality of life, eradicate poverty in whatever degree. A CEO from developing country could surely change if he/she has done it at home. And there are far too many examples of such CEOs in that re-emering part of the globe :)

          Key lies in sincerety of leadership, hard work and integrity of people - work ethics. Someone said long ago ' no lunches are free'... I thought, even breakfasts are not :)
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          May 24 2011: Dear Sanjay
          As moderator you are doing great and your subject is great as well.

          Ok I am focusing to a country who raised quality of life to a great extent , that's South Korea. Just giving an example of 1997 economic crash what happened South Korea. When the crash came what was the role of those two global institutions? Did they come forward to rescue ?

          Many Korean Conglomerate went in the hand of US economic Giants, funds from World Bank & IMF could stop that but they didn't. Finally with a call from goverment korean ladies queued infront central bank with thier jwelleries to give it to bank so that national economy survive.
          You can say 1997 is too far from 2011, I agree , but did the economic or political erena shifted to a greater extent during this time.Do you think a Ban Ki Mun in IMF or World Bank 1997 could do anything different. CEO needs his full team to support him in his execution , that's my point.

          Hypothetically , just think to what will happen to highly growing & emerging economy of China if suddenly if only US / EU conglomerates in one fine morning say , no we will no more place any order to China , what will happen to numerous manfacturing factories and millions of workers ?

          These so called emerging economy is not innovation based , they are just manufacturer. Marketing strength elementary , Brand equity almost zero. Only have their huge domestic market , but right that time domestic market lost purchasing capability hence consuming. Only penetrated to the lower segment of consumers global market where profitability is low.

          Please don't take me wrong as I drew a gloomy hypothetical picture. I jsut drew that to show how dependent these emerging economies are on developed economy.

          Not being an economic or financial expert I talked much where many thing can be wrong even, just point out those , I want take the learning opportunity being wrong.
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        May 18 2011: Hi Sanjay
        Understand your point, I have no disagreement with you about someone to head IMF & World Bank from Emerging Economy. My worry is that there is a high possiblity the person will be acting as acted by UN head. By the way World bank started as an extended agency of UN.

        Moreover who funds and controls the fund of IMF & World Bank? Funds of both are linked with world financial market and of which 5 big shareholders are France, Germany, Japan, the United Kingdom and the United States. In such scenario do you think being headed by someone from emerging economy will shape up the game any differently ?

        But if s/he can really change the game that definitely will be a great achievement !!!
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          May 18 2011: Salim..yes these are the core question..questions about the validity, integrity and viability of the IMF istelf. I have used this conversation as an excuse to invest a fairly considerable amount of time in understandung the IMF..hours and hours and hours. And I would have to say if it doesn't reform itself it will make itself extinct. The head would obviously not come from a developing nation..the whole premise is developed nations making decisions about devleoping nations many of which not conidentally ontrol important global resources.Chnaging the head..even ifthe head was non EU would notfundanmentally chnage the IMF or its stragety for developing nations.

          Many have this idea that the IMF and the World Bank are some how benevelont associtions inteded to help emerging nations take control of their own destinities, Important for evryone ti take a look themselves beyod this mythology and understand what the UN, Wolrd Bank, Nato, and IMF really are about..
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          May 24 2011: Salim a sweet point..a kind one..

          my purpose isn't to bust Sanjay's dream but to look toward what I believe he dreams of with him..in support of all the undeveloped and under developed countries so poorly served by the IMF and the Wolrd Bank.

          My internal gyroscope alines in only one direction

          and that is towards the truth.

          towards discerning truth

          toward uncovering truth where it has been long hidden.
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        May 23 2011: Salim thak you for sharing this first hand view of what the IMF actually does in developing and under developed countries and how far that is from the reality of who they say they are. I grew up to honor the UN, the Wolrd Bank, the IMF, even Nato and WTO as venerable insutitions stannding for and furthering the global welfare. I have believed all my life as most Americans have that the point of the wolrd bank and the imf was to end poverty in these nations to help them become their own viable economic and political soverign enitities,

        I now see that is not so. I am shocked even frightened by that. Still trying to understand it and still trying o work throgh what the EU should do about the IMF and wht the united states should do about the Wolrd bank.

        For the health of our wolrd..for the sake of rights tha we hold to be for all poeple..they cannot continue to be as they have been.

        I am hoping to visit thi ssoon in a speparte TED Converstaion when I have more of my facts tsraight and understand more of the history. But thnak you for telling the Ted Community that all is not what it seems to be with the IMF.
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          May 24 2011: Nice to hear from you Lindsay & you are welcome.

          So far I know one of the big sources of fund of IMF & World Bank is Money Managers of Stock markets like Wall Street. The interest rate in matur economy like US & Europe is very low , so they lend money to World Bank & IMF as they lend that money to the third world and devloping world who needs cash flow for they survival of their economy at a much higher rate, so stock market Money Managers makes money out of that.

          So it's not solely in the hand of political leadershi as well.
          I don't want to demoralize Sanjay who actually having good dream , just giving some reality touch. Like Sanjay I also love dreaming, because every new thing happens starts with a dream.