IN PRACTICE, HOWEVER, the IMF's contribution to a more stable and prosperous global economy continues to be undermined by long-standing structural and governance deficits. Perhaps nowhere is this clearer today than in the courageous report that the IMF has prepared on its involvement and failures in the first Greek bailout.
By the IMF's own admission, the institution allowed itself to be overly influenced -- some would say outright bullied -- by some of its partners (such as the European Commission) in supporting policies that were inadequately designed and whose implementation was insufficiently owned by Greece. Specifically, the IMF ignored its own assessment of financial viability that pointed to the need for an early restructuring of Greek debt. It lent into a program that was not well-enough financed, and its understanding of the country's growth and debt dynamics proved incomplete.
Unsurprisingly, Greece is still struggling mightily three years and hundreds of billions of dollars later, after a huge bailout operation and massive austerity program. Anywhere else, such a costly, visible failure would prompt governing boards to conduct serious discussions and pursue reforms. Not at the IMF.
Despite more than two decades of talk about updating its representation and voting, the IMF is still overly influenced by European politicians. Two reasons for this (among many) are that (1) the IMF's top job is still unofficially reserved for a European, just like it was back in 1944, and (2) Europe still holds about one-third of the seats on the executive board. No wonder European leaders don't hesitate to push back hard when the IMF offers constructive criticism. As a case in point, within hours of the Greece report going public, European officials rushed to the airwaves to condemn it as "plainly wrong" and neither "fair" nor "just."
Meanwhile, emerging economies seethe -- frustrated by Europe's dominance of the IMF and, more generally, by an institution that still seems stuck in the 1970s. Yet no one really wants to lead the reform movement, especially as this would involve locking horns with some of the developed world's big bulls (or, perhaps, bears these days). Brazil has, more than once, accompanied its private advocacy for more equitable representation with bold public statements. But to no avail.
Leadership on this urgent matter could -- and should -- come from within the IMF itself. Yet Christine Lagarde, the IMF's well-liked and charismatic managing director, has essentially punted on this issue. Rather than signal a steadfast willingness to pursue reforms and take on Europe's angry, misguided reactions to criticism, she has reverted to diplospeak, noting the IMF's "very unusual and very exceptional" relationship with European institutions.
We shouldn't criticize her too much -- it is not easy to bite the hand that feeds you. In a selection process that continues to place geography well ahead of merit and inclusiveness, Lagarde owes her appointment to European politicians. And long gone are the days when these politicians would pick an experienced technocrat such as the highly respected Jacques de Larosière or Michel Camdessus. Instead, since 2004, Europe has opted for political personalities for a job seen as a stepping stone to presidencies and prime ministerships at home.
This leaves only one player with the power to turn the tables: the United States. As the world's most powerful economy, the United States has the largest voting share of any country at the IMF (16.8 percent). And it has been periodically dismayed, if not irritated, by how Europe has handled its financial crisis.
But Washington cannot lead -- or even coordinate -- a deep, comprehensive reform of the IMF. In normal times, most American politicians are highly skeptical about the role, cost, and effectiveness of multilateral institutions. And given today's polarized and dysfunctional Congress (not to mention many of its members' poor grasp of what the IMF does), any attempt by President Barack Obama's administration to rejigger the IMF's makeup could easily be misconstrued as selling out America's European allies to less-reliable developing countries.
Yes, the world urgently needs a more effective IMF that can reduce the global imbalances that undermine growth and jobs in so many countries. But don't look to the upcoming gatherings in Washington to deliver the needed reforms. Instead, and despite yet another frank and well-documented self-evaluation, it is likely that the IMF will continue to be undermined by political masters who lack courage and vision. Let us just hope that the global economy doesn't require saving soon -- because the IMF is not yet ready.