Washington is a snake pit, an all-too familiar story, even if the U.S. capital’s wounded warriors usually limp away, often put to pasture, with well-paid jobs in lobby outfits, poor compensation for their deflated egos, but there they remain...
Mrs Kristalina Georgieva, managing director of the International Monetary Fund (IMF) since September '19, seemingly insulated from political slanders by her technical expertise, was different
However, a report commissioned by the World Bank, published in September '21 and written by law firm WilmerHale about the 2018 Doing Business rankings at the Bank, put the spotlight on her responsibilities as second in command at the time
Highlighting reasonable doubt about altered scores in the ranking of China and of three other countries (Azerbaijan, Saudi Arabia and the United Arab Emirates), the report left Mrs. Georgieva fighting at the IMF's helm...
While Mrs. Georgieva ultimately survived what seemed to be a concerted assault, the struggle laid bare the absurdities of a post- WWII power-sharing relic,
- at the World Bank where American voting power is three times larger than China's
- as well as at the IMF where Europe and the U.S. have held on to the senior management positions
With China's - and soon India's - growing importance in the world economy, the iron law of unforeseen consequences may come back to haunt the U.S. Treasury at the next renewal of mandates
At the World Bank for 17 years, where Mrs. Georgieva rose to director of Strategy and Operations and finally vice president and corporate secretary, before getting nominated to the European Commission in 2010, first as Commissioner and from 2014 as Vice-President
Responsibilities as CEO of the International Bank for Reconstruction and Development at the World Bank drew Mrs. Georgieva back to Washington from 2017, becoming interim President of the Bank following the departure of President Jim Yong Kim in January 2019
Moving seamlessly on the strength of her impressive carrier in international organizations, Mrs. Georgieva took over as managing director at the IMF in September 2019
In an increasingly quaint convention as economic weights shift towards Asia, the managing director of the IMF, chosen by the shareholders, is supposed to be a European national and the first deputy an American
The arrangement worked well as long as Europe choose to put forward powerful and influential directors, such as Jacques de la Rosière (10 years at the helm), followed by Michel Camdessus (13 years), esteemed professionals who earned their spurs at the French Treasury
As the duration of directors on the job fell to 3-4 years and the position took on a political turn, the balance of expertise between Europe and the U.S. shifted
Neither of Mrs. Georgieva's immediate predecessors, Mr. Strauss-Kahn, former French minister or Mrs. Lagarde, with a distinguished carrier at Baker & McKenzie, an American international law firm, before a stint in the French government as well, were truly qualified to lead a financial organization
As public face of the Fund, both earned recognition in their home country and were content to leave actual management to the American long-serving first deputy, Mr. David Lipton, who took up his position in September 2011…
A pleasant power sharing agreement between the main parties concerned...
…until the arrival of Mrs. Georgieva who turned out to be a literal reader of her job description and intended…well to manage, cutting short Mr. Lipton’s term due to end in August 2021 by 18 months…
Though hardly a move to endear Mrs. Georgieva to the Fund’s largest shareholder (even if another civil servant from the American Treasury, Mr. Geoffrey Okamoto, was 'by right' appointed by the Board), it has not been – and cannot be – suggested that retaliation was in the cards…
The very public criticism against Mrs. Georgieva by the U.S. Treasury, on the grounds of the World Bank report, implying favoritism benefiting China, is no less perplexing
The World Bank may state with a straight face on the Bank's site that "each member of the IMF is assigned a quota, based broadly on its relative position in the world economy"
Very broadly indeed, as far as China is concerned....
The inconsistency between the country’s weight as an World Bank shareholder (5.02% of total voting power vs. 15.73% for the U.S.) and its growing economic weight (GDP $14.7 trillion vs. US. $20.9 trillion in 2020 current dollars) is glaring
And it is fair to assume that no outright request (or pressure) by China can in fact be ignored at the World Bank - a trade-off of sorts
Much like special concerns expressed by any large shareholder, and foremost by the U.S. itself, China’s expectations will presumably be subject to intense negotiations involving the World Bank’s highest echelons – such as the Bank president, Mr. Jim Yong Kim at the time and his closest associates, including Mrs. Georgieva
However, a seemingly concerted effort to push Mrs. Georgieva out might just possibly have succeeded with
- World Bank insiders suggesting data manipulation and intellectual dishonesty,
- a carefully worded report holding an ambiguous middle ground between possible oversight and serious negligence,
- a chorus of esteemed financial publications questioning her judgment and the consequences for her remaining time at the IMF (Bloomberg), while calling for her departure (the Economist)
- and direct involvement of Treasury Secretary Yellen, for whom the report "raised legitimate issues and concerns'
… except for the timing
Having let down its allies in Afghanistan a month earlier, and mishandling the relationship with France after a covert submarine transaction in Australia, the U.S. discovered belatedly that backroom deals between allies were poorly received...and support of the European countries at the Fund's executive board for their nominee remained unaltered
Though the U.S. declined to express public support for Mrs. Georgieva, Mrs. Yellen had no choice by mid-October but to conclude that absent 'further direct evidence', there was no basis for a change in leadership at the fund
A climb-down with a call for more transparency at the World Bank....
Surely all the shareholders will agree on that point of view
If the U.S. will accept to play second fiddle at the IMF as Mrs. Georgieva’ reorganization implied, if dialogue with the Fund's largest shareholder revives operational collaboration, will only be known over time and when her 5-year term comes up for renewal… in 2024