Jacqueline Best

From the Top–Down: The New Financial Architecture and the Re-embedding of Global Finance

After decades of touting the International Monetary Fund (IMF) as a neutral, expertise-based institution, Fund representatives have recently adopted a surprisingly normative tone in their policy statements. IMF staff and leaders have begun to talk about the value of ‘good financial citizenship’, ‘civility’ and the goal of ‘civilising globalisation’. This new institutional vocabulary appears most commonly in the context of calls for a new financial architecture—the most influential of current responses to the recurring financial crises of the past decade. In this article, I will attempt to excavate some of the foundations of this new architecture, paying particular attention to the logic of its newly normative vocabulary. In doing so, I will make use of a concept that has most frequently been used to make sense of the postwar financial system—‘embedded liberalism’. Coined by John Gerard Ruggie but inspired by Karl Polanyi, this term was used to describe the peculiar compromise of the postwar order: while the Bretton Woods regime sought to promote a liberal financial order, Ruggie argued, it also embedded those universal liberal principles within the particular social and political norms of member-states. With the end of the Bretton Woods regime, however, many have argued that there has been a progressive disembedding of liberalism, as we have witnessed the gradual marketisation of domestic society and the increasing subordination of domestic stability to the principle of international economic liberalisation.

Legitimacy dilemmas: the IMF's pursuit of country ownership

Abstract There can be little doubt that the International Monetary Fund is currently facing a serious challenge to its legitimacy. Such criticisms echo similar debates that have surrounded other international organisations, including the World Bank, the United Nations and the World Trade Organization. As these different institutions seek to respond to this challenge, the Funds efforts to respond to its critics provide a number of interesting lessons and warnings. In this article I examine the Funds response to challenges to its legitimacy by focusing on one of the often overlooked aspects the institutions recent reforms: the IMFs efforts to change its relationship with borrowing countries by revising its conditionality guidelines and pursuing greater domestic ‘ownership’ over the reforms that it requires. While this response helps to resolve a number of legitimacy gaps that have emerged in the past decades, this strategy has also produced a number of new legitimacy dilemmas that raise questions about the sustainability of the IMFs current reform efforts. Chief among them is the limit to the Funds ability to obtain the deeper political legitimacy that it seeks by using the same narrowly technical economic strategies that it has relied on in the past.

The Limits of Financial Risk Management: Or What we Didn't Learn from the Asian Crisis

In retrospect, the Asian financial crisis was the canary in the coal mine that global leaders failed to recognise. While both the Asian crisis and the current one were the product of excessive leverage, moral hazard and poor risk management, the lessons drawn from each appear to be rather different: the Asian crisis was largely seen as the fault of Asian governments, while the current crisis has been primarily blamed on market actors. Does this mean that we have learned collectively from the mistaken assessments of the previous crisis? Yes and no. After tracing the links between the response to the Asian crisis and the drive towards securitisation, this article suggests that while the international financial community has avoided repeating the first major error that they made after the Asian crisis – by recognising that the problems now lie as much at home as abroad – they continue to make a second and more profound error in their response to the subprime crisis: financial leaders continue to believe that a large part of the solution is to be found in greater transparency, more accurate risk assessment models, better due diligence – in short, to provide the markets with a truly comprehensive picture of the financial instruments that are being traded. I suggest that there are two crucial problems with this assumption. The first is that it is highly unlikely that it will ever be possible to truly calculate and quantify the indeterminacies that are at the heart of the process of securitisation and the originate to distribute (OTD) model. The second is that even if it were possible to develop such a comprehensive picture of the indeterminacies involved in securities markets, it is not at all clear that financial markets will have the capacity or the interest in making effective use of that information. These limits to financial risk management not only raise some serious questions about the kinds of regulatory solutions that are currently being proposed, but also make it all the more important that we develop a politically accountable response.

Micro- or macro-moralities? Economic discourses and policy possibilities*

ABSTRACT This paper highlights the ethical implications of the distinction between micro- and macroeconomics, arguing that the methodological emphasis on establishing microfoundations has hardened into a liberal-individualist normative bias. We first argue that the key difference between micro- and macroeconomics is less any ostensible concern for small- or large-scale processes than a value-laden emphasis on the priority of private or public interests. We then show how these methodological assumptions have structured policy debates over the past century, from the emergence of Keynesian macroeconomics in the aftermath of the Great Depression to the more recent neoliberal emphasis on policy credibility. This analysis highlights the unappreciated ethical components of policy debates in the age of globalization, and the ways in which methodological biases infuse even the most ostensibly positive models with normative implications.

Redefining Poverty as Risk and Vulnerability: shifting strategies of liberal economic governance

Abstract The existence of global poverty poses a dilemma for liberal economic governance. Its persistence is an irritant to expert assertions that things will get better soon, making it necessary to develop new theories about the causes and nature of poverty and new strategies for managing and reducing it. This paper examines the most recent shift in how the World Bank and other organisations conceptualise and manage poverty, by beginning to view it through the lenses of social risk and vulnerability. The paper examines the evolution in how the Bank has historically sought to contend with the problem of poverty, and then considers the various expert debates and bureaucratic negotiations that shaped how this new conception of poverty as risk and vulnerability came to be institutionalised. Finally, I consider the implications of this shift for how the problem of poverty is governed, suggesting that it involves a much more dynamic ontology of poverty and requires the use of a more proactive set of techniques. While this more active intervention requires a more present and engaged state than was evident in the structural adjustment era, its role nonetheless remains constrained by the liberal preoccupation with limiting governmental power.

Review Article Moralizing finance: the new financial architecture as ethical discourse

(2003). Review Article Moralizing finance: the new financial architecture as ethical discourse. Review of International Political Economy: Vol. 10, No. 3, pp. 579-603.

Towards a Cultural Political Economy – Not a Cultural IPE

This short article provides a response to Matthias Kranke’s review in this journal (vol. 42, no. 3) of our book Cultural Political Economy. Although we recognise the good intentions behind Kranke’s attempt to bring our book into ongoing ‘trans-Atlantic’ debates about the definition of International Political Economy (IPE) as a field, the very effort to define what IPE ‘is’ and ‘is not’ is precisely the kind of reifying move that our volume was trying to avoid. Our project is principally an ontological one: we try to make sense of what political economy would look like if we took seriously the role of culture. This allows us to cut through the epistemological debates that have historically defined IR and the methodological ones that have recently dominated IPE.

International Political Economy meets the unexpected: Brexit, Trump and global populism

The June 2016 Brexit vote and November 2016 Trump election have posed renewed challenges to IPE Theory, as unexpected events which have highlighted the need for theoretical reflection and engagement. In light of these and other events, we, on the RIPE editorial board, saw the need for a ‘taking stock’ of IPE Theory. Building on RIPE’s longstanding tradition of pluralistic, pragmatic scholarship, we approached a number of leading thinkers in the field with a set of core questions, to enable a critical analysis of the ‘state of the art.’ We asked scholars identified with approaches spanning Open Economy Politics, Constructivism, the New Interdependence Approach, Critical Feminist Political Economy, and Discursive Institutionalism to address three broad questions:

The Paradox of Monetary Credibility

One of the hallmarks of recent political events has been a growing suspicion of so-called elites and experts—chief among them, those very central bankers who were only recently being celebrated for saving the global economy. Central bank independence and rule-based monetary policy became the norm over recent decades on the assumption that democratic influence would erode the policies’ credibility and therefore effectiveness. Yet, recent electoral events remind us that insulating economic decision-makers too much from popular concerns tends to erode their legitimacy—and thus undermines the credibility they seek to protect. Whereas central banks provided some of the most effective responses to the last crisis, it is unlikely they will have the legitimacy and effectiveness needed to fight the next crisis. In fact, their declining legitimacy may be one of its major causes.

The Inflation Game: Targets, Practices and the Social Production of Monetary Credibility

ABSTRACT In recent years, central banks have continued to preach inflation targeting even as they have pursued a wide range of unorthodox inflation-management policies. As the disconnect between discourse and practice grows, there is a growing risk of a serious credibility gap. This article seeks to shed some light on these dilemmas by looking backwards, focusing on the ‘Great Inflation’ in Britain in the 1970s and early 1980s and the successive failures of Labour’s incomes policy and the Conservatives’ monetarist experiment. These historical experiences suggest that for inflation policy to work it needs to be both understood as and made credible—which means that key actors need to not only learn that this is how the inflation game works, but also put into place a whole range of supporting practices that reflect and reproduce this conviction. In spite of the many claims by economists and central bankers to the contrary, quantitative targets do not in fact anchor inflationary expectations – social practices instead play that crucial anchoring role. At the same time, these cases both underline the particular dilemmas associated with a reliance on hard quantitative targets in times of social instability – lessons that do not bode well for our present moment.