There are good reasons for Trudeau to lobby for Mark Carney to take over as head of the IMF


All this chatter about Mark Carney, son of Fort Smith, NWT., replacing Christine Lagarde as head of the International Monetary Fund and ending Europe’s reign atop that institution reminded me of some diplomatic trivia.

The first managing director of the IMF was very nearly a Canadian.

By the spring of 1946, Camille Gutt, a Belgian, had emerged as a strong candidate to get the new institution up and running. But the Americans wanted someone else.

Canada’s negotiators at the conference that created the IMF and the World Bank had impressed their counterparts from Washington and London. Fred Vinson, the U.S. treasury secretary, asked Bank of Canada Governor Graham Towers to go for the job. John Maynard Keynes, the celebrated economist and head of the British delegation, backed the entreaty.

Remarkably, Towers refused, even after President Harry Truman phoned Prime Minister William Lyon Mackenzie King and asked him to encourage his central bank governor to accept the post. “Of all things in the world, this was the one he wanted least,” Louis Rasminsky, another Canadian involved in the negotiations, said in a letter cited in Bruce Muirhead’s biography of Rasminsky, who would become the third governor of the Bank of Canada in 1961.

Towers’s personal decision had profound implications on the way the world would be run.

Gutt became managing director, and thus the first beneficiary of a shameless example of diplomatic horse trading that continues seven decades later. The United States went from attempting to install its own choice at the IMF to letting Europe’s powers decide; in return, the Europeans let the White House select the president of the World Bank.

They can do this repeatedly because the members of the European Union control a majority of the voting shares at both institutions, and the U.S. alone has enough clout to veto important decisions.

It should embarrass anyone who claims to be a champion of an international order in which countries abide by rules and norms managed by credible institutions. And yet the tradition continues. In April, Team Trudeau, its friends in Europe, and everyone else who has said over the past few years that they would protect the multilateral system from Donald Trump, watched silently as the U.S. president installed an unqualified candidate as the new president of the World Bank.

Chrystia Freeland, the global affairs minister, argues that smaller countries needn’t settle for the scraps left by the biggest ones. In that spirit, Jim Carr, the trade minister, opted against inviting the U.S. and China when he assembled a group of peers to work on WTO reform. They could be onto something.

When the Americans are in the room, they set the tone. With the U.S. turning inward, those countries that remain interested in international co-operation can negotiate on more level ground. The Trans-Pacific Partnership stands out as evidence that the world can go on even if the U.S. isn’t there to take the lead.

Alas, the Trudeau government’s desire to give the little guy a voice in international affairs has limits. It endorsed David Malpass’s candidacy to lead the World Bank and said nothing about the failings of a hiring process that produced only one application.

Finance Minister Bill Morneau told me in an interview in April that Malpass had assured him that the World Bank’s work on climate change and gender equality would continue. “Obviously, we’re part of the decision to appoint him,” Morneau said.

Back to Carney, who is set to complete his service to the United Kingdom early next year.

He’s an obvious candidate to replace Lagarde, who on July 2 accepted a nomination to become the next president of the European Central Bank. Few can match Carney’s resume: Harvard; Oxford; Goldman Sachs; Canada’s finance department, where he handled all the international files; the Bank of Canada during the financial crisis; the Financial Stability Board, which rewrote global banking rules under his volunteer leadership; the Bank of England during Brexit.

The one thing working against Carney is that European politicians will see through his British and Irish passports.

The Reuters news agency quoted an unnamed French official on July 7 who noted that even though Carney is well regarded, he is “basically a Canadian,” and therefore his candidacy would threaten the EU’s claim on IMF management. The official also raised Malpass’s appointment as justification for placing a 12th European in the top job at the fund, according to the Reuters report.

There never has been a better opportunity to stop this cycle.

There are native Europeans who could do the job, but there are none who can match Carney’s credentials. If the EU balks at endorsing a Canadian, then Trudeau will have a second chance to show that Canada really is back, as he declared in his victory speech four years ago. He and Morneau could insist on a fair, merit-based contest; encourage quality candidates from around the world to apply; and then do whatever they can to get Carney the job, which probably would come down to persuading Trump to turn his back on tradition.

The president has demonstrated little respect for global norms, so he just might do it, assuming he didn’t see an opportunity to blackmail the Europeans into giving him something. Either way, Trudeau should try, if only to atone for Canada’s role in enabling the U.S. and Europe to claim the IMF and the World Bank as theirs on Day One.

• Email: |

Source: Financial Post

Subscribe to Equity Extra

Recieve the Latest Updates on Breakout Stocks

Subscribe to Equity News Report’s ‘Equity Extra’ Alerts list to be the first to learn about Premium Nasdaq Stocks before they Breakout


Leave a reply