Weekend Wars: Emerging Markets vs. European Union

An intriguing battle is buikding out of the ashes of the Dominique Strauss-Kahn bonfire. Namely, emerging markets nations wanting “one of their own” to head up the IMF.Not surprisingly the Germans have already thrown their weight behind Christine Lagarde, who in all likelihood will be the next IMF honcho.

The interesting thing in this story is not who will win the prized position. What is of interest is the power struggle atop the IMF going forward. There is quite a silent power struggle going on in world finance today and it is happening between the old powers of Europe and their former colonies of the emerging market world.

As Americans, we look at things that have an effect on our lives. Perfectly normal. The abundancy of U.S. Treasuries in Chinese hands, the potential for India to take even more American jobs, Brazil’s swift ascendancy right here in our own hemisphere. The reality, however, is that the emerging markets still have a long way to go before they are a true competitor to the U.S. Europe meanwhile, is much more of a realistic target.

Keep in mind that European countries have been doing business and making a killing (literally and figuratively) in countries today known as emerging markets for hundreds of years. Where European capitalism was once a mystery deserving of a shaman or witch doctor, today it is ho-hum business as usual across Asia, MENA and South America. Though the DSK affair changes nothing in the short term, it is just the sort of thing interests/nations like China needed to give them and in into historically European centers of power.

What will the IMF look like when it inevitably begins to reflect the globe’s changing fiscal demographics? Will it still be business as usual? Or will old school colonial powers get a taste of their own medicine in terms of financial imperialism? We can be pretty sure the next head of the IMF will be a woman, the first in the organization’s history. How (if at all) will the IMF change, however, once it’s leaders and top level structure are increasingly, non-European?