IMF needs leader from the developing countries<\/p>\n
Sebastian Edwards, Professor of Economics, UCLA's Anderson Graduate<\/p>\n
School of Management, Project Syndicate<\/p>\n
Horst Kohler's resignation as Managing Director of the
\nInternational Monetary Fund (IMF) offers a unique opportunity to
\nreform the embattled international financial institution.<\/p>\n
What the IMF needs, as a first step towards comprehensive
\nreform, is a new leader with solid technical training, a broad
\nvision, and first hand experience in dealing with the
\nmacroeconomic risks faced by emerging and transition economies.
\nKohler lacked all of these characteristics. A gray bureaucrat
\nand a mediocre economist, he was not even Germany's first choice
\nfor the post.<\/p>\n
Unfortunately, instead of getting the best man or woman for
\nthe job, politics as usual is likely to prevail. The Managing
\nDirector position is expected to go to a European. Until a few
\ndays ago Rodrigo Rato, Spain's Finance Minister, appeared to be
\nthe front-runner. However, now that his Popular Party has been
\ndefeated in the Spanish general elections, it is unlikely that he
\nwill be Europe's candidate for the IMF post.<\/p>\n
Yet the fact that Rato was seriously considered shows how
\nwrecked the process is. Rato is an able politician and under his
\nstewardship Spain's finances have done well. However, it would
\nbe a stretch to argue that he is the best candidate for the IMF
\nposition.<\/p>\n
Rato is a lawyer by training and has an MBA. But he has no
\nexperience in crisis management, major economic reforms, or
\ncrisis prevention. If qualifications have any weight in
\nselecting the next Chief of the IMF, Rato would not even make the
\nfirst cut.<\/p>\n
Not surprisingly, the most knowledgeable people on crisis
\nprevention and crisis resolution are in the successful countries
\nof Latin America. After decades of instability, a handful of
\nLatin countries -- in particular, Chile and Mexico -- have become
\nan example of prudence, austerity and macroeconomic stability.
\nThese Latin American nations have learned the hard way. Their
\nleaders understood that to achieve prosperity and social
\nprogress, a combination of good economic policies, political
\nrealism, and well-funded social programs was required.<\/p>\n
Former Mexican President Ernesto Zedillo, a respected
\neconomist and currently the Director of Yale's Center for
\nGlobalization, is an excellent candidate for the IMF post. Under
\nhis leadership Mexico took gigantic steps towards achieving
\nstability, and becoming a more open and democratic society.<\/p>\n
Earlier in Zedillo's career he worked in restructuring
\nMexico's debt, and he has a deep understanding of international
\nmarkets. Moreover, during his administration the much-admired
\nProgresa social program to reduce rural poverty was launched.<\/p>\n
Alejandro Foxley, Chile's first finance Minister after the
\nreturn of democracy in 1990, and one of the architects of the
\ncountry's extraordinary economic success, is another ideal
\ncandidate to lead the IMF.<\/p>\n
People as different as Joseph Stiglitz, one of the IMF's most
\nferocious critics, and Robert Rubin, the former U.S. Secretary of
\nthe Treasury have praised Chile's economic accomplishments. The
\nlist of Chile's achievements includes fast economic growth, the
\nhalving of poverty in less than a decade, and the management of
\nspeculative capital through market-based restrictions on short-
\nterm inflows.<\/p>\n
Indeed, Foxley's profile is so perfect for the position that
\npeople who don't know him may believe that he is an invention.
\nWith a doctorate in economics, he is a respected and widely
\npublished scholar, an experienced manager, and an able politician
\nwho was elected to Chile's Senate five years ago.<\/p>\n
Foxley understands the plights of the emerging and transition
\ncountries, and at the same time knows first hand that policies
\naimed at macroeconomic stability have a tremendous pay-off in
\nterms of growth, prosperity and poverty reduction.<\/p>\n
The writer was the World Bank's Chief Economist for Latin
\nAmerica from 1993-1996.<\/p>",
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