BRICS knock at IMF's door

On May 28, the visiting French Defence Minister, Mr Gerard Longuet, told reporters in New Delhi (as only a Frenchman can do), “there is a sign of the importance of India for France”, adding that his colleague, the French Finance Minister, Ms Christine Lagarde, would “begin her campaign for the IMF (managing directorship) in India”.

Expectedly, Mr Longuet was unable to put a firm date to the projected Lagarde visit. The French envoy to India, Mr Jerome Bonnafont, however, added the detail that New Delhi would be among the “first stops on a global tour, but would not necessarily be the start”. Incidentally, Ms Lagarde is beginning her tour – aimed at gathering support for her candidacy of the IMF managing directorship – from Brazil, which is a BRICS country, and thereby hangs a tale.

PAST AND PRESENT

The long and the short of it is that the world has changed beyond recognition since the 1944 Bretton Woods conference at New Hampshire. So, what precisely is so sacrosanct about the top positions of the World Bank and the International Monetary Fund, the two most important Bretton Woods institutions, that they must continue to be controlled even today by the Americans and the Europeans, respectively?

Clearly, there is no doubt at all that this is one more anachronism which is bound to die a natural death, as has been the case with most other similar shibboleths going back to the early post-Second World War years.

The question is, when?

The developing countries have raised questions about the IMF's managing director being a European and the World Bank's president being an American, which indicates that the churning has begun in right earnest.

The formal aspect of the churning was provided by the May 24 media release by the BRICS nations (Brazil, Russia, India, China and South Africa) which stated, among other things, that the informal grouping was acting concertedly on the matter of “the selection of the next managing director of the IMF”.

And, secondly, that the process for the selection of the IMF chief “and other senior positions in the Bretton Woods institutions” (meaning the World Bank's presidency) must be “a truly transparent, merit-based and competitive process”.

The statement added, “if the Fund is to have credibility and legitimacy, its Managing Director should be selected after broad consultation with the membership. It should result in the most competent person being appointed as Managing Director, regardless of his or her nationality.”

What are the chances of the BRICS move succeeding? Frankly, none at all because such an important change in the selection process of the IMF and World Bank chiefs – which would in reality represent a huge concession on the part of the “developed” world – requires the agreement of all the major players which, briefly, is not yet in place.

AIMING FOR NO 2 SLOT

In fact, as the Russian President, Mr Dmitri Medvedev, who attended the recent G-8 summit at Deauville in France, has said clearly, the West is almost agreed on the choice of Strauss-Kahn's successor - Ms Lagarde.

But, importantly, he also added that Moscow had tabled a proposal at the summit for the first Deputy Managing Director's post to go to the BRICS countries; the present incumbent, the American, Mr John Lipsky, leaving the position at the end of August.

Clearly, since conventionally the IMF's No. 2 position has always gone to an American, the first target should be this position. Once this is achieved, the prize positions will fall in no time. The reform cannot be stopped; but progress has to be made step by step.

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