64 Finance & economics The EconomistFebruary 15th 2020
2 cessor, Christine Lagarde, had been con-
tent to be the imf’s public face while Mr
Lipton handled much of the day-to-day
management. Ms Georgieva, though, is a
more hands-on manager, making Mr Lip-
ton’s role, as currently defined, redundant.
And so he went. Ms Grasso, whose renewed
term had started only five days before her
departure was announced, is leaving partly
because her job is, unusually, one for
which Ms Georgieva can pick a successor.
That would allow her to nominate
someone to help realise her vision for the
fund, which includes doing more to help
fragile states and tackling climate change.
In her first speech as the fund’s chief, she
called for governments to enact domestic
reforms that achieve “stronger and more
resilient growth”, and for those with re-
maining fiscal firepower to deploy it. She
has promised to collaborate more with the
World Bank, particularly regarding coun-
tries that have received the fund’s help. Ms
Georgieva may want to remove the impres-
sion that theimf cares only about restoring
stability to crisis-ridden countries at the
expense of jobs and growth.
It is hardly unusual for new bosses to
make management changes, including at
the fund. It could benefit from a shake-up
that flattens its hierarchical management
structure. Its policies could also be im-
proved. Its programmes sometimes crimp
growth, such that countries miss its rosy
gdp forecasts. Its engagement with fragile
states can be lacklustre.
The risk, though, is that Ms Georgieva’s
reforms backfire. If she wants the most able
staff to work on fragile states, she will have
to butter them up. Mr Lipton’s departure
means one fewer set of capable hands to
help in a crisis. Some fear that without him
there will be an increase in “clientitis”—
country directors being too soft when de-
manding reforms. One near-term chal-
lenge is Argentina, the recipient of the
fund’s biggest ever loan (see chart). On Feb-
ruary 12th fund officials began talks withthegovernment,whichisseekingto re-
structureitsdebt.
TherearealsoconcernsthatMrLipton
mightbereplacedbysomeonelesscapa-
ble.TheTrumpadministrationhasresisted
theideathatMrLipton’sjobbeabolished
altogether.ItisfloatingthenameofGeoff-
reyOkamoto,anactingassistantsecretary
oftheTreasury,asa potentialreplacement.
ForMsGeorgieva’sstrategytowork,she
needssomeonepliableintherole.Butif
theyaretooweak,theinstitutioncould
eventuallysuffer.
Ms Georgievastill needsto convince
somefund-watchersthatsheisupdating
itsmissionnotdilutingit.Newambitions
requireresources—ora senseofwhichold
taskswillbecuttomakewayfornewones.
Structuralreformsneed notdodamage.
Buttheyshouldbeenactedwithcare. 7Funding flows
IMF, January 2020Source: IMFSouth Korea (1997)Argentina (2001)Ireland (2010)Greece (2012)Brazil (2002)Portugal (2011)Greece (2010)Argentina (2018)0 20 40 60Lending arrangements, $bn Agreed DrawnIndiaItalyFranceBritainGermanyChinaJapanUnitedStates0 5 10 15 20Votingsharebycountry,%W
hen autocratic, oil-rich nations
enjoy a windfall from higher crude
prices, where does the money go? One
place to look is Swiss bank accounts. Sure
enough, an increase in oil prices is fol-
lowed by a spike in deposits held by these
countries in financial havens, according to
a 2017 paper by Jorgen Juel Andersen of bi
Norwegian Business School, Niels Johann-
esen of the University of Copenhagen and
their co-authors.
When Mr Johannesen presented this re-
sult at the World Bank in 2015, the audience
included Bob Rijkers, a member of the
bank’s research group. The two of them
joined forces with Mr Andersen to investi-gate if something similar happened after
another kind of windfall: infusions of aid
from foreign donors. Their conclusion was
dispiriting. World Bank payouts to 22 aid-
dependent countries during 1990-2010
were followed by a jump in their deposits
in foreign financial havens. The leaks aver-
aged about 5% of the bank’s aid to these
countries.
Mr Rijkers is part of a unit that reports to
the bank’s chief economist, Pinelopi (Pen-
ny) Goldberg. The team publishes working
papers on the understanding that their
views do not represent the bank’s. But Mr
Rijkers’s collaborative effort, which was
leaked to The Economist, is not yet among
them. It passed an exacting internal review
by other researchers in November. But, ac-
cording to informed sources, publication
was blocked by higher officials. They may
have been worried about how it would look
if the bank’s own researchers said that a
chunk of its aid ended up in Swiss bank ac-
counts and the like.
The bank insists a final decision on
publication has not been made and that it
still has legitimate concerns about the pa-
per. A correlation between aid disburse-
ments and offshore deposits is not proof of
causation. And the 5% of “leaks” might in-
clude some innocent money, earned by aid
contractors who just happen to prefer off-
shore havens to other financial centres. But
the paper had already answered similar ob-
jections in the review process.
The integrity of the bank’s research is
meant to be safeguarded by its chief econo-
mist. The position is typically filled by a
well-regarded academic, who has both an
external reputation to protect and the in-
ternal clout to defend their turf. The job
was, however, split in 2017 when Paul
Romer, a star economist with little mana-
gerial finesse, was relieved of his bureau-
cratic duties. (He then left the job altogeth-
er after only 15 months in the role.) Ms
Goldberg was given more managerial pow-
er than Mr Romer ended up with, but less
than he started with.
This month she said she would be re-
turning to Yale in March, after only 15
months in the job. Her reasons were un-
clear. A reorganisation of the bank may
have been a factor, including the imminent
arrival of Mari Pangestu, who will assume
oversight of Ms Goldberg’s unit, in an effort
to align research more closely with the
bank’s country operations. Ms Goldberg
may have come to feel that the position car-
ried too much of a managerial burden, but
too little power to rule her fief.
But it is also possible that the bank’s de-
cision to block one of her team’s papers
grated on her. After aid to a country spikes,
money departs for offshore havens. And
after a sensitive paper is spiked, Penny de-
parts for New Haven. In both cases, correla-
tion is easier to prove than causation. 7HONG KONG
The global poverty-fighting institution
loses another chief economist. Why?The World BankThe Goldberg
variations