IMF Chief’s Arrest – OpEd

In the arrest of IMF chief Dominique Strauss Kahn on charges of attempted rape there is an important principle at stake. He, like anyone else who is charged with crimes, has to be presumed innocent until found guilty. That being so, the morally correct conclusion, as names are thrown into the ring to replace him, is he should not have to resign as head of the IMF until and unless found guilty.

But there is a practical issue at stake as well. The effectiveness of the IMF is seriously undermined. There is the euro zone crisis; Greece, for example, needs the IMF’s fullest attention and help. So does Egypt. Last week, it asked for a loan of up to $12 billion to cover the immediate financial shortfall following the political uprising and the battering that the country’s all-important tourist industry has taken as a result. The IMF is crucial in helping find solutions for them and for others that will work. Time is of the essence. Engrossing though it is, this sideshow is a damaging distraction from its work. It cannot wait until Strauss-Kahn either walks free or is jailed. That could be months away.

In those circumstance practicality outweighs principle. It has to. Strauss- Kahn has to go. Someone else must take over. By not resigning, he is putting his rights above the IMF’s proper functioning.

It may turn out that he is innocent. If so, this is a tragic state of affairs for him but he will be compensated adequately. He does not, though, have an automatic right to stay in post.

US Treasury Secretary Timothy Geithner has said he should go – and rightly so. Yet, yesterday, his was something of a lone voice. Other international politicians when asked whether the IMF should have a new head avoided the issue. That was irresponsible. They have a duty to ensure the IMF functions without this shadow hanging over it.

As to who takes over and where that person comes from, there are many voices now saying that the IMF has been too long in European hands and that it is high time that someone from one of the world’s fast growing economies was given the job of running it. We support that view. The IMF has an international remit. It is not for Europe to decide what is in the best interests of its borrowers. The tacit agreement that the IMF chief should always be a European and the head of the World Bank an American looks distinctly colonialist in this day and age. So why not a Brazilian or Russian or an Indian? Or maybe a Turk or an Egyptian? A candidate’s suitability should be based on capability, not nationality. In most people’s minds, this is a matter of principle.

Unfortunately, practicality again will probably be the deciding issue. The fact is that Europe, North America and Japan have between them some 60 percent of the votes in the IMF, because they contribute some 60 percent of the funds.

If other countries want a greater say in the fund, they are going to have to contribute more.