Jeune Street

One outcome of the recent G20 meeting in London was increased financing for the IMF and there has been serious discussion about giving developing countries a greater voice in decisions. Dani Rodrik applauds the 'new' IMF but urges more reform to make it a more effective multilateral financial institution:

Simply giving developing nations greater voting power will make little difference if the IMF's organizational culture is not changed as well. The Fund is staffed by a large number of smart economists, who lack much connection to (and appreciation for) the institutional realities of the countries on which they work. Their professional expertise is validated by the quality of their advanced degrees, rather than by their achievements in practical policymaking. This breeds arrogance and a sense of smug superiority over their counterparts - policymakers who must balance multiple, complicated agendas.

Countering this will require proactive efforts by the IMF's top leadership in recruitment, staffing, and promotion. One option would be to increase substantially the number of mid-career recruits with actual practical experience in developing countries. This would make the IMF staff more cognizant of the value of local knowledge relative to theoretical expertise.

Another strategy would be to relocate some of the staff, including those in functional departments, to "regional offices" in the field. This move would likely face considerable resistance from staff who have gotten used to the perks of Washington, DC. But there is no better way to appreciate the role of context than to live in it. The World Bank, which engaged in a similar decentralization a while back, has become better at serving its clients as a result (without facing difficulties in recruiting top talent).

This is an important moment for the IMF. The international community is putting great store in the Fund's judgment and performance. The Fund will require internal reforms to earn that trust fully.