Syracuse University SURFACE Dissertations - ALL SURFACE June 2014 Drivers of Change: Explaining IMF Low Income Country Reform in the Post Washington Consensus Mark Rittenhouse Hibben Syracuse University Follow this and additional works at: https://surface.syr.edu/etd Part of the Social and Behavioral Sciences Commons Recommended Citation Hibben, Mark Rittenhouse, "Drivers of Change: Explaining IMF Low Income Country Reform in the Post Washington Consensus" (2014). Dissertations - ALL. 49. https://surface.syr.edu/etd/49 This Dissertation is brought to you for free and open access by the SURFACE at SURFACE. It has been accepted for inclusion in Dissertations - ALL by an authorized administrator of SURFACE. For more information, please contact [email protected]. Abstract Through use of rationalist, constructivist, and historical structural theory, this study of IMF Low Income Country (LIC) policy change from 1996 to 2010 identifies potential causal variables and mechanisms that drive contemporary reform in the institution toward its poorest member states. Patterns uncovered through principal-agent analysis suggest that coalition formation between at least two actors is a necessary condition for LIC policy reform. Principal-agent analysis also establishes that discontinuity among powerful states gives IMF management and staff greater openings to initiate or block reform efforts. Constructivist analysis assesses if shifts in thinking among IMF insiders and the broader epistemic community of development economists have causal effect on LIC policy reform. Evidence gathered through process tracing methods shows that reform occurred after economic ideas that underwrote previous policy positions lost legitimacy among influential elites within and outside the IMF. Thus while IMF staff self -identify as rational technocrats, they are also driven by concerns of pursuing what the broader elite community deems as appropriate policy choices. When the boundaries of appropriateness change, we can expect reforms that are consistent with new frames of acceptable policy choices to emerge. Stepping outside of mainstream IR theory, historical structural analysis of IMF reform focuses on the interrelation of contemporary capitalist crisis, hegemony, and “inclusive neoliberal” development models. Here, the IMF is understood to hold a central role in the creation and perpetuation of the current geopolitical order underwritten by globalizing capitalism. Recent IMF LIC reforms that champion more participation, flexibility, and a nod toward Keynesian practices thus are seen as one component of a broader political project pushed by global elites to undermine potential challenges to the contemporary world order. Evidence gathered through discourse analysis and interviews shows that IMF staff and management were cognizant of growing resistance to Washington Consensus reforms and embraced less coercive and more participatory means to increase LIC buy in into concessionary lending programs. The scope and character of contemporary IMF reforms paralleled similar calls for rethinking how to ‘do’ development among global elites. This suggests that a component of IMF policy response in LICs is tied to a broader political project focused on building a more inclusive and hegemonic form of globalizing capitalism. The juxtaposition of three theoretical frameworks to examine the same phenomenon also provides a platform to evaluate current IR theory focused on IMF reform. Rationalist and positivist oriented constructivist approaches provide clear analytical roadmaps to cut through the complex dynamics found in the IMF, identify potential causal variables and mechanisms, and develop testable predictive hypotheses related to institutional reform. However, if studies of IMF LIC reform rely solely on current mainstream frameworks, explanation and analysis of how Fund policy change is interrelated with shifts and tensions in capitalist social structures and the power relations therein remain unexamined. This proves particularly critical when exploring why certain ideas considered market distorting remained off limits in contemporary IMF debates and how post Washington Consensus reforms reflect attempts by global elites to manage crisis points in the contemporary historical structure. In conclusion, I assess the merits of IMF research open to the use of positivist and historical relational paradigms. Such an approach will not produce one correct answer and suffers at some level from divergent baseline understandings of the social world. However, I maintain that despite this tension, the complexity of that world and processes of change within it merit space for mainstream and critical ontologies. Future studies of the IMF should explore more fully how diverse paths of inquiry can be effectively used to explain policy reform. DRIVERS OF CHANGE: EXPLAINING IMF LOW INCOME COUNTRY REFORM IN THE POST WASHINGTON CONSENSUS By Mark Hibben B.S. University of Maine, 1992 M.A. University of Birmingham (UK), 2005 M.A. Syracuse University, 2007 DISSERTATION Submitted in partial fulfillment of the requirements for the Degree of Doctor of Philosophy in Political Science in the Graduate School of Syracuse University Syracuse University June, 2014 Copyright 2014, Mark Hibben All Rights Reserved Acknowledgements This project only was successful due to multiple layers of support from professors, colleagues, IMF staff, friends, and family. Thanks first to my committee members and professors I worked with at Syracuse University- Mark Rupert, Matt Cleary, Jon Hanson, and Audie Klotz. Both in the classroom and in the dissertation process, they challenged me to think clearly and question preconceived notions of how the world works. Critique, however, was presented in a spirit that opened up opportunities for growth and learning. I will take their examples forward with me in my teaching and research career. Beyond academics, Mark, Matt, Jon, and Audie all provided invaluable moral and personal support at different stages of the PhD process. Thank you all for this. Bessma Momani, my outside reader and IMF expert, provided invaluable feedback on this project. I look forward to our future work together. Thanks to Thomas Perrault who agreed to chair the defense. His clear and steady facilitation of the process helped me focus on the task at hand. Office managers Candy Brooks and Jacque Meyers also provided critical logistical support and timely hugs to keep the process on track. I’m also grateful to my fellow graduate student colleagues for their friendship and support. Thanks to Michael Connolly, colleague and friend at Saint Joseph’s College of Maine, who pushed me to focus on finishing up the dissertation. Staff members at the IMF were extremely helpful in setting up interviews and granting access to archival material. Special thanks to IMF archivist Premela Isaac; Jeremy Marks and Marjorie Henriquez from the Fund’s External Relations Department; and staff from the Strategy, Policy, and Review Department, Africa Department, and Research Department. v Finally, I want to extend my gratitude to family members for their long term support through thick and thin. My parents, Stuart Hibben and Dietlinde Lamparter, my brothers Kent Hibben and Christopher Hibben, and Craig Hibben, my dear uncle who recently succumbed to brain cancer, all played key roles in this process. Kate Adams, my wife and best friend, somehow managed to see the big picture when her partner did not. This dissertation is dedicated to her. vi Contents Acknowledgements v List of Figures and Tables viii List of Abbreviations ix CHAPTER ONE 1 The IMF, LIC Reform and the post Washington Consensus CHAPTER TWO 30 Overview: The IMF and LICs CHAPTER THREE 69 Coalitions of Change: Rationalist Explanations of LIC Reform CHAPTER FOUR 106 Crises of Legitimacy: Constructivist Explanations of LIC Reform CHAPTER FIVE 159 Inclusive Neoliberalism: Historical Structural Explanations of LIC Reform CHAPTER SIX 206 Conclusion: Drivers of Change: Explaining IMF LIC Reform in the Post Washington Consensus Appendix I: Interview Questions 223 Appendix II: List of Interviews 225 References 226 Biographic Data 238 vii Figures and Tables Figures 1.1 Four Cases of post-Washington Consensus IMF LIC Reform (1996-2010) 4 2.1 IMF Organizational Chart 33 2.2 IMF Managing Directors: 1946-2013 34 2.3 IMF Lending Facilities 37 2.4 Strategy Policy and Review Department 40 2.5 Economist Program Recruits (1985-2010) 44 3.1 Types of PA Relationships 72 3.2 Hypothetical Chain of Delegation 73 3.3 Principals at Two Levels of Delegation Chain 76 4.1 Norm Cycle 103 4.2 Target LIC Inflation Rates (1995-2011) 139 4.3 Price Intervention Typology 153 5.1 Historical Structure 163 5.2 Central Themes of World Economic Forum Annual Meetings (1999-2012) 198 Tables 3.1 Coalitions of IMF LIC Reform (1996-2010) 103 4.1 Five Economic Schools of Thought 119 viii Abbreviations AFR African Department APD Asia and Pacific Department CFF Compensatory Financing Facility EB Executive Board ECF Extended Credit Facility ED Executive Director EFF Extended Funds Facility ENDA Emergency Natural Disaster Assistance EPCA Emergency Post-Conflict Assistance EP Economist Program ESAF Enhanced Structural Adjustment Facility EU European Union Eurodad European Network on Debt and Development G-7 Group of Seven G-20 Group of Twenty GAB General Arrangement to Borrow GATT General Agreement on Tariffs and Trade GFSR Global Financial Stability Report HIPC Highly Indebted Poor Country Initiative HIPC II Enhanced Highly