27 April, 2009Issue 9.1EconomicsPolitics & SocietySocial PolicySouth AmericaWorld Politics

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All Politics Is Local

Taylor St. John

RiggirozziPia Riggirozzi
Advancing Governance in the South: What are the Roles for
International Financial Institutions in Developing States?

Palgrave MacMillan, December 2008
213 pages
£50.00
ISBN 978-0230220119

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Two years ago, the International Monetary Fund’s loan portfolio was a mere $13 billion—down 87% from 2003. In the spring of 2007, a Washington think tank hosted a debate entitled, “Is the IMF Obsolete?” In September of that year, the new managing director of the IMF, Dominique Strauss-Kahn, said that the “very existence” of the IMF was in question. The “two main issues” facing the fund, according to Strauss-Kahn, were “relevance and legitimacy”.

The IMF’s relevance is no longer in question. Since the start of the global financial crisis this past fall, the IMF has lent $50 billion to Eastern European countries, Iceland, Pakistan and El Salvador—and it received a $500 billion boost at the G-20 summit in London this month. Its sibling organization, the World Bank, is on a lending spree as well. However, the legitimacy of these Bretton Woods brethren remains hotly contested, as the enormous protests taking place today in Washington demonstrates. In the post-crisis world, the crucial question is not if the international financial institutions (IFIs) have a role to play, but how the IFIs should approach their roles.

The title of Maria Pia Riggirozzi’s new book promises to answer that question from a global perspective. In its catalogue, publisher Palgrave Macmillan promises to answer the question on a “regional scale”. But the book actually asks the question from a national perspective—specifically, an Argentine one. The mismatch between the country-specific contents and the global aspirations of the title actually provides an ironic (and unintentional) commentary on the state of scholarship on IFIs. Scholars berate the IMF and World Bank for applying one-size-fits-all solutions to development challenges. Yet most scholarship on the IFIs is marketed under the same assumption: that the conclusions from one country are applicable to all others.

Amid the current global economic drama, Riggirozzi’s careful study of the power relations between IFIs and a single country is more important than ever. The core of IFI action lies in the individual relationships between IFI staff and national policymakers, and those dynamics determine if an IFI has the legitimacy it needs to be effective. Riggirozzi argues that in the case of Argentina, the IMF’s top-down model of power imposition led “not only to a loss of legitimacy, but in turn to the disempowerment of the institution”. In her analysis, the success or failure of IFI intervention is determined by how policy is made: is it a top-down imposition and conveyance of money and ideas, or is a consultation with local experts to broker policies? Riggirozzi identifies IFI staff doing both in her case study of Argentina in the aftermath of the 2001 crisis. She differentiates between divisions of the World Bank and shows the most successful IFI teams acted as sensitive, nimble “brokers” of policy ideas, not as “conveyors” or “imposers” of global best practice. Although sharply critical, Riggirozzi does not see IFI action in Argentina as an unmitigated disaster: she is more interested in understanding policy-making mechanisms than placing blame.

Riggirozzi’s analysis shows the enormous insights gained from approaching IFI interactions as specific encounters embedded in a local context. However, the generalisation in the title of the book assumes that one country’s relationship to a single IFI can serve as a description of all countries in the ‘South’ and their relationships to all IFIs. This “global” approach to IFIs encourages imprecise terminology, trivializes local political-economic dynamics and discourages inquiry into specific local grievances. It lumps all anti-IFI discourses into a single globalised bundle of discontent. But globalisation has many discontents, and each one is worth exploring individually.

Generalisations seem endemic to international political economy as a discipline, but imprecise terms are particularly prevalent in less academic discussions of international finance. The terms “international financial institution” and “global South” are commonly used (as in Riggirozzi’s title), but rarely are their exact meanings explored or questioned. This is unfortunate for many reasons, not least because this casual use helps perpetuate stylised critiques of the IFIs, which discredit them simply by referring to a pervasive stereotype that they are all part of some monolithic neo-liberal monster.

Certainly the IFIs themselves deserve some of the blame. Their geographic concentration in Washington does nothing to dispel the notion that they are agents of American hegemony. The persistent mission creep of the IMF and World Bank onto the turfs of one another makes it difficult for anyone to tell them apart. Worse yet, instances of “cross-conditionality” in which the World Bank and IMF demand the same concessions from borrowers reinforce perceptions of a singular IFI agenda.

But that agenda appears to be changing or, at the very least, evolving in the current financial crisis. In March, the IMF approved a new Flexible Credit Line framework that guarantees emergency funding—without preconditions—for emerging-market economies with “very strong track records”. The program has provided a $47 billion line of credit to Mexico. IMF officials have indicated that Poland and Colombia will receive “no-strings-attached” guarantees in the near future as well. As the IMF shows signs of greater flexibility, the question remains: will academics and activists cling to their rigid stereotyping of international financial institutions?

The idea of a unitary “global South” is even more of a leap from reality than the idea of a unitary international financial institution. To begin with, it is factually incorrect to split the world into a “rich North” and “poor South” (Moldova, meet New Zealand). Not only does the term “global south” implicitly equate poverty with geography, it assumes similarities and solidarities between nations that do not exist. For example, Riggirozzi argues that the IFIs need to empower local experts. Her choice of Argentina, with its sophisticated domestic think tanks, helps her make this case. If she had chosen Guinea-Bissau, by contrast, she might be less convincing.

If the title was her choice and a global perspective really her goal, Riggirozzi could have chosen from a variety of similar middle-income countries to underscore her conclusions beyond Argentina. Not only would a comparison of countries highlight how context-specific politics and personalities can drive international financial policy-making, it would also raise interesting questions about the degree to which IFIs are seen as “patrons” or as “partners” in different regions. Why, precisely, is it that Poland and other Eastern European countries still broadly trust and rely on the IMF? And why, as Argentina’s Economy Ministry questions the competence of IMF officials, does the leader of neighbouring Brazil say that he is “proud” to lend to the fund?

Understanding that each country’s relationship with the Bretton Woods institutions has its own distinctive flavour is critical for national and international policy responses to the financial crisis. The success of potential policies depends on their domestic palatability, which varies according to country-specific historical and political legacies. In Peru, the IMF may forever be associated with the repressive regime of Alberto Fujimori. In the Czech Republic, the IMF may eternally be intertwined with the image of Vaclav Havel, who left behind a happier, but still complicated legacy. In Argentina, as Riggirozzi’s work illustrates, what the IMF approached as “technocratic reforms” were implemented alongside ugly and unethical local political actions—such as President Carlos Menem packing the Supreme Court—and it may take many decades for the fund can live this down. In that respect, Riggirozzi delivers an important message, even if her title obscures it: whatever the role of IFIs, success depends on sensitivity to local politics—from academics, activists and the institutions themselves.

Taylor St. John is a DPhil student in Development Studies at St. Antony’s College, Oxford. Her research deals with World Bank-sponsored arbitration of water disputes in Latin America.