The late entry of Stanley Fischer, Israeli central bank governor, into the race to succeed Dominique Strauss-Kahn as head of the International Monetary Fund has come as something of a surprise. Though popular with fund staff during his time as second-in-command there from 1994 to 2001, both his close association with the US and controversy about decisions taken during his tenure may tell against him.
Mr Fischer’s pitch for the job is based on his wide experience of the problems of middle-income countries and his expertise as an economist, rather than any sense that he represents a constituency.
“Having someone who understands the issues of emerging markets, particularly on the macro[economic] side, is very important,” he told the Financial Times. However, he added: “Whether you have to come from a particular geographic background seems to me another issue.”
Agustín Carstens, the Mexican central bank governor who is currently second-favourite for the IMF job, has sought to stress his emerging-market background as well as his economic credentials.
Mr Fischer professes great respect for Mr Carstens, whom he regards as a friend. But he adds that the notion of emerging markets acting as a single interest group appears to be neither true in practice nor desirable in principle.
“Among the emerging markets, there was some expectation that they would unify around a single candidate but, for whatever reason, it hasn’t happened,” he said. “I suspect the fund operates fairly well when they don’t operate all the time in blocs but rather on the basis of what their judgments on particular issues are.”
As a former Massachusetts Institute of Technology professor, Mr Fischer has excellent academic credentials and, by coincidence, co-wrote one of the classic graduate macroeconomic textbooks with a fellow MIT academic, Olivier Blanchard, the IMF’s chief economist.
But he faces some obstacles. One is procedural: because Mr Fischer is 67, the IMF would need to take a special vote among all its 187 member countries to waive the below-65 age requirement to be appointed to the job.
Another is his close links to the US. Mr Fischer has taken Israeli citizenship to become central bank governor, but is also a naturalised American. While at the IMF, he worked closely with the US Treasury, and the long lists of conditions that the fund placed on loans to Asian countries in the financial crisis of 1997-98 created a legacy of bitterness and suspicion that has yet to fade completely.
Mr Fischer defends most of those decisions, including the controversial Indonesia rescue programme in 1998 that became a byword for intrusive IMF micromanagement for demanding the dismantling of the country’s clove marketing board. He says such conditions were necessary to get reluctant advanced economies to back IMF loans.
As for the governance of the IMF, Mr Fischer deviates from the general view that the Group of 20 leading economies, of which Israel is not a member, can be an effective steering group for the world economy and particularly for the fund.
He would like to see it take a similar form to the IMF’s executive board, which represents all 187 member countries, and has particular concerns about the limited membership of the Financial Stability Board, set up by the G20 during the global financial crisis to oversee regulation.