Clift, Ben and Tomlinson, Jim. (2011) When rules started to rule : the IMF, neo-liberal economic ideas and economic policy change in Britain. Review of International Political Economy, Vol.19 (No.3). pp. 477-500. ISSN 0969-2290

	Text WRAP_Clift_0370082-pais-270312-ripe_1550_rules_final_publication_version.pdf - Accepted Version Restricted to Repository staff only Download (318Kb)
Preview	Text WRAP_Clift_When_rules_started_09692290%2E2011%2E561124.pdf - Published Version Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (424Kb) | Preview

Abstract

This article reassesses the neo-liberal shift within British economic policy-making and the international political economy, focusing especially the role of the International Monetary Fund (IMF) in the 1960s. The IMF has always used the conditions attached to its lending to try and shape borrower's policy; here we explore the evolving content of that conditionality and the economic ideas underpinning it. Using recently released IMF records, as well as other archives, we argue that the negotiations between the IMF and the UK Government in the 1960s can be seen as part of the Fund's drive towards a crucial change from discretionary to rules-based approaches to macroeconomic policy making. This drive took place within a struggle over a specific policy instrument, domestic credit expansion (DCE), at that time regarded as an important measure of monetary policy. The article locates the IMF advocacy of DCE within an attempt by the Fund to constrain discretionary policy-making through increasingly specific and binding rules. In response, UK Government officials began to pre-empt and even deceive the Fund to avoid being tied down. Our analysis unpacks which neo-liberal economic ideas the Fund embraced, noting its rejection of monetarism. In the period charted here (1965–69), the rules-based regime remained compatible with Keynesianism. However, the UK Government's grudging acceptance of this approach provided a crucial condition of possibility for a significant qualitative shift in macroeconomic policy-making when rules later became infused with an increasingly neo-liberal character.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Politics and International Studies
Library of Congress Subject Headings (LCSH):	Great Britain -- Economic policy -- 20th century, Great Britain -- Foreign economic relations, International Monetary Fund, International economic relations
Journal or Publication Title:	Review of International Political Economy
Publisher:	Routledge
ISSN:	0969-2290
Date:	21 June 2011
Volume:	Vol.19
Number:	No.3
Number of Pages:	24
Page Range:	pp. 477-500
Identification Number:	10.1080/09692290.2011.561124
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Funder:	Economic and Social Research Council (Great Britain) (ESRC), University of Warwick. Dept. of Politics and International Studies
References:	Alexander, S. (1952) ‘Effects of a Devaluation on a Trade Balance,’ Staff Papers, Vol. 2, pp. 263-78. Artis, M and Nobay (1972) ‘Balance Sheet Analysis of Money and the Concept of DCE’ in H. Johnson, ed, Readings in British Monetary Economics Oxford: Clarendon Press, pp.557-574. Babb, S. (2007) ‘Embeddedness, Inflation, and International Regimes: The IMF in the Early Postwar Period’ American Journal of Sociology Vol. 113 No. 1, pp. 128–64. Baer, W. & Kerstenetzky (eds.) (1964) Inflation and Growth in Latin America Illinois: Richard Irwin Barnett, M. and Finnemore, M. (1999) ‘The Politics, Power, and Pathologies of International Organizations’ International Organization Vol. 53, No. 4, pp 699-732. Barnett, M. and Finnemore, M. (2004) Rules for the World: International Organizations in Global Politics Ithaca: Cornell University Press. Beckerman, W. (1972) The Labour Government’s Economic Record, 1964-1970 London: Duckworth. Best, J. (2005) The Limits of Transparency: Ambiguity and the History of International Finance Ithaca: Cornell University Press. Best, J. (2004) ‘Hollowing out Keynesian norms: how the search for the technical fix undermined the Bretton Woods regime’ Review of International Studies Vol 30, pp.383-404. Blyth, M. (2002) Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century Cambridge: Cambridge University Press. Boughton, J. (1997) ‘Modeling the World Economic Outlook at the IMF: A Historical Review’ IMF Working Paper WP/97/48 Washington D.C.: IMF. Boughton, J. (2004) ‘The IMF and the Force of History: Ten Events and Ten Ideas That Have Shaped the Institution’ IMF Working Paper WP/04/75 Washington D.C.: IMF. Broome, A. (2010). The Currency of Power: The IMF and Monetary Reform in Central Asia Basingstoke: Palgrave Broome, A & Seabrooke, L (2007) ‘Seeing like the IMF: Institutional change in small open economies’ Review of International Political Economy Vol. 14, No.4, 576-601. Cairncross, A. (1996) Managing the British Economy in the 1960s: a Treasury Perspective Basingstoke: Macmillan. Cairncross, A. (1997) The Wilson Years: A Treasury Diary 1964-1969 London: Historians Press. Callon, M. (1986) ‘Some Elements of a Sociology of Translation: Domestication of the Scallops and the Fishermen of St Brieuc Bay’ in Law (ed.) Power, Action and Belief London: Routledge Kegan & Paul. Campbell, J. (1998) ‘Institutional Analysis and the Role of Ideas in Political Economy’ Theory and Society, Vol. 27 No. 3: 377-409 Chwieroth, J. (2007). ‘‘Testing and Measuring the Role of Ideas: The Case of the Neoliberalism in the International Monetary Fund.’’ International Studies Quarterly 51(1): 5–30. Chwieroth, J. (2008). ‘Normative Change from Within: The International Monetary Fund’s Approach to Capital Account Liberalization’ International Studies Quarterly (2008) 52, 129–158 Chwieroth, J. (2010) Capital Ideas: The IMF and the Rise of Financial Liberalization Princeton University Press. Cox, R. (1987) Power, Production and World Order New York: Columbia University Press. de Vries, Margaret Garritsen. (1976) The International Monetary Fund 1966-1971: The System under Stress Volume 1: Narrative. Washington: IMF. de Vries, M. G. (1987) Balance Of Payments Adjustment 1945 to 1986: the IMF Experience Washington D.C.: IMF. Dell, S. (1981) On Being Grandmotherly: The Evolution of IMF Conditionality Princeton Essays in International Finance, no. 144 Princeton, NJ: Princeton University Press. Ferguson, T. (1988) The Third World and Decision Making in the International Monetary Fund London: Pinter. Friedman, M. (1959) A Program for Monetary Stability New York: Fordham University Press. Friedman, M. (1968) ‘The Role of Monetary Policy’ American Economic Review Vol 58: pp.1-17. Friedman, M. (1969) ‘The Lag in Effect of Monetary Policy’ in The Optimum Quantity of Money Chicago: Chicago University Press. Gold, J. (1970) Stand-by Arrangements of the IMF Washington: IMF. Guitian, M. (1992) Rules and Discretion in International Economic Policy Washington: IMF. Hall, P. (1993) ‘Policy Paradigms, Social Learning, and the State: the Case of Economic Policy-making in Britain’ Comparative Politics Vol. 25, pp.275-296. Harvey, D. (2005) A Brief History of Neoliberalism Oxford: Oxford University Press. Hay, C. (2001) ‘The “Crisis” of Keynesianism and the Rise of Neoliberalism in Britain: An Ideational Institutionalist Approach’ in Campbell & Pedersen (eds.) The Rise of Neoliberalism and Institutional Analysis Princeton: Princeton University Press Hoover, K. (1984) ‘Two Types of Monetarism’ Journal of Economic Literature Vol 22, pp.58-76. IMF (1977) The Monetary Approach to the Balance of Payments Washington: IMF. Jenkins, R. (1991) A Life at the Centre London: Macmillan. Johnson, H. (1972) Further Essays in Monetary Economics London: Allen and Unwin. Kydland, F. and Prescott, E. (1977) ‘Rules Rather than Discretion: The Inconsistency of Optimal Plans’ Journal of Political Economy Vol. 67, pp. 473-491. Laidler, D. (1981) ‘Monetarism: an Interpretation and an assessment’ Economic Journal Vol 91, pp.1-28. Lascoumbes, P. & Legalès, P (2007) ‘Introduction: Understanding Public Policy through its Instruments – From the Nature of Instruments to the Sociology of Public Policy Instrumentation’ Governance Vol. 20 No. 1, pp. 1-21. Lombardi, D & Woods, N (2008) ‘The Politics of Influence: An analysis of IMF surveillance’ Review of International Political Economy Volume 15, No. 5, 711-739. March, James G. & Olsen, Johan P. (1984) ‘The New Institutionalism: Organizational Factors in Political Life’ American Political Science Review 78:3, 734-749. March, James G. & Olsen, Johan P. (1989) Rediscovering Institutions. New York: Free Press. Peters, B. Guy (1999) Institutional Theory in Political Science. London: Continuum. Polak, J. (2001) The Two Monetary Approaches to the Balance of Payments: Keynesian and Johnsonian IMF Working Paper WP/01/100 Washington D.C.: IMF. Polak, J. (1997) ‘The IMF Monetary Model at 40’ IMF Working Paper WP/97/49 Washington D.C.: International Monetary Fund Research Department. Polak, J. (1957) ‘Monetary Analysis of Income Formation and Payments Problems’ IMF Staff Papers 6, pp.1-50. Ruggie, J. (1982) ‘International Regimes, Transactions and Change: Embedded Liberalism in the Post-War Economic Order’ International Organization, Vol. 36 No. 2, pp. 379-415. Schmidt, V. (2008) ‘Discursive Institutionalism: The Explanatory Power of Ideas and Discourse’ Annual Review of Political Science Vol. 11:303–26 Stiglitz, J. (2002) Globalisation and its Discontents London: Penguin. Taylor, L. (1987) ‘Incomplete Theory, Policy Malpractice’ in R. Myers (ed.) The Political Morality of the International Monetary Fund Oxford: Transaction Books) pp. 65-80 Thirkell-White, B. (2005) The IMF and the Politics of Financial Globalization (Palgrave) Wadsworth, J. (1973) ed. The Banks and the Monetary System in the UK 1959-1971 London: Methuen. Woods, N. (2006) The Globalizers: The IMF, the World Bank, and their Borrowers Cornell University Press.
URI:	http://wrap.warwick.ac.uk/id/eprint/42024

Request changes to a record

Actions (login required)

View Item