Liam Clegg

Social spending targets in IMF concessional lending: US domestic politics and the institutional foundations of rapid operational change

Abstract This paper contributes to the literature on the mechanics of change in global economic governance. By synthesising an empirically driven case study with conceptual insights from the existing literature, I highlight three intervening variables that enabled the Legislative Mandates passed by the US Congress in 2009 on the use of social-spending targets (education and health expenditure ring fences) in IMF concessional lending to be rapidly translated into operational change. The intervening variables that stood between US domestic action and rapid operational change are: first, the existence of effective enforcement mechanisms to ensure compliance from the US Executive Director with the Mandate; second, preference congruence between other primary principals and the content of the Mandate, and; third, the existence of effective enforcement mechanisms to ensure compliance from IMF staff with the principals’ collectively-sanctioned goal. The outcome observed – the near universal incorporation of social-spending targets into concessional lending arrangements – adds credence to calls for further empirical work to assess the extent of a post-Washington Consensus transition at the IMF.

Benchmarking and Blame Games : Exploring the Contestation of the Millennium Development Goals

Benchmarking has long been a central component of the global development industry, with the most prominent recent initiative being the Millennium Development Goal (MDG) framework. However, within existing scholarship, the agent-level interactions surrounding the MDG framework remain under-explored. Here, on the back of an analysis of interactions that took place within and around key MDG review summits, I develop a typology to clarify the intersection of benchmarking and blame games. Overall, I demonstrate that despite the efforts of the MDG architects to insulate the initiative, blame games have permeated policymakers’ engagements with the framework. Moreover, the content of these blame games have been carried over into the recently outlined Sustainable Development Goals (SDGs). A pattern of strategic clarification has seen the emergence within this follow-on SDG framework of more precise responsibilities on higher-income states to meet aid targets, and on lower-income states to meet governance reform targets. Given the deeply-embedded cleavages that were evident in UN review summits, similar blame games seem likely to follow the periodic evaluations within the SDGs’ lifespan.

Global Governance and the Politics of Crisis

The notion of global governance has always been intimately linked to that of crisis. In recent crisis episodes the architecture of global governance has been held responsible for weak or ineffective regulatory mechanisms that failed to either prevent systemic crises or to at least give an “early warning” of impending disasters, while in other episodes global governance institutions have been blamed for poor crisis responses and management. Global governance institutions have also been blamed for failing to expand the scope of their jurisdictions to incorporate new systemic risks and new market players, as well as for their inability to adapt to new political, economic, social and environmental challenges. The framing article for this special issue on “Global Governance in Crisis” examines four key features of global governance in the context of the global financial crisis: (1) the dynamic role played by ideas in making global governance “hang together” during periods of crisis; (2) how crisis serves as a driver of change in global governance (and why it sometimes does not); (3) how ubiquitous the global financial crisis was as an event in world politics; and (4) the conditions that constitute an event as a crisis. Due to the complexity and institutional “stickiness” of the contemporary architecture of global governance, the article concludes that a far-reaching overhaul and structural reforms in global governance processes is both costly and improbable in the short-term.

Post-crisis Reform at the IMF: Learning to be (Seen to be) a Long-term Development Partner

It is by now clear that for the International Monetary Fund (IMF) the global financial crisis has been spectacularly good for business. And whilst the recently announced doubling of the Funds concessional lending resources and renewed commitment to “poverty reduction” are intrinsically important developments, they also serve to shed light on the politics of change within the organisation. By placing recent developments in their historical context, this article outlines the evolution of competing views amongst key internal actors over how and when the Fund should lend to low-income countries, and highlights the limited ability of US representatives to achieve their aims in this policy area. In line with a series of historical precedents, advocates of a “developmentalist” IMF have again drawn upon a period of crisis to overcome the more “minimalist” views of the US. By doing so, space has been opened up for the IMF to gain traction over “poverty reduction” through the use of ring-fenced spending. With these changes the IMF is gradually learning to become a development partner.

Global governance in crisis

1. Global Governance and the Politics of Crisis 2. Crisis is Governance: Sub-prime, the Traumatic Event, and Bare Life 3. IMF Surveillance in Crisis: The Past, Present and Future of the Reform Process 4. Post-crisis Reform at the IMF: Learning to be (Seen to be) a Long-term Development Partner 5. Global Trade Governance and the Challenges of African Activism in the Doha Development Agenda Negotiations 6. Multilateralism in Crisis? The Character of US International Engagement under Obama 7. Each Time is Different! The Shifting Boundaries of Emerging Market Debt

The World Bank and the Globalisation of Housing Finance

The World Bank remains one of the most prominent actors in the field of global development, and one of the foremost international organisations in contemporary global politics. Over its history, its lending for housing has mortgaged development by prioritising financial sector expansion over the needs of low-income groups. Through this book, Liam Clegg explores the drivers of World Bank operational practices, and the contribution of these operations to state transformations across the global South.

Apolitical Economy and the Limits to Stakeholder Engagement at the IMF

In the world of monetary policy, information asymmetries between decision makers and market actors are widely thought to enhance the efficacy of policy choices. Because of this, discussions of monetary policy have traditionally taken place behind closed doors, and even today the most liberal of disclosure procedures allow only for the post hoc release of limited accounts of discussions (Gutner 2010). In line with these norms, throughout the majority of its life, the IMF — the international organisation charged with overseeing the international coordination of monetary policy — has been accustomed to ‘acting behind the scenes’,2 providing advice and conducting negotiations out of the public limelight. Such an operating procedure is diametrically opposed to the calls for greater openness and engagement that are now routinely placed on IOs, and it is for this reason that the politics of stakeholder control at the Fund are of particular interest. Although over the past decade innovations in the relationship between the Fund and low-income country populations have emerged, deeply ingrained institutional characteristics of the Fund continue to restrict the emergence of direct mechanisms of stakeholder engagement. The disjuncture between the Fund’s and its critics’ understandings of appropriate practices in this area means that, almost inevitably, heated disagreements will continue.

Shareholder Control and the Rise of Poverty Reduction at the World Bank

In early 1942, Harry Dexter White sat down in his US Treasury office to draft a proposal for an international bank. With his mind understandably focused on the mass of physical devastation that the years of war had wrought, White headed the report ‘Bank for Reconstruction’. However, during the course of re-writing the blueprint, a tete a tete with his deputy, Ed Bernstein, would lead to a fateful two-word appendage to the embryonic institution’s title. When optimistically thinking to the future and considering the bank’s place in a post-war global order, Bernstein wondered aloud about what to do with the institution after reconstruction had been completed. White turned the question back on his deputy, and Bernstein suggested that it could be used to lend to other areas that required development. When the amended plan was circulated to other governments the following year, it outlined ideas for an expanded organisation: an ‘International Bank for Reconstruction and Development’ (Kapur et al. 1997: 57). It is around the operationalisation of this broad developmental mandate that shareholder states have, with increasing intensity, sought to bolster the mechanisms of control at their disposal. And in establishing a monitoring framework and financial inducements to support their MDG-focused ‘results agenda’, the Bank’s shareholders are working to lock in a particularly precise understanding of poverty reduction at the heart of the organisation’s mission.

Shareholder Conflicts and the Rise of Social Spending at the IMF

During the closing years of World War II, when the potential form and function of the IMF was being discussed among allied policy makers, the needs of developing countries were considered as, at best, a secondary matter. The main concern of the architects of the Bretton Woods System was that a mechanism for ensuring stability in the exchange rates of the major global currencies be established, in order to provide a predictable environment in which international trade could recover. It was thought that the prosperity of developing countries, which largely operated within colonial currency blocs, would best be ensured with the IMF acting as an effective systemic guardian. However, as over time developing countries have become independent members of the IMF and as the structure of the international monetary system has profoundly altered, the relationship between the Fund and this group of states has become much more intimate, much more long term, and also much more controversial.