Sep 26, 2019

The unusual new leaders of our unusual new world

The faces of Christine Lagarde, Jerome Powell, David Malpass and Kristalina Georgieva carved into a mountain.

Illustration: Lazaro Gamio/Axios

The announcement Wednesday of Kristalina Georgieva as IMF managing director cements a clear changing of the guard at the world's most important economic institutions.

Why it matters: "Economists tend to have a certain view of how the economy works," Mark Zandi, chief economist at Moody's Analytics, tells Axios. "It’s more difficult to move monetary policy in a significant way because economists have a set framework of how they think about things."

  • "Lawyers don’t have that, so they’re more willing and able to shift."

The new leaders:

  • Fed chair Jerome Powell is not a lifelong central banker or even a PhD economist. He's a lawyer and former private equity manager, who became the first Fed chair without an economics pedigree since the disastrous William Miller whose tenure from 1978—1979 led to U.S. stagflation.
  • Christine Lagarde, the incoming ECB president, is also a lawyer by training and became managing director of the IMF after a career in politics with no real background in central banking.
  • David Malpass, president of the World Bank, is best known for his time in the Reagan administration and at Bear Sterns where months before the financial crisis he wrote an op-ed titled, "Don't Panic About the Credit Market."
  • Kristalina Georgieva, incoming IMF managing director, is a well-respected economist with significant experience. But the the first ever person in that role from an emerging country is a night-and-day change from outgoing director Lagarde and the prototypical leaders of the fund.

Our thought bubble, per Axios' chief financial correspondent Felix Salmon: "Georgieva was also born in post-war Bulgaria, grew up behind the Iron Curtain, and was European Commissioner for Humanitarian Aid and Crisis Management. She’s very different from the French financial technocrats we’re used to."

The intrigue: The economic world's new leaders arrive as politicians like U.S. real estate mogul and reality TV star Donald Trump, Ukrainian comedian Volodymyr Zelensky and formerly fringe politicians like Mexico's Andrés Manuel López Obrador and Brazil's Jair Bolsonaro have become leaders of some of the world's most important democracies.

The bottom line: These atypical appointees are taking over the world's top institutions at a time of unprecedented global uncertainty and change.

  • Global debt is at an all-time high and central banks are re-evaluating their policy tools. The typical structures that have upheld banking, the economy and even money itself are being completely upended.
  • Their arrival could bring a flood of fresh new thinking, but could also leave the world's most important financial decisions up to folks who are not up to the task.

Editor's note: This article has been corrected to show William Miller was Fed chair from 1978-1979 (not 1979-1981).

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