The IMF and the Politics of Financial Globalization: From the Asian Crisis to a New International Financial Architecture?

287 Pages·2005·1.007 MB·English

by  Ben Thirkell-White (auth.)

The IMF and the Politics of
Financial Globalization
From the Asian Crisis to a New
International Financial Architecture?
Ben Thirkell-White
The IMF and the Politics of Financial Globalization
International Political Economy Series
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FUTURE MULTILATERALISM
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INNOVATION IN MULTILATERALISM
Ben Thirkell-White
THE IMF AND POLITICS OF FINANCIAL GLOBALIZATION
From the Asian Crisis to a New International Financial Architecture?
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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
© Ben Thirkell-White 2005
Softcover reprint of the hardcover 1st edition 2005 978-1-4039-2078-2
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First published 2005 by
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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.T487 2005
332′.042–dc22 2005041049
10 9 8 7 6 5 4 3 2 1
14 13 12 11 10 09 08 07 06 05
Contents
List of Figures vii
Acknowledgements viii
List of Abbreviations ix
1. Introduction 1
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 13
Part I
2. IMF Legitimacy: Principles and Institutions 19
2.1 IMF legitimacy, core principles 20
2.2 Analysis 26
2.3 Decision-making in practice: formulating 40
conditionality
2.4 Conclusions 45
3. An Evolving IMF 47
3.1 The IMF’s evolving mandate 48
3.2 Responding to financial globalization, the IMF 61
in the 1990s
3.3 Conclusions 74
Part II
4. The Asian Crisis and the Case Studies 77
4.1 The politics of IMF legitimacy and the case studies 77
4.2 The politics of the Asian crisis 80
4.3 Conclusions 97
5. South Korea 98
5.1 Background to the crisis 99
5.2 The crisis in Korea 106
v
vi Contents
5.3 Political interests and post-crisis reforms 111
5.4 The politics of crisis management 116
5.5 Conclusions 126
6. Indonesia 128
6.1 Background to the crisis 129
6.2 The crisis in Indonesia 136
6.3 The politics of crisis management 143
6.4 Conclusions 153
7. Malaysia 156
7.1 Background to the crisis 157
7.2 The crisis in Malaysia 163
7.3 The politics of crisis management 169
7.4 Conclusions 177
8. The United States 179
8.1 Institutional environment 179
8.2 Pre-crisis US foreign policy 184
8.3 US responses to the IMF’s role in Asia 189
8.4 Outcomes and analysis: Treasury policy after the 197
crisis
8.5 Conclusions 201
Part III
9. From Crisis to a New Architecture? 205
9.1 The IMF and the politics of financial globalization 206
9.2 IMF decision-making and the Fund’s new role 213
9.3 The politics of crisis 222
9.4 Towards a new international financial 230
architecture?
10. Conclusions 240
Notes 246
Bibliography 253
Index 269
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
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 every-
one 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
List of Abbreviations
ABRI Angkatan Bersenjata Republic Indonesia (Indonesian
Armed Forces)
ASEAN Association of Southeast Asian Nations
AWSJ* Asia Wall Street Journal
BI Bank Indonesia
BIS Bank for International Settlements
BK Business Korea
BN Barisan Nasional
BOK Bank of Korea
BULOG Indonesian government food distribution service
DAP Democratic Action Party
DFID Department For International Development
(UK government)
ED Executive Director
EIU Economist Intelligence Unit
EU European Union
EOI Export oriented industrialization
EPB Economic Planning Board (Korea)
ESAF Enhanced Structural Adjustment Facility
FDI Foreign direct investment
FKI Federation of Korean Industries
FSC Financial Supervisory Commission (Korea)
FT Financial Times
FSF Financial Stability Forum
GAB General Agreements to Borrow
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GDP Gross domestic product
GNP Gross national product
HICOM Heavy Industries Corporation of Malaysia
HIPC Highly indebted poor countries
IBRA Indonesian Bank Restructuring Agency
ICA Industrial Coordination Act (Malaysia)
* Abbreviations in italics are used for references to newspaper and periodical
sources
ix