Christine Lagarde has said she is open to serving another five-year term as Managing Director of the International Monetary Fund. She should get it. The IMF has never had better leadership, and its board of directors should give her the chance to finish the work she has begun.
When Lagarde took the helm in July 2011, she inherited an institution in crisis. The global financial meltdown in 2008 and its economic aftershocks had discredited western-led multilateral lenders and the free-market “Washington Consensus.” Lagarde’s leadership has helped to restore the Fund’s reputation.
Much attention is paid to her personal qualities — and rightly so. She is frank, forceful, warm, and engaging. In country after country, officials with whom she has met, often under delicate circumstances, describe her as both a teller of difficult truths and a sensitive listener. These are important qualities for the leader of an institution that must negotiate, rather than dictate, terms of agreement.
The Europeans did not like it much when Lagarde told them their banks needed to be restructured or that they needed to build a firewall to protect against financial contagion for example, Greece, Pakistan, Tunisia, and Ukraine — that are crucial to global stability. And there’s much more. The IMF is not often associated with creativity and compassion. Lagarde has begun to change that. In the process, she has provided a human face for an institution often associated with the prescription of bitter medicine. Helping to manage the Middle East’s refugee crisis, for example, is not an expected part of the IMF’s mandate. Yet, under her leadership, the Fund adjusted a program so that Jordan’s government could spend more to help those displaced by conflict in Syria and Iraq.
Similarly, when Ebola struck West Africa in 2014, Lagarde directed the IMF to use its available cash to buy debt relief for countries in crisis, which enabled them to pay more doctors and nurses — the first-ever such use of IMF capital.
Under her leadership, the IMF has also addressed the broader question of income inequality. Lagarde has done important work in helping the world begin to understand the full implications of technological change. For example, automation will continue to make manufacturing more efficient and less costly, but it will also ensure that economic growth generates fewer jobs than in the past. The political, economic, and social consequences of this emerging reality deserve recognition and serious study. Lagarde has brought the IMF into the center of that work.
Critics will say that it’s time for an IMF head who represents the developing world. Lagarde is, after all, the 11th consecutive European to hold the post, a privilege that has become hard to justify in today’s world. Others will say that the failure to recognize the full effects of IMF-endorsed austerity on Greek citizens proves that she is out of touch with ordinary people. Still others will argue that the charges she faces in connection with a financial scandal in France will distract her from IMF business. After the ugly scandal surrounding Dominique Strauss-Kahn, her predecessor at the Fund, the Fund, critics will insist, can’t afford such a distraction.
The IMF (and the World Bank) should welcome leadership from beyond Europe and the US. But the purpose of ending this western privilege is to make the leadership selection process one that is based on merit, not political considerations. Lagarde is the best candidate for the job, and emerging powers like the BRIC countries have not united behind an alternative. The leadership of a European managing director probably facilitated the IMF’s decision late last year to add China’s renminbi to the basket of currencies underpinning its Special Drawing Rights.
In addition, Lagarde displayed impressive political dexterity in finally persuading Republicans and Democrats in the US Congress to pass governance reforms that not only bolster the IMF’s firepower to fight financial crises, but also more accurately reflect changing global economic dynamics. The BRIC countries, for example, are now among the IMF’s top ten shareholders.
Finally, the French charges against Lagarde were filed over the objection of the country’s prosecutor-general, and her involvement in the case appears tangential at best. The world badly needs a leader dedicated to making the world a safer and more prosperous place. Lagarde has shown that she is such a leader, committed to making the IMF fit for the 21st century. She deserves the chance to finish what she started.
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The writer is President of Eurasia Group. ©Project Syndicate
