There are four perspectives on this question which are worth noting:
- There is an obvious gap between the power structure at the IMF, which reflects the structure of the world economy after the Second World War, as compared with the present reality. As an example, at present, the Netherlands has 2.08% of the votes while India has 2.35%. But Indian GDP is now $1.6 trillion while Netherlands is at half that.
- The world would benefit from a competent and capable IMF. The best man (or woman) for the job will not be obtained by having any restrictions on nationality. As an example, in today's world, a name that leaps out to me is Stan Fischer. But he's not European, and hence was never even considered for the top job in the last decade. (As with Montek, he is now over age 65 and is hence not eligible for the job today). Given that a large fraction of the top economists of the world are not European, this rule yields a less capable IMF.
- A quota system where the IMF MD must now be from an emerging market is as bad as a quota system where the IMF MD is only recruited from a European country. The key is to get away from all these restrictions, and to only recruit the best person for the job. The emphasis should be on technical capability. As an example, see how in the UK, they recruited an American into their Monetary Policy Committee.
- In the standard narrative, one hears the idea that in this crisis in Europe, the Europeans are gaining from their control of the IMF. I disagree. In the Asian crisis, it was good for Asia that the IMF was not conflicted by considerations of domestic Asian politics. Similarly, the IMF program in India in 1981 and 1991 was uncontaminated by domestic Indian political considerations. This helped produce technically sound programs, which helped in jumpstarting India's growth. It is not accidental that we see structural breaks in India's GDP growth around these two dates.
What Europe needs most is a tough IMF, which will be a stern taskmaster, which will force difficult political choices so as to heal the economy. Economic policy in Europe today needs to be cruel to be kind. Instead, by placing a string of career politicians from France into the IMF MD's job, the valuable role which the IMF could have played in solving the European Crisis is being negated. This damages Europe. The wise thing for Europe today is to say: Give us a tough and competent taskmaster, recruited through global search, where European politicans are not allowed to apply. The biggest loser from the present arrangement is Europe.