What has been missed is that we are now in the early stages of an interregnum in global governance — an extended transitionary phase, as we move from the end of the old order and the eventual birth of the new.
The BRICS Stand Up: On the IMF Leadership Change
The illusion of permanence has kept a powerful hold on global governance.
It has led some to continue to argue for the relevance of the G8, even after it has became readily apparent that G7- or G8-centred international governance arrangements can no longer undertake the necessary measures to contain global economic crises, and despite their questionable usefulness for brokering global security and environmental solutions. It has caused some to continue to focus on how the traditional players in the international system can set the agenda, and define the priorities for global economic governance.
But fundamental shifts are underway — even if there is a lag effect in global diplomacy.
The latest sign of the global shift came this week when International Monetary Fund (IMF) directors for the five key so-called "emerging countries" issued their first joint statement, saying it was time to end the "obsolete unwritten convention" that requires the head of the IMF to be from Europe.
In their joint statement, IMF directors for Brazil, Russia, India, China and South Africa (BRICS) criticized European officials for suggesting that the successor to former IMF chief Dominique Strauss-Kahn should continue to be a European.
The BRICS countries urge "abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe," and suggest that this practice undermines the legitimacy of the global institution. The choice, they say, should be based on competence, not nationality.
Reuters reported that French authorities indicated earlier this week that China backed French Finance Minister Christine Lagarde for the post, but China's foreign ministry had no comment.
In the joint statement, the BRICS nations said that the recent financial crisis, which erupted in developed countries, highlighted the urgent need to reform international financial institutions, including reforms in representation and decision making to reflect the growing clout of developing countries in the world economy.
The BRICS' statement on IMF leadership is a harbinger of things to come. Those who have been paying attention to the current shifts in the global order will appreciate that this move was the logical next step in the evolving global governance scenario unfolding gradually for the past decade, and picking up speed since the outbreak of the 2008−09 financial crisis.
What is especially eye opening is the timing of this current joint criticism from the BRICS. Their challenge to the impending IMF leadership change comes after the British government issued a very public endorsement of the French candidate, after a number of European countries, including Germany and the European Union, came out in support of the French finance minister, and after Minister Lagarde announced her candidacy.
What has been missed, given the illusion of permanence, is that we are now in the early stages of an interregnum in global governance — an extended transitionary phase, as we move from the end of the old order and the eventual birth of the new.
It is not an accident that the BRICS' joint criticism of the traditional entitlements in the international system comes just as government leaders of the established powers are jetting to France for the G8 summit.
The BRICS challenge comes amid a sensitive time for France, when many domestic voices consider the public handling of the former IMF chief's arrest as an affront to French national honour and, perhaps most important, when the French presidency is heading for the home stretch in preparing for the upcoming G20 summit in Cannes.
For now, the criticism of the BRICS is aimed at European privilege in global affairs. The French will, perhaps, eventually prove successful in wooing Chinese authorities to come onside, this time, to support Minister Lagarde as IMF head. France has, after all, made significant efforts to reach out to Beijing on key issues for the Chinese for the G20, such as international monetary reform and speculation on commodity markets.
An alternative IMF leadership outcome would, moreover, presuppose that the BRICS can settle on a preferred candidate from the developing world, as well as overcome the strong influence which the United States and Europe continue to exercise over the board of the IMF.
However, the assault of the emerging powers on the traditional entitlements of the established powers is only likely to intensify as long as the shift in global economic power continues. The longer-term interest of the BRICS and the general trend is reflected in the comment made last week by China's central bank governor, Zhou Xiaochuan, that the IMF's leadership should reflect the growing stature of the emerging economies and the shift in the world economy.
Goldman Sachs Assets Management has now thrown its influential support behind choosing the next leader of the IMF on the basis of merit: they should be "well versed in the many economic and policy issues that the IMF must handle and lead; and must have a personality that can engage successfully with the many different members to orchestrate change, as well as a better and more balanced world economy. That the leader must not simply be a figurehead of a European and US "deal" to sustain the historic arrangement."(1)
Fortunately, the Group of 20 nations endorsed "an open, transparent, and merit-based selection process" for the heads of the global financial institutions at their April 2009 summit. The test of their commitment to this pledge is still to come.
(1) Source: Jim O'Neill, "IMF Leadership," Viewpoints from the Office of the Chairman. Goldman Sachs Asset Management, May 22, 2011. Available at: wwwqa2.goldmansachs.com/gsam/advisors/education/viewpoints_from_chairman/viewpoints-pdfs/IMF-Leadership.pdf.
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