IMF: Gerontocracy or Meritocracy?

A gerontocracy is ruled by leaders who are significantly older than most of the adult population.

The International Monetary Fund (IMF) headquarters building in Washington, D.C.
Yuri Gripas | Getty Images
The International Monetary Fund (IMF) headquarters building in Washington, D.C.

Currently the International Monetary Fund is ruled by a European, part of an informal agreement formed following the Second World War between Western Europe and the US which stipulates that an American runs the World Bank and a European runs the IMF.

In the 1940s, Europe and the US where the adults and everyone else the children; but this view of the world is now being challenged from every corner of the world.

This decades-old agreement is now under significant pressure following Dominique Strauss-Kahn’s arrest in New York on sexual assault charges.

The Chinese foreign ministry has called for the leadership of the IMF to be based on "fairness, transparency and merit" and, with no stand-out European candidatein the running to replace DSK at the IMF, Europe has a battle on its hand to hold onto this prestigious job.

Who gets the job could be significant, according to Neil Mellor from Bank of New York Mellon in London.

“An Asian head might see global imbalances and their cause in a slightly different light” than a European, Mellor wrote in a research note.

“In September of last year, Brazilian finance minister Guido Mantega declared, 'we’re in the midst of an international currency war' and alleged, in no uncertain terms, that the US and China were its principal protagonists,” he added.

DSK found himself as the European head of the IMF having to keep quiet as the Chinese and Americans policy decisions saw the euro rise and fall on the basis of policy in Beijing and Washington that pegged the yuan to the dollar.

“For Europeans, this 'piggy in the middle' status has been highlighted all too clearly by the rise of the euro – a product of the inter-elations between US and Chinese economic policies,” said Mellor. “Although clearly unabashed speculation, we wonder whether China would see an Asian head of the IMF as more amenable to its views?”

“With the IMF having already bestowed greater respectability upon capital controls this year, could it be that an Asian head would be more readily inclined to hone its criticism of the policy stance in Washington?,” he said.

Maybe politics will trump merit again if America decides it does not need the IMF and China siding together on US fiscal policy.