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A on inflation at the IMF in April 2022. Image: MFI Photo/Cliff Owen
To escape the imperial legacy of the IMF and The World Bank, we want a radical new vision of global economic governance.
The IMF developed those powers during two decades of global turmoil that encompassed the Third World debt crisis of the 1980s and 1990s, the collapse of the Soviet Union, and the Asian currency crisis of 1997-1998. In the process, he faced a crisis of legitimacy. Around the world, the IMF has been criticized for interfering in domestic politics and applying neoliberal policies in the southern states and the former communist bloc. In the 2000s, aware of the establishment’s bad reputation, some IMF officials claimed that their aid was now an issue to less stringent situations. But when the situations eased, it was usually because the lending country had already undertaken so many liberalization reforms that it had little left to implement. And while some at the IMF increasingly insisted that the establishment had abandoned its doctrinaire neoliberalism, it continued to make the same far-reaching austerity demands as states turned to it for help, even at the height of the COVID-19 pandemic.
Today, while the IMF remains the only foreign monetary establishment with the requisite resources to deal with severe currency crises, it is sometimes turned to by the most desperate states. More are likely to do so in the coming months as central banks, led by the US Federal Reserve, raise interest rates, making servicing sovereign debt much more expensive. From Sri Lanka to Pakistan to Ghana, many countries are now experiencing excessive debt distress, raising the possibility of a new global wave of sovereign defaults. After the last global debt crises of the 1980s and 1990s, when the IMF prolonged its success in top domestic domestic politics in some of its member states, a widespread backlash arose against what were seen as its espionage powers. To avoid IMF bailouts, states have sought choice tactics to hedge against currency instability, adding gigantic amounts of accumulated foreign exchange reserves. This was true not only for US rivals like China and Russia, but also for many emerging markets and low-income emerging countries, as well as South Korea and Brazil.
This strategy has not been painless: it has diverted cash from public investment and poverty alleviation systems in low-income countries and channeled capital from the Global South into investments in the public debt of the Global North. But for some states, the choice: accept a conditional loan from an establishment governed through the U. S. Treasury. In the U. S. , even worse.
As the magnitude of the demanding global situations of the twenty-first century grows, the ideal of foreign monetary cooperation involving those interventionist and unpopular demands on national policies seems closer to realization than ever before. A solid and valid form of global economic governance for an unsound world economy has not yet been found.
what’s there to do? The answer rests in part on how we tell the story of the crisis in global economic governance. A popular narrative sees this in terms of the rise of neoliberalism. From this point of view, the Bretton Woods establishments created in 1944 at the height of the Keynesian consensus of the mid-20th century, which added the IMF and the World Bank, became interference only from the 1970s After Nixon separated the dollar from gold in 1971, the IMF and World Bank lost their original mandates and were used by the US state to oversee a revolution in the global market. Previously, according to Hitale, those establishments had represented what political scientist John Ruggie called “the compromise of embodied liberalism” at the core of the postwar economic order, a formula that was multilateral and revolutionary in allowing states greater autonomy to pursue expansive economic growth and welfare policies that were unimaginable before the 1930s, when popular gold severely limited how they controlled their national economies.
The result of this narrative is necessarily nostalgic: if we abandon the neoliberalism of the last days, according to the argument, those establishments can once again serve as the valid cars of foreign cooperation that they once were. The goal, in short, would be to return to a lost golden age of global economic governance.
But focusing on the postwar neoliberal turn, as important as it was, obscures the failures of liberal institutions even in the mid-twentieth century, failures that become clearer when we get bigger of our old attention over time. The first foreign efforts to govern the global economy emerged decades before World War II when nineteenth-century empires adapted to a reshaped global order during World War I. procedure of imperial adaptation to the new bureaucracy of mass politics and the emergence of self-determination at the beginning of the twentieth century.
In other words, there was no solid era of cooperation in the mid-twentieth century that can be traced smoothly today. Since their appearance in 1918, foreign economic establishments have been accused of being an interference and have been strongly connected to the prerogatives of empires. Unlike the foreign bodies tasked with preventing disputed foreign ministries from signaling war, his paintings sought to delve into questionable domestic issues. Even when limits were placed on their power, these establishments tended over time to become more interventionist, with their decisions impacting many degrees of the political, social, and economic life of states and empires. It is imperative to take this legacy into account in order to actually build cooperative establishments for today’s global economic governance.
The very important turning point in this great story is not World War II, but World War I. It was at this time that foreign economic institutions, for the first time in Hitale, began to interfere in the most important national economic decisions of some of their countries. member states. In the process, these establishments have seen a primary transformation of foreign sovereignty and order, reshaping the old gear of monetary imperialism for a new era of self-determination. This era of foreign interference in national economic policymaking was long downplayed, largely because the interwar foreign establishments were seen as failures. If compared to his goals of saving the world from depression and preventing the outbreak of war, no other conclusions can be drawn. But historians have recently shown how the foreign reporting of those years laid the foundation for the foreign order of the post-1945 period. Along with advances in foreign regulation of public health, migration, refugee, and smuggling policing, efforts to govern global capitalism were inaugurated in the tumultuous years between the global wars, not in the 1940s. Array
These early foreign economic establishments were designed to protect capitalism and stabilize a European-dominated foreign order that had been disrupted by World War I. Its powers were formed through the prerogatives of a few European governments and central banks, primarily those of the victorious Allied powers, although American self-interest and public governance also played a part in its genesis. The vital maxim of those institutions was the League of Nations, partly conceived by US President Woodrow Wilson and founded in 1920, but which the United States never joined. The forty-two founding members of the League spread from the British Empire and much of Europe to Argentina, Cuba, China, and Japan. It was incorporated through the world’s first foreign bank, the Bank for International Settlements, in 1930, and various intergovernmental bodies soon sprung up to facilitate the production and exchange of raw cloth and agricultural products such as tin, rubber, and wheat. In the aftermath of those events, foreign intervention became a regime as global markets were embedded in new legal and institutional frameworks, secured through a handful of states, empires, and hardline banks.
These establishments pioneered interventionist powers similar to those of the IMF, the Global Bank, and other fashionable organizations. The first time a foreign establishment made loans on the condition that a government has interaction in a program of internal austerity and independence from the central bank, for example. , dates back to the early 1920s, when the League of Nations oversaw monetary reconstruction systems in the former Ottoman and Habsburg territories, adding Austria and Hungary. The volatile regions of Europe, the westward march of Bolshevism and the outbreak of war or the primary territorial adjustments that jeopardized the fragile post-war agreement.
Similarly, the first time personal investment was channeled into an overseas progression program was in 1923-24, following the refugee crisis in Greece following its war with Turkey, when the League oversaw the use of a giant foreign loan for a farm progression allowance. Infrastructure matrix and housing progression. This assignment referred to a foreign-led commission, unconcerned with the Greek government, that was necessarily charged with the economic livelihoods of a massive new population of Greek citizens. And the first primary intergovernmental organization for the production and costs of crude materials, as the Organization of the Petroleum Exporting Countries (OPEC) does today with oil, was introduced in the early 1930s with two other products, oil. tin and rubber, like the British and the Dutch. Colonial officials sought to engage hard-working uprisings in the Southeast Asian colonies and meet the demands of corporate lobbies. What tied those efforts together were the really extensive demands they placed on the economic policies, resources, and data of sovereign powers, all with the goal of stabilizing a global capitalist formula that had been altered by World War I and its aftermath.
Of course, foreign ministries, corporations and banks had long before worked in combination across national borders, but without allowing any foreign establishment to touch the important economic interests of difficult states. And beyond Europe’s borders, few states had been insulated from external demands; For centuries, empires have violently claimed the wealth and resources of the non-European world. Even when their incursions did not result in colonial annexations, the imperial forces, adding the United States, forced many countries to open their internal spaces to foreign actors, whether in China, the Middle East, Latin America, the Caribbean or the European Balkans. . periphery. In fact, in the 19th century, the banks and the empires that governed them perfected the art of interfering in other countries without engaging in open colonization. The first multilateral establishments of monetary control, in fact, were debt commissions created at the request of European investors in North Africa and the Middle East, beginning in the 1860s. This team of informal monetary imperialism allowed bank officials and of foreign governments exerting overwhelming forces on the incomes and budgets of so-called high-default sovereign borrowers. At the end of World War I, there was no shortage of precedents of strong countries violating the sovereignty of the weak in the call of strength and profit.
But post-World War I establishments like the League were meant to be mechanisms of cooperation between officially sovereign entities, not just a new bureaucracy of imperial coercion. A new era of self-determination was beginning. The collapse of old empires such as the Russian and Austro-Hungarian gave rise to new states that maintained their sovereignty cautiously. These transformations of the global order have been accompanied by ideological and political adjustments at the national level. Many governments have become more democratic as elegance and gender barriers to suffrage fell and socialist parties took hold in parliaments. This made it harder than ever for governments to justify the incursion of foreign actors into their domestic policies, even as hard-line national elites identified that it could be useful in restricting domestic opposition to austerity or other questionable re-bureaucracy.
In the early twentieth century, the rule of formal sovereignty that protects states from attack by foreign actors is deeply rooted in foreign law. Problems in the early fashionable period, however, over time focused on the question of whether constitutional changes, revolutions, and civil wars in some states could be overturned through others. extending similarly to economic problems, even when they affected the well-being of other countries, problems such as tariffs, taxes, foreign exchange and public spending.
But those were precisely the spaces that required intervention after World War I, when a series of Western bankers, government officials, and technocratic internationalists (mostly victorious Allied powers) pushed governments to engage in fiscal restraint, to lessen trade barriers. and oversight of sound financial policies. With demands for self-determination now a harsh ideological force, such efforts to govern the global economy have posed a new challenge: forcing sovereign state governments to relinquish full autonomy over domestic policies, resources, and establishments without insulting their claims to autonomy and governability. National pride.
These inventions in global governance have been debatable precisely because they have been carried out in the shadow of imperialism. In a deeply unequal global order, how can a sovereign state open its internal affairs to external intervention without loss of strength and autonomy?Does it allow an establishment representing the interests of rival governments, central banks or capitalists to influence domestic politics?Participating in such external cooperation goes beyond the signing of treaties; it meant forcing an establishment to make judgments about the most delicate domestic problems of political economy. And indeed, each and every attempt to go beyond the economic sovereignty of states has led to fierce resistance, from political elites, bankers, staff, and corporations. they fought their own battles, those actors debated whether the new establishments presented a true foreignness or just an inventive approach of whitewashing or legitimizing the empire.
Take the example of the first conditional loans granted through the League in the 1920s to defeated central powers such as Austria and Hungary. Unlike later institutions, adding the IMF and the World Bank, the League did not have direct access to capital. Lending, however, can and did mediate, relations between foreign lenders and member states by appointing advisers to recipient governments to control their budgets. making sure they have interaction on policies widely considered mandatory for monetary stabilization: cutting government spending, raising taxes, ending cash printing, isolating central banks from political control, and returning to the gold standard. control in the past reserved for sovereign borrowers outside Europe or its supposedly more developed Balkan periphery.
But the prospect of building public debt commissions in Vienna or Berlin like those established decades ago in China, Egypt and the Ottoman Empire was incredibly controversial. It has broken down the imaginary barriers that separate Europe’s so-called “civilized” world from the world. global non-European. By exposing European countries to a form of foreign interference that European bankers (and the empires their interests) had long imposed on regions of the world codified as “backward,” the sovereignty of European countries was confused, as was their belief of status in the postwar foreign order. The equipment developed for the outer edge had been returned to the heart.
From Latin America to China to India, critics have noted that this new type of foreign government is little more than an attempt to mask outdated imperial practices. In fact, following the loss of autonomy of the beneficiaries of the League’s stabilisation loans, many countries have refused similar aid. Even in its desperate search for capital, for example, the nationalist government that came into force in China in the late 1920s refused any loans with the same demands the League had made from Austria and China. Hungría. De similarly, the Liberian government in the 1930s rejected a League technical assistance program on the grounds that it would interfere particularly in the internal affairs of one of the only sovereign African states that were members of the League. one state after another made the decision that preserving its autonomy was more valuable than accepting loans with onerous demands on its domestic politics. This resistance provided a prelude to the IMF’s counter-conditionality reaction many decades ago.
Despite this fierce resistance, the bankers’ new taste for international relations eventually prevailed. A sustainable practice of foreign government was born, a practice that continues to shape appointments between borrowers and creditors today.
These same problems of sovereignty and interference were at the heart of the negotiations that led to the Bretton Woods agreements in the middle of the century. This fact goes unnoticed in articles on Bretton Woods, which tend to focus on how British economist John Maynard Keynes fought with his American counterpart, Treasury economist Harry Dexter White, in an effort to create a foreign economic formula that would stabilize currencies and prevent a balance of accounts crisis for Britain. and reconciling external economic stabilization with national policies of full employment and social protection. The compromise they reached was, with some modifications, ratified at the Bretton Woods Conference in July 1944.
However, far from marking a radical break with the pre-war global economic regime, Bretton Woods intervened in ongoing disputes over how foreign establishments can simply walk the tightrope of exerting valid force over sovereign states without subjecting them to interference from foreign governments and personal interests. . . In designing the IMF, Keynes and his colleagues sought to ensure that the establishment respects the economic autonomy of its member states by staying away from their national fiscal and financial policies, especially since it has become transparent that the establishment’s representatives in the U. S. The U. S. would be able to exert an effective veto force over its decisions; his attention was to be limited to what Keynes called “the foreign terrain. “They tried to avoid anything resembling the League’s lending style, which transparently implied the option that the War-weakened British Empire would face the kind of foreigner that was once reserved for it. Britain’s defeated enemies.
But while the British were assured that the IMF would not expand those forces, their efforts to save them from an interventionist organization were unsuccessful. Shortly after its creation, the IMF gradually followed an older taste in banking diplomacy, linking access to its resources to increasingly intrusive demands on sensitive domestic economic policies. As early as the early 1950s, the promise of access to capital gave the IMF enormous influence over the policies of some of its member states, as Wall Street bankers — who had noticed that their influence temporarily reduced the war — gradually assumed more strength in the institution. Array It is not surprising that the demands made through the IMF to the states receiving its aid were, at first, the largest in the classic places of the American and European casual empire, specifically in Latin America. While European officials have used IMF resources, it is outside Europe that the most extensive fiscal and financial situations have been imposed on access to IMF capital, from Bolivia to Chile to Paraguay.
These practices continued throughout the 1950s and 1960s, when the IMF softened its strategies of attaching situations to loans through its so-called “stand-by arrangements” and focused its efforts primarily on offering economic assistance to countries in so-called emerging countries. following the collapse of the Bretton Woods formula in the early 1970s, the IMF’s conditional lending practices expanded, leading to the emergence of the interventionist IMF we know today. During the 1980s, the scope of the institution in the internal affairs of some Member States expanded considerably, going beyond fiscal and economic problems to also come with primary structural reforms: privatizations, liberalization of industry, deregulation, imposition of central bank independence, and adjustments in social policies and labor legislation. Although these were broader powers than the IMF had exercised before, it did not take the rise of neoliberalism for them to emerge for the first time: they had been latent in the IMF’s conception.
One of the effects of this broader view is to throw bloodless water on any mid-20th-century nostalgia. The foreign economic establishments created in 1944 were not the first of their kind and did not respect the autonomy of all their member states. “Incorporated Liberalism” was, at its most productive, a limited doctrine, applicable primarily to the North Atlantic states in their most physically powerful form. After 1945, much of the world continued to live within the confines of colonial empires, not sovereign countries, where there was little political autonomy to speak of. Countries that gained formal independence rarely saw their new legal prestige translate quickly into freeing themselves from outside pressure. Above all, the new Bretton Woods establishments have, in practice, never relinquished their powers to interfere in the internal affairs of states. At most, as soon as the IMF began offering monetary assistance to Latin American member states, its receipt was made conditional on austere and anti-inflationary reforms. Even after the abandonment of the gold standard, countries continued to face external disciplinary pressures, now applied through intergovernmental establishments exercising discretionary judgments that were inevitably political. These establishments were less advocates of a radically new reconfiguration of global sovereignty, democracy, and capitalism than heirs to an old taste of informal monetary imperialism, updated for an era of US global primacy.
The turn of this repudiation of nostalgia will have to be a lucid and ambitious confrontation with the realities of the global governance of 21st century capitalism. The demanding situations are much larger than the stylized histories of neoliberal rupture suggest. In light of the deep imbalances of global forces, the ability to interfere in the internal economic affairs of some other state, either directly or indirectly, has led to problems of primary legitimacy, absolutely undermining the project of economic cooperation. Foreign. One of the most demanding situations for foreigners has been convincing states to relinquish some sovereignty in the call for cooperation while affirming the lifestyles of a domain that belonged only to the state. These efforts are undermined when those sacrifices are not required of all states, but only of those perceived to occupy a subordinate position in the global order, and when they are designed to advertise personal gains and the strategic goals of competing states in rather than a true form of foreign cooperation. The fact that this problem, in various forms, has persisted for more than a century suggests that only modest refurbishments of existing establishments will not be enough to produce a more robust and valid form of global economic governance.
But this same inadequacy may also trigger a more ambitious reflected picture of how to conceive of a new architecture of foreign cooperation that goes beyond the establishments of the twentieth century and the legacies of empire.
What does this imply?
A first step would be to expand and consolidate the existing bureaucracy of monetary assistance to states that do not involve the same onerous domestic political requirements. There is already an approach to doing this at the IMF: Special Drawing Rights (SDRs), which provide unconditional liquidity to all member states, for the amounts we decide through their quotas. While the IMF allocated $650 billion in SDRs in August 2021, only a small portion of that sum went to the poorest countries that needed it most. Congressional opposition makes it unlikely that more than this amount will be approved, largely because those assets are supplied not only to U. S. partners. The U. S. but also rivals like Iran and China. Array The state of EE. UU. no uniformly opposes unconditional monetary aid: In times of severe crisis in 2008 and 2020, the Federal Reserve made billions of dollars to be held in currency exchange agreements with foreign central banks without conditions. But that cash only went to several countries, most commonly close U. S. partners. USA
What is needed, at the very least, is a de facto global monetary safety net that does not tie the fate of borrowers to the strategic whims of the great powers. Despite its shortcomings, the IMF is the only existing multilateral establishment that could, at least in theory, function on this scale. But the capital that the IMF must have is not up to the demanding situations it faces. Efforts to increase the length of club dues and rebalance the percentage of dues for decision-making by the most representative establishment have been blocked through its U. S. administrators. The fact that the U. S. The U. S. having a veto at the IMF means that the sclerotic nature of U. S. domestic policy is not being vetoed. can’t do. And it ensures that the IMF’s primary decisions, despite their multilateral nature, are ultimately shaped through America’s strategic imperatives.
Editor’s note: This essay is adapted with permission from author’s new e-book The Meddlers: Sovereignty, Empire, and the Birth of Global Economic Governance, through Harvard University Press.
Jamie Martin is an assistant professor of history and social studies at Harvard. His writings have also appeared in the New York Times, London Review of Books, the Nation, No. 1, Dissent, Bookforum and The Guardian.
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