Strauss-Kahn has resigned as the head of the IMF and there are far reaching implications that go beyond a sex case. The head of the IMF has always gone to a European while the head of the World Bank has been gone to a US choice. Now the abrupt change requires a new head and the creditor countries (emerging markets) have been clamoring for a the head of the IMF to go to one of their own.
This change in power structure results from the change in global financial power. When the World Bank and IMF were organized at the end of the WWII with the Bretton Woods Agreement for fixed exchange rates, the US was the dominant creditor to the world. The fixed rates of Bretton Woods are gone and the US power as a world creditor is gone. The developed world does not have the power to dictate the direction of global financial policy. Hence, the power structure has to change.
The only reason a wholesale change will not occur is that the emerging markets cannot agree on who should be their new representative. Most likley someone from a BRIC, but there is little agreement on who could fit this role. More importantly, it is not clear how a non-European will deal with such issues as the Greece or a bail-out of an emerging market country. Additionally, how much pressure should be placed on the US and their large imbalance.
This change in power structure results from the change in global financial power. When the World Bank and IMF were organized at the end of the WWII with the Bretton Woods Agreement for fixed exchange rates, the US was the dominant creditor to the world. The fixed rates of Bretton Woods are gone and the US power as a world creditor is gone. The developed world does not have the power to dictate the direction of global financial policy. Hence, the power structure has to change.
The only reason a wholesale change will not occur is that the emerging markets cannot agree on who should be their new representative. Most likley someone from a BRIC, but there is little agreement on who could fit this role. More importantly, it is not clear how a non-European will deal with such issues as the Greece or a bail-out of an emerging market country. Additionally, how much pressure should be placed on the US and their large imbalance.
No comments:
Post a Comment