The IMF and the Politics of Financial Globalization

Transcription

1 The IMF and the Politics of Financial Globalization

2 International Political Economy Series General Editor: Timothy M.Shaw, Professor of Commonwealth Governance and Development, and Director of the Institute of Commonwealth Studies, School of Advanced Study, University of London Titles include: Lucian M. Ashworth and David Long (editor) NEW PERSPECTIVES ON INTERNATIONAL FUNCTIONALISM Robert W. Cox (editor) THE NEW REALISM Perspectives on Multilateralism and World Order Frederick Deyo (editor) GLOBAL CAPITAL, LOCAL LABOUR Stephen Gill (editor) GLOBALIZATION, DEMOCRATIZATION AND MULTILATERALISM Björn Hettne, Andás Inotai and Osvaldo Sunkel (editor) GLOBALISM AND THE NEW REGIONALISM Christopher C. Meyerson DOMESTIC POLITICS AND INTERNATIONAL RELATIONS IN US-JAPAN TRADE POLICYMAKING The GATT Uruguay Round Agriculture Negotiations Michael G. Schechter (editor) FUTURE MULTILATERALISM The Political and Social Framework INNOVATION IN MULTILATERALISM Ben Thirkell-White THE IMF AND POLITICS OF FINANCIAL GLOBALIZATION From the Asian Crisis to a New International Financial Architecture? Thomas G. Weiss (editor) BEYOND UN SUBCONTRACTING Task Sharing with Regional Security Arrangements and Service-Providing NGOs Robert Wolfe FARM WARS The Political Economy of Agriculture and the International Trade Regime International Political Economy Series Series Standing Order ISBN hardcover Series Standing Order ISBN paperback (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England

3 The IMF and the Politics of Financial Globalization: From the Asian Crisis to a New International Financial Architecture? Ben Thirkell-White Lecturer in International Relations School of International Relations University of St Andrews, UK

4 Ben Thirkell-White 2005 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act First published 2005 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N. Y Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin s Press, LLC and of Palgrave Macmillan Ltd. Macmillan is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN ISBN (ebook) DOI / This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Thirkell-White, Ben, 1971 The IMF and the politics of financial globalization : from the Asian crisis to a new international financial architecture? / Ben Thirkell-White. p. cm. (International political economy series) Includes bibliographical references and index. 1. International Monetary Fund. 2. International finance. 3. Financial crises Asia. I. Title. II. International political economy series (Palgrave Macmillan (Firm)) HG3881.T dc

5 Contents List of Figures Acknowledgements List of Abbreviations vii viii ix 1. Introduction 1 Part I 1.1 A political approach to the IMF and financial 3 globalization 1.2 In search of the politics of the Fund the concept 7 of legitimacy 1.3 The core argument IMF Legitimacy: Principles and Institutions IMF legitimacy, core principles Analysis Decision-making in practice: formulating 40 conditionality 2.4 Conclusions An Evolving IMF 47 Part II 3.1 The IMF s evolving mandate Responding to financial globalization, the IMF 61 in the 1990s 3.3 Conclusions The Asian Crisis and the Case Studies The politics of IMF legitimacy and the case studies The politics of the Asian crisis Conclusions South Korea Background to the crisis The crisis in Korea 106 v

6 vi Contents 5.3 Political interests and post-crisis reforms The politics of crisis management Conclusions Indonesia Background to the crisis The crisis in Indonesia The politics of crisis management Conclusions Malaysia Background to the crisis The crisis in Malaysia The politics of crisis management Conclusions The United States 179 Part III 8.1 Institutional environment Pre-crisis US foreign policy US responses to the IMF s role in Asia Outcomes and analysis: Treasury policy after the 197 crisis 8.5 Conclusions From Crisis to a New Architecture? The IMF and the politics of financial globalization IMF decision-making and the Fund s new role The politics of crisis Towards a new international financial 230 architecture? 10. Conclusions 240 Notes 246 Bibliography 253 Index 269

7 List of Figures Figure 2.1 IMF decision-making bodies 23 Figure 3.1 Old and New models of conditionality 73 negotiations Figure 5.1 Won-dollar exchange rate 108 Figure 5.2 Opinion poll on crisis causation 112 Figure 6.1 Rupiah-dollar exchange rate 139 Figure 7.1 Ringgit-dollar exchange rate 165 Figure 7.2 Stock markets during the crisis (not adjusted 171 for exchange rates) vii

8 Acknowledgements I would like to thank the ESRC for partially funding the Research on which this book is based, Simon Bromley and David Beetham for their excellent advice, and Robert Wade for encouragement and help. Jen Nelson, Tim Shaw and Amanda Watkins at Palgrave have been efficient, patient and supportive. I have greatly appreciated the help, support and good company of my academic colleagues and friends (categories that fortunately overlap considerably) at the Universities of Leeds, Sheffield, Bristol, and St. Andrews and further afield. In Washington, I received kind hospitality from Abby, Max and Lea. I would also like to thank everyone that generously gave their time to talk to me at the IMF, in Congress and elsewhere. The majority of interviews were off the record so I won t list any names here but that does not in any way indicate a lack of gratitude. Finally, I am deeply indebted to the many friends who reassured me that commercial law was not my vocation and helped make the shift to academia such a happy one. This book is dedicated to the Educational Trust. viii

9 List of Abbreviations ABRI ASEAN AWSJ* BI BIS BK BN BOK BULOG DAP DFID ED EIU EU EOI EPB ESAF FDI FKI FSC FT FSF GAB GATS GATT GDP GNP HICOM HIPC IBRA ICA Angkatan Bersenjata Republic Indonesia (Indonesian Armed Forces) Association of Southeast Asian Nations Asia Wall Street Journal Bank Indonesia Bank for International Settlements Business Korea Barisan Nasional Bank of Korea Indonesian government food distribution service Democratic Action Party Department For International Development (UK government) Executive Director Economist Intelligence Unit European Union Export oriented industrialization Economic Planning Board (Korea) Enhanced Structural Adjustment Facility Foreign direct investment Federation of Korean Industries Financial Supervisory Commission (Korea) Financial Times Financial Stability Forum General Agreements to Borrow General Agreement on Trade in Services General Agreement on Tariffs and Trade Gross domestic product Gross national product Heavy Industries Corporation of Malaysia Highly indebted poor countries Indonesian Bank Restructuring Agency Industrial Coordination Act (Malaysia) * Abbreviations in italics are used for references to newspaper and periodical sources ix

10 x List of Abbreviations ICMI IEO IFA IFI ILO IMF IMFC INDRA IOSCO IR ISI ITO JP KCIA KCTU KISDI KLSE KOPASSUS LDC LIBOR LLR LTCM MCA MFN MIC MLG MOFE MPR NAFTA NDP NEP NGO NICs NIEO NST NU Association of Indonesian Muslim Intellectuals Independent Evaluation Office International Financial Architecture International Financial Institution International Labour Organization International Monetary Fund International Monetary and Financial Committee (of the IMF) Indonesian Debt Restructuring Agency International Organisation for government securities commission International relations Import substituting industrialization International Trade Organization Jakarta Post Korean Central Intelligence Agency Korean Confederation of Trade Unions Indonesian committee for solidarity with the Muslim world Kuala Lumpur Stock Exchange Komando Pasukan Khusus (special forces command, Indonesia) Least Developed Country London Inter-bank Offer Rate Lender of last resort Long-Term Capital Management Malayan Chinese Association Most Favoured Nation Malayan Indian Congress Multi-level governance Ministry of Finance and Economics (Korea) People s consultative assembly (Indonesia) North American Free Trade Association National Development Plan (Malaysia) New Economic Policy Non-governmental organization Newly Industrialized Countries New International Economic Order New Straits Times Nahdlatul Ulama (revival of the religious scholars, Indonesia s largest Muslim organization)

11 List of Abbreviations xi NYT OECD PAS PCIJ Ser A PDI PDI-P PPP PRGF PRSP ROSC SCMP SDDS SDR SDRM SME TNC UEM UMNO UN UNCTAD USAID USED USTR WSJ WTO New York Times Organization for Economic Cooperation and Development Parti Islam Se-Malaysia Proceedings of the Court of International Justice Series A Parti Demokrasi Indonesia (Indonesian Democratic Party) Megawati s new PDI formed after her expulsion from the PDI Parti Persatuan Indonesia Poverty Reduction and Growth Facility Poverty Reduction Strategy Paper Report on the Observance Standards and Codes South China Morning Post Special data dissemination standard Special Drawing Right Sovereign Debt Restructuring Mechanism Small and medium sized enterprise Transnational corporation United Engineering Malaysia United Malays National Organization United Nations United Nations Conference on Trade and Development United States Agency for International Development United States Executive Director (of the IMF) United States Trade Representative Wall Street Journal World Trade Organization