International Political Economy:

The IMF, Global Inequality and

Development

IMF. Structural Adjustment. Neoliberalism.

Neoimperialism.

Introduction

A. The IMF as an anti-globalization target

B. Original mission of the IMF

Decolonization to Structural

Adjustment

A. Decolonization brings political change, but economic patterns persist

B. International division of labor

1. North has diversified industrial economies; South had specialized economies relying on raw material exports

2. Raw material prices subject to both significant fluctuations and long-term decline in terms of trade

Decolonization to Structural

Adjustment

C. From raw materials to industrial production

1. The logic of import substitution

a. Channel investment to selected industries

b. Protection of industries from more mature foreign competition

c. Initial success of import substitution in terms of high growth rates

Decolonization to Structural

Adjustment

2. Problems of import substitution

a. Moving beyond low-tech industries proves

difficult

b. Money borrowed from Northern banks

and governments for more investment

c. Assumption that more growth will permit

repayment of debts

Decolonization to Structural

Adjustment

3. The debt crisis

a. Slow growth in 1970s and rising energy

prices hurt ability to repay loan

b. To prevent default IMF grant decisions

D. Structural adjustment

– Conditionality and IMF loans

Critical Issue

• Debates over IMF and structural adjustment policies are actually the latest manifestation of ongoing debates about the sources/causes of development and underdevelopment

A. IMF assumes main obstacles are the misguided policies pursued by developing states

B. Critics of IMF see the global economic order as systematically biased against the interests of developing states

The IMF and Neoliberalism: Free

Markets Promote Development

A. Intellectual currents of the late 1970s and 1980s

1. Rise of Neoliberalism (Friedman v. Keynes)

2. The Reagan/Thatcher triumph

3. Failure of state socialism

B. Structural adjustment policies embody neoliberalism

1. Fiscal austerity

2. Reductions in government subsidies

The IMF and Neoliberalism: Free

Markets Promote Development 3. Reduced tariffs and other trade barriers

4. Reduced obstacles to foreign investment

5. Privatization

C. Neoliberalism on the lessons of development

1. Some nations have successfully achieved development

2. What distinguishes success from failures?

The IMF and Neoliberalism: Free

Markets Promote Development

3. Successes followed market friendly policies

emphasizing international trade

D. The neoliberal vision

– Development is possible for all with a liberal

international economic order

– Development is a positive-sum process

Neoliberalism as Neoimperialism

A. Political economy of dependency

1. Core/periphery (semi-periphery)

2. Ruling elites in developing countries allied with economic interests in North to exploit developing nations and prevent genuine development

3. MNCs reap windfall profits without reinvesting in developing nations

4. Primary obstacles to development found in structures and dynamics of global economic system, not policies of developing nations

Neoliberalism as Neoimperialism

5. Northern wealth and prosperity seen as

dependent on the exploitation of an

impoverished South

B. IMF seen as reflecting the interests of

economically dominant states and MNCs

C. The failure of structural adjustment

1. Required policy reforms disproportionately

hurt poor and most vulnerable

Neoliberalism as

Neoimperialism 2. Policies designed mainly to advance

interests of MNCs

3. Most studies, including those of IMF, show little or no positive effect of structural adjustment policies on economic growth or poverty reduction

D. Hypocrisy: IMF impose policies for development that were not followed by nations as they were developing

Conclusion

A. Good news: India and China (substantial

growth and poverty reduction)

B. Bad news: Sub-Saharan Africa

(cumulative total of obstacles to

development)