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LGD 2005 (1) - Wright

The IMF and the Politics of Financial Globalization: From the Asian Crisis to A New International Financial Architecture?


Ben Thirkell-White

Palgrave Macmillan (2005), London
ISBN: 1403920788

Reviewed by Christopher Wright
Department of International Relations,
London School of Economics and Political Science.


‘Democracy is not a technical exercise’, argues Thirkell-White in his new book, The IMF and the Politics of Financial Globalization, implicitly accusing the Fund of disagreeing with him. As the post-Washington Consensus era has ushered in a new set of governance norms that promote transparency, accountability, participatory decision-making and demand-driven development assistance, international financial institutions are struggling to come to grips with reconciling an increasingly politicised development agenda with their historically narrow technocratic mindsets. Crucially, the new agenda has not come from within, but has been forced upon them by increasingly vocal challenges to neo-liberal orthodoxy that have highlighted the social and environmental costs associated with unregulated private markets. In academic circles, the greater legitimacy afforded to disciplines other than economics in studying issues related to the global political economy has encouraged stinging critiques of the rational and utilitarian assumptions embedded in neo-classical economic theory, and the macroeconomic policy prescriptions that flow from these assumptions.

In relation to the Fund, its increasing engagement with the post-Washington Consensus agenda following the Asian crisis has provided a context for many to critically reflect on its transformed role in an era of financial globalization. Thirkell-White’s text is among the most thoughtful of these, and offers an informed and very accessible critique of the Fund’s new institutional role in the multilateral system following the Asian crisis. Drawing on three case studies of Fund interventions, his analysis observes that the Fund’s changing operational environment has induced an expansion of its institutional role that goes well beyond its current capacity as a technocratic body. His story depicts an international organisation created, defined and experiencing its formative years in an era quite different from the current. Consequently, it is struggling to make sense of its formal mandate in the context of an increasingly politicised and diverse development agenda, brought about by normative and material shifts in its institutional environment. In particular, a renewed appreciation of the state as a potentially positive force in development has led the Fund to move beyond its formal regulatory role as a custodian of the international monetary system, to directly promote domestic legal and institutional reforms aimed at instilling investor confidence and increase financial stability. This new institutional role, argues Thirkell-White, ‘takes the IMF into unavoidably political territory’ that leaves its discretion disconnected from ‘a legally codified view of acceptable behaviour in the international monetary system’ (p 231), which has deeply problematic consequences for its political legitimacy.

While seeking to distance himself from ‘hyperglobalist discussions’, which he dismisses as ‘empirically simplistic and politically disabling’, Thirkell-White’s analysis of the Fund’s new institutional role is in fact refreshingly blunt. He directly confronts its governance structure, by claiming that it sanctions ‘consensus decision-making in conditions of secrecy’ (p 38), rather than supporting democratic notions of representation and accountability. He questions the intellectual basis upon which most of the Fund’s policy prescriptions are based, by arguing ‘it is simply inadequate to think about the impact of Fund programmes in developing countries in purely economic terms.’ (p 3) The way it employs loan conditionality to induce reforms is characterized as an ‘all-or-nothing approach [that] does not reconcile with political realities’, and, in fact, ‘sharpens the choices countries face, rather than making a moderate level of integration look attractive.’ (p 240) And in concluding remarks, he rejects the Fund’s self-prescribed a-political role, by claiming that its new governance agenda necessarily transforms it into an ‘institution of political management’ by more directly affecting the distribution of resources in borrower countries.

In many ways, Thirkell-White’s observations of the Fund’s uneasy venture into new political grounds mirrors the experience of other international financial institutions. For example, in the case of the World Bank, the participation of external actors in the decision-making process, bringing with them broader development concerns rooted in alternative normative perspectives, was initially seen as obstructing and unnecessarily politicising sound economic analysis. But over time, as the Bank realised the capacity of civil society groups to effect the political legitimacy of its policies and projects, information disclosure and public consultation became institutionalised features of Bank operations. While Thirkell-White rightly observes that the Fund’s narrow mandate has left it largely insulated from the ideological and political criticisms levelled at other international financial institutions, its adoption of a governance agenda, and the deepening role in domestic policy-making that this entails, nevertheless suggests that the sources of the Fund’s political legitimacy will increasingly depend on whether interventions conform to the normative expectations of civil society, with regards to transparency, accountability and justice. The new normative politics surrounding debt cancellations underscores this.

But disappointingly, while he claims that political legitimacy depends on whether ‘relevant political actors are convinced by the justifications that are available’, he fails to discuss which actors are deemed ‘relevant’ in the post-Washington Consensus era. In a way, he does not deliver on his initial promise to provide an agency-centred analysis of the politics of financial globalization, by failing to supplement his discussion of Fund relationships with borrowing governments with a wider discussion of the increasingly autonomous role non-state actors play in the international financial system. For example, his observation that U.S Treasury policies during the Asia crisis, and thus to some extent those of the Fund, were ‘closely aligned with the wishes of Wall Street’ could have triggered a discussion of the rising influence of private financial institutions on multilateral decision-making. Indeed, his understated remark that ‘developing country relationships with private financial markets have always been problematic’ left an expectation that the Fund’s growing role in catalysing private capital flows to their borrowing countries, rather than redirecting them to more publicly desirable purposes, would be more directly explained and confronted. But while he identifies the recent surge in transnational private capital flows as a significant influence on the evolutionary process within the Fund, he largely discusses the relationship between private and public credit in the abstract sense, rather than in the form of strategic interactions between private financial institutions and the Fund, and how this may diversify and strengthen the Fund’s leverage in negotiations with developing countries.

Despite these omissions, Thirkell-White’s contribution to the recent surge in literature on international financial institutions is valuable, mostly because of his success at combining insightful observations of the Fund’s interventions in post-crisis economies with a strong contextual understanding and appreciation of the actual political realities that exist on the ground. The credibility of his criticism is further enhanced by his propensity to mix critical remarks with humble reflections on the inherent difficulties with diagnosing and resolving fiscal crisis. He rightly acknowledges that the circumstances under which Fund interventions take place are inherently messy, often caused by multiple, and often synergistic political, economic and social factors, rather than single policy failures. His discussions of interventions in Korea, Indonesia and Malaysia are brief, yet insightful, and assess the significance of political patronage, sub-national politics and long-standing redistributive policies to the outcomes of IMF interventions in fiscal crisis. In each case, he skilfully outlines national political and economic variations in separate case studies, and uses them to critique utilitarian perspectives on fiscal crisis that advocate ‘blueprint’ policy prescriptions that fail to consider significant contextual features of borrowing countries. Overall, he observes that the Asian crisis was as much a result of deep-rooted political and institutional factors closely related to economic nationalism and nation-building, as inefficient macroeconomic policies that can be corrected by technocratic fixes.

In conclusion, his consideration of a new international financial architecture, touching on a common theme in recent literature, does not focus primarily on revising or scaling back the role of the Fund. Nor does he suggest that the narrow technocratic policy discourse of the Fund should be supplemented or replaced by a ‘popular civil society solution.’ (p 244) Instead, Thirkell-White calls for ‘empowering domestic politics’ by pushing ‘towards a greater reliance on national-level political processes, even if creating the necessary insulation from capital inflows may have some economic costs.’ (p 242) This reflects his attention to subjecting questions concerning macro-economic policy to legitimate debate and more open deliberation. Furthermore, his advocacy of contextual solutions customised to fit the political economy of individual countries signals his desire to infuse nuance and flexibility to a macro-economic policy agenda that has often been presented as a choice between full integration or complete insulation. Implicitly, the argument to devolve decision-making to the national-level, not only signals a deep scepticism with regards to the political legitimacy and efficacy of the Fund’s emerging governance agenda, but the capacity of the multilateral system generally to foster decision-making that is transparent and accountable to the people it is meant to serve.


This is a book review published on: 5 October 2005

Citation: Wright, C, ‘The IMF and the Politics of Financial Globalization: From the Asian Crisis to A New International Financial Architecture?’ by Ben Thirkell-White, Book Review, 2005 (1) Law, Social Justice & Global Development Journal (LGD). <>