Mohamed El-Erian Blasts The "Feudal" Traditions Of The IMF, Officially Denies He Is In The Running To Become The New DSK

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Mohamed El-Erian is back to doing what he has been doing best lately: writing opeds. Today, the man who some speculated could well be the replacement for DSK himself, has written a scathing posting blasting the IMF's sad state, focusing on the specifics of the "head" position as well as the qualifications required to attain it. His coup de grace: "This feudal
selection approach must be changed; and now is the time to do it.
Without a credible and quickly-recovering IMF, Europe will face even
more uncertain prospects, progress on structural reforms in advanced
economies will recede, and the world will find it more difficult to make
room for rapidly growing emerging economies." As for speculation that MEE (in keeping with acronymis) could be the next DSK: "I will not be
part of this process; I already have a great job, here in California."
His words of wisdom: "Hopefully, governments of the world can finally come together and open
the selection process to a pool of other candidates from around the
world. By so doing, they would cast aside a tradition that no longer
serves a purpose consistent with the spirit of multilateralism and its
required effectiveness."

From the FT: "Feudal IMF job process must change"

“Its
déjà vu all over again.” Thus began a 2005 column that I wrote for the
Financial Times lamenting that the Managing Director of the IMF was
still chosen on the basis of horse trading rather than through an open,
transparent and merit-based process.

Today the issue is back on the table as the incumbent, Dominique Strauss-Kahn, battles allegations of sexual assault. Judging from the dynamics already in play,
it will again be undermined by an outmoded and harmful process, that
places national prestige above the multilateralism that the IMF stands
for.

Under a tradition that dates back to 1944, the IMF’s MD has
been “reserved” for a European, allowing the institution to develop deep
roots by anchoring it to the political and economic powers of the time.
But over the years, the tradition has evolved from being a source of
stability to eroding the legitimacy and credibility of the institution.

The
problem has been compounded by the manner it has been implemented.
Nominations have been determined by political back door deals among a
small set of countries, often governed by issues of national prestige
rather than job qualifications.

Indeed, at times, the country of
origin of the next chief was specified before the suitable individual
was identified. And while the successful European nominee always gained
the formal support of the whole membership of the institution, this was
done using the full apparatus of foreign policy and bilateral political
pressures.

For years now, most people have acknowledged the need
for change. There have even been attempts to do so. Yet European
governments have effectively opposed the required shift; and the
Americans have not pressed the issue.

It should come as no
surprise that this features prominently in the IMF’s struggle to gain
legitimacy and effectiveness in today’s global economy. This failure to
adapt undermines the institution’s ability to become a “trusted advisor”
to countries around the world, while individual countries are worse
off, because they do not feel comfortable making full use of the Fund’s
expertise.

Even the language surrounding this topic constantly denotes an impression of entitlement rather than merit. We see this today as some claim that Europe must “retain” the IMF post while
others feel that it is “the turn” of another group of countries. In the
process, people rush to recommend specific names without the
pre-requisite of clarity on the qualification criteria. I have even seen
my name mentioned in the list of potential candidates should it be the
“turn” of emerging economies to get the post.

This feudal
selection approach must be changed; and now is the time to do it.
Without a credible and quickly-recovering IMF, Europe will face even
more uncertain prospects, progress on structural reforms in advanced
economies will recede, and the world will find it more difficult to make
room for rapidly growing emerging economies.

It is therefore
critical that, in the coming weeks, the IMF Executive Board finalise and
publicise a process that would be used, should Mr. Strauss-Kahn be
forced to resign. Specifically, the post of Managing Director should be
open to all nationalities, with candidates assessed on the basis of
transparent job qualifications.

It should also involve an
internationally balanced committee to evaluate applicants and put
forward 2-3 finalists for Executive Board consideration, and the final
choice should emerge from a fair vote of the Board.

I will not be
part of this process; I already have a great job, here in California.
Hopefully, governments of the world can finally come together and open
the selection process to a pool of other candidates from around the
world. By so doing, they would cast aside a tradition that no longer
serves a purpose consistent with the spirit of multilateralism and its
required effectiveness.