Nominate nine wise men and women to restore IMF’s credibility

Nominate nine wise men and women to restore IMF’s credibilityPublished: May 4 2009 03:00 | Last updated: May 4 2009 03:00From Prof Jorge Castañeda and Mr Augusto López Claros.Sir, The Group of 20 summit in London went some way towards strengthening the capacity of the International Monetary Fund to assist emerging markets currently suffering the spillover effects of the financial crisis. The summit seems to have been less successful in updating the governance structure of the IMF. Thus, at least until 2011, IMF decisions will continue to be made in an absurd system where the voting power of the European Union currently stands at 32.4 per cent, whereas the combined voting power of the US, China, India, Brazil and Russia, accounting for a much larger share of global gross domestic product, is 26.9 per cent.The G20 also decided to finally break, at least nominally, with the convention adhered to ever since the IMF’s creation, which establishes that its managing director must be an EU citizen. Like the current permanent membership in the United Nations Security Council, this practice is an aberration and should have been abandoned long ago.Despite the important symbolism of the G20’s decision, we think that the new system is not likely to be much better and there is a significant risk that it might actually be worse. The main risk is that we will now move to the system in place at the United Nations, where the secretary-general is chosen on a rotating basis, from different regions of the world.The problem with that system is that it tends towards the lowest acceptable common denominator, with the top job going to someone who is palatable to all constituencies, a process which on occasion can lead to mediocrity or worse.We have a humble proposal. Let’s do away with the job of the MD and replace it with a Supreme Management Council, a group of nine wise men and women appointed for life (or until a suitable retirement age). Think of all the benefits.First, they would not be beholden to the interests of the richer members and would operate with independence of mind and the interests of the international community at heart. Second, as members retired they would be replaced with younger blood and the council would thus become a repository of decades of relevant experience on the issues that matter for management of the global economy.Contrast this with the present system where each new MD has to spend a couple of years catching up before the pressures of work or other factors tempt them to bail out.Both Horst Köhler and Rodrigo Rato – the two preceding MDs – left before the expiration of their five-year terms. Nine members working in a spirit of consultation, not worried about the length of their tenure, would bring more mental firepower to the job than an individual. Unanimous decisions would be favoured but, as needed, majority voting would do.Instead of having central bank governors and finance ministers nominate their own favourite peers, the council could be filled via international recruitment.Such a system would go a long way towards strengthening the much diminished credibility of the IMF, at a time when that scarce asset is most in need.Jorge Castañeda,Global Distinguished Professor,New York University, NY, US(Foreign Minister of Mexico 2000-2003)Augusto López Claros,Director,EFD – Global Consulting Network,Madrid, Spain