Bloomberg View

Bloomberg View is the new opinion section of Bloomberg News. Each week, Bloomberg Businessweek will run select editorials committed to an ideology of transparency and tolerance, nonpartisanship and intellectual honesty, free markets and data-driven solutions to global problems

THE IMF'S ELECTORAL MATH DOESN'T ADD UP
French Finance Minister Christine Lagarde, now a formal candidate to become the International Monetary Fund's next chief, enjoys decisive support and may well get the post. The chances of any non-European vaulting ahead of her were always remote, given that IMF voting power is tilted heavily in Europe's favor. For the good of the Fund, the next IMF boss should pledge to eliminate this inequity.

To see what's wrong with the electoral math, consider Belgium and Brazil. Belgium is the world's 20th-largest economy, with a 1.86 percent voting share in the IMF. Brazil is a vastly larger and more populous nation, ranked in the world's top 10 economies, with triple Belgium's output. At the IMF, however, Brazil is the weakling, with just 1.72 percent of the vote. China, the world's second-largest economy, ranks sixth in IMF voting power behind the U.S., Japan, Germany, France, and Britain. The IMF has been gradually realigning voting shares since 2006, and China is due to rise to No. 3 in voting power next year. That still lags economic reality.

The distortions date to the 1940s, when the developed world of Europe and the U.S. had most of the cash, know-how, and leadership. Under a gentleman's agreement among nations, the U.S. claimed the top job at the World Bank, which provides development aid, while Europe took the IMF, with its emphasis on government rescue loans and austerity plans.

Picking Lagarde keeps a well-connected European in charge of the half-finished work of resolving Greece's debt woes. Even if second-guessers think the IMF should have treated Greece more sternly last year, a radical switch in strategy now risks chaos. But changing fortunes demand an IMF that transcends its European past. Some $3 trillion of currency reserves, 31 percent of the global total, is held by China, according to Bloomberg News. Former IMF borrowers such as South Korea and Chile now sport single-A or double-A credit ratings. Singapore has a triple-A grade. By contrast, debt troubles in Europe have touched off a flurry of ratings cuts and IMF rescue loans. It's time for the IMF to reflect the new reality.

A NUCLEAR DISASTER AGENCY THAT KNOWS NO BORDERS
The Fukushima Dai-Ichi nuclear plant disaster keeps bringing new bulletins of unexpected trouble, including the disclosure by Tokyo Electric Power on May 23 that three reactors suffered fuel meltdowns in the early days of the crisis, suggesting that the accident was far more severe than previously acknowledged.

In the first few hours of the debacle, Japanese engineers struggled alone. One entity could have rallied world expertise in a hurry: the Vienna-based International Atomic Energy Agency.

The 2,300-person U.N. body has a 53-year history of involvement in all things nuclear. What's missing is a crisis fighter's mentality and a mandate to act. As the agency's chief, Yukiya Amano, conceded soon after the tsunami hit Japan, "We are not a nuclear safety watchdog."

From June 20-24 the IAEA will meet in Vienna to evaluate the consequences of Fukushima. Amano now acknowledges the need to move beyond "business as usual." At that meeting, the agency's chief should set a much bolder agenda, one that states that the IAEA will now:

• Help set mandatory standards for safe operation of the world's approximately 440 nuclear plants.

• Enforce those standards. The IAEA has won high marks for nuclear-plant inspections related to weapons-making concerns, even when it didn't find signs of trouble (such as its Iraq inspections in the Saddam Hussein era). As an independent agency free from industry pressures, it needs to bring that same zeal to safety.

• Improve rapid-response plans so that the best crisis experts can put their skills to work within hours of a major failure of reactor safety, wherever it occurs.

INVESTORS OUGHT TO BE WARY OF LINKEDIN
A share of stock is supposed to represent a claim on a company's future earnings. On May 19, LinkedIn's (LNKD) first trading day, the stock closed at $94.25, a jump of 109 percent from the $45 offering price, putting the company's market value at a stratospheric $9 billion. Although LinkedIn shares declined in the days after its initial public offering, they were still trading at more than 520 times 2010 earnings of $15.4 million. Considering that the company itself is warning that revenue growth is likely to decline this year—and that perennial highflier Google (GOOG) trades at a price-earnings ratio of 20—this level seems hard to justify.

Individual investors should be particularly wary. Thirty million LinkedIn shares changed hands on the first trading day, meaning that each of the company's 7.8 million shares traded, on average, 3.8 times. Chances are that the smart money was buying and instantly selling to make a profit, leaving someone else—small investors?—holding the bag.

To read Ramesh Ponnuru on the GOP's chances in 2012 and Ronald Klain on Cabinet secretary chaos, go to: Bloomberg.com/view

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