Between Sovereignty and the IMF
This piece was originally published in Commonweal.
Across the world, countries in dire financial straits are giving up economic sovereignty in exchange for emergency loans from the International Monetary Fund (IMF). Sri Lanka, for example, reached a deal with the IMF to restore economic stability after it ran out of fuel and other essentials earlier this year due to mismanagement by former president Gotabaya Rajapaksa. As Pakistan endures an economic crunch and recovers from floods that covered up to a third of the country, it is receiving a $1.1 billion bailout from the IMF to help it stave off default. Some countries have even reached deals with the IMF in anticipation of financial crises that have not yet arrived. In August, the IMF approved an $18.5 billion precautionary flexible credit line to Chile over concerns about a global slowdown and sinking commodity prices. Egypt has applied for a new loan from the IMF to deal with drastic increases in the price of food.
All these bailouts require the involved countries to adopt policies preferred by the IMF in exchange for funds, even if these policies may have negative consequences for their most economically vulnerable citizens. For example, critics of Egypt’s relationship with the IMF have noted that the requirements of previous loans actually increased the cost of living for ordinary Egyptians.
Jaime Martin’s new book, The Meddlers: Sovereignty, Empire, and the Birth of Global Economic Governance, arrives at a critical moment, as many countries are asking the IMF and other international institutions to help them address economic and environmental crises. An economic historian at Harvard University, Martin offers a helpful economic and social analysis of the history of international intervention in sovereign economies. He traces the origins of many of today’s debates on economic sovereignty to institutional design choices made during and after the world wars. Martin covers the rise of institutions from the Bank of International Settlements (created to facilitate German war reparations after World War I), to the League of Nations (the interwar precursor to the United Nations), to the IMF’s founding as part of the UN in 1945.
Tags: Innovation governance