5. ‘Pro-Poor’ Concessionary Lending: The PRGF

1. IMF Official Website, IMF Factsheet: IMF Concessional Financing through the ESAF, http://​www.​imf.​org/​external/​np/​exr/​facts/​esaf.​htm, date accessed 9 June 2015.

2. This is arguably overstated as several prominent policy positions consistent with monetarism shaped Fund policy directives and debates in the 1980s and 1990s. First is the notion that the primary role of monetary policy is ensuring price stability rather than a focus on issues of full employment. Second, given the political pressure for short-term inflationary stimulus, the most effective institutional arrangement to promote price stability is one where central banks are independent and follow fixed rules rather than ad hoc discretions when instituting monetary policy. And third, monetarists argue against capital controls, maintaining that volatility is a symptom of speculators and investors responding rationally to underlying policy and institutional weakness. Capital movement thus is a corrective mechanism rather than a variable in and of itself that causes economic turmoil. This argument was fundamental to the efforts led by Managing Director Camdessus and First Deputy Managing Director Stanley Fischer in the late 1990s to unsuccessfully lobby for the Fund executive board to amend the Articles of Agreement to include jurisdiction over capital controls.

3. If an economy sees a decrease in money supply, for example, consumption and aggregate demand fall. As prices and wages are generally inflexible, they fail to quickly respond to reduced demand. This results in a drop in production and increased unemployment.

4. New classical theorists assume the following responses during a hypothetical period of government monetary expansion designed to increase output and employment. In anticipation of inflation, consumers will spend on goods and services before prices rise. Firms, for their part, will raise prices. Unemployed individuals will adjust to inflationary expectations and hold out for higher wages. Government expansionary policy will thus produce immediate increases in nominal demand and lower supply that results in no change in aggregate output or unemployment levels and higher price levels.

5. See Little et al. (1970) and Shaw (1973).

6. See Bhagwati (1978) and Krueger (1978).

7. See McKinnon (1973).

8. For a more in-depth look at influential neoclassical economists and their impact on development theory in the 1980s, see Rapley (2007: 67–86).

9. The Peterson Institute for International Economics (formerly the Institute for International Economics) in Washington, DC, was founded in 1981 and remains among the most influential think tanks concerning international economic policy.

10. Monopolies and their opportunity costs on welfare outcomes were initially modeled by Gordon Tullock (1967). Krueger, however, was the first to coin the term ‘rent seeking’.

11. As highlighted by Rapley (2007: 73–4), Bates drew from Mancur Olson’s (1965) theory of collective action in his study to explain why large rural populations failed to politically organize to dismantle ISI policies supported by small, tight knit groups of urban elites.

12. Author interview with Fund staff member from the SPR department, Washington, DC, June 2011.

13. The IMF described privatization efforts as a ‘second-stage’ strategy of structural adjustment.

14. The themes of increased surveillance and institutional liberalization in LIDCs were also reinforced by the Uruguay Round of the GATT (lasting from 1986 to 1994) and the formation of the World Trade Organization in 1995. Three trade agreements were formed during the Uruguay Round that extended multilateral trade policy beyond just manufactured and agricultural goods. These included the General Agreement on Trade in Services (GATS), the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs), and the Agreement on Trade Related Aspects of Investment Measures (TRIMs). The GATS, TRIPs, and TRIMs were incorporated into the newly formed WTO along with the controversial Dispute Settlement Body (DSB). A state can lodge a formal grievance to the DSB if they believe another member state has violated its rights under WTO agreements.

15. Stiglitz was fired from his position of chief economist of the World Bank in 1999 for his pointed critique of the IMF and the US Treasury in regard to their development policy positions and response to the Asian crisis.

16. For more on these two positions, see Chap. 13 in Bhagwati (2004). Bhagwati argues that the Asian crisis was caused by ‘hasty and imprudent financial liberalization’ underwritten by ‘gung-ho international financial capitalism’ pushed by the ‘Wall Street - Treasury Complex’. He describes the Wall Street-Treasury Complex as follows: ‘This is a loose but still fairly coherent group of Wall Street firms in New York and the political elite in Washington, the latter embracing not just Treasury but also the State Department, the IMF, the World Bank, and so on.’ He made similar arguments in a 1998 publication in Foreign Affairs. See Bhagwati (1998).

17. M. S. Khan (2001) ‘IMF Conditionality and Country Ownership of Programs’, IMF Working Paper No. 01/142, 25 February 2001 as cited by Rückert (2007: 103).

18. Author interview with Fund staff member from the African department, Washington, DC, June 2011.

19. Author interview with Fund staff member from the SPR department, Washington, DC, September 2011.

20. Author interview with Fund staff member from the African department, Washington, DC, September 2011.

21. Author interview with Fund staff member from the SPR department, Washington, DC, June 2011.

22. Author interview with Fund staff member from the SPR department, Washington, DC, September 2011.

23. Author interview with Fund staff member from the African department, Washington, DC, June 2011.

24. Author interview with Fund staff member from the African department, Washington, DC, June 2011.

25. Author interview with Fund staff member from the African department, Washington, DC, June 2011.