Is there more room to negotiate with the IMF on fiscal policy?

This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.During the 1980s the IMF emerged as a global “bad cop,” demanding harsh austerity measures in countries faced with debt problems. Has the Great Recession changed all that? Is there more room to negotiate with the Fund on fiscal policy? The answer is yes. If we take a close look at what the IMF researchers say and what its most influential official reports proclaim, then we can see that there has been a more “Keynesian” turn at the Fund. This means that today one can find arguments for less austerity, more growth measures and a fairer social distribution of the burden of fiscal sustainability. The IMF has experience a major thaw of its fiscal policy doctrine and well‐informed member states can use this to their advantage. These changes do not amount to a paradigm shift, a la Paul Krugman’s ideas. Yet crisis‐ridden countries that are keen to avoid punishing austerity packages can exploit this doctrinal shift by exploring the policy implications of the IMF’s own official fiscal doctrine and staff research. They can cut less spending, shelter the most disadvantaged, tax more at the top of income distribution and think twice before rushing into a fast austerity package. This much is clear in all of the Fund’s World Economic Outlooks and Global Fiscal Monitors published between 2009 and 2013 with regard to four themes: the main goals of fiscal policy, the basic options for countries with fiscal/without fiscal space, the pace of fiscal consolidation, and the composition of fiscal stimulus and consolidation

From cocktail to dependence: revisiting the foundations of dependent market economies

This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.Recent contributions to the comparative political economy of East European capitalisms have found that a distinctive variety of capitalism emerged in some new EU member states. The new variety has been dubbed “dependent market economy” (DME). This paper makes several contributions to this literature. First, it marshals evidence to show that this institutional variety now includes the political economy of Romania, a case previously excluded from it. More importantly, this analysis also finds that earlier scholarship on dependent capitalism has failed to capture crucial mechanisms of dependence created by transnationalized finance. Third, the paper suggests that some of the arguments made in the existing scholarship on the interests of foreign capital with regard to domestic innovation and labor training need to be qualified. Finally, by showing reflexivity towards select critiques of the dependent market economy framework, the analysis proposes by this paper is a self-limited attempt to bridge the differences between the varieties of capitalism and Polanyian analyses of capitalist diversity in semi- peripheral middle-income states

Changing the textbooks? Crisis and aperture at the IMF’s teaching institutes

This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.Using insights from the sociology of knowledge and findings from preliminary empirical probes into IMF research since the Great Recession, this paper aims to propose a new analytical framework for the study of the teaching activities of the IMF’s teaching infrastructure: the Institute in Washington DC and in two regional centers: the Brazil-based Joint Regional Training Center for Latin America (BTC) and the Joint Vienna Institute (JVI). How have these institutes negotiated the “productive incoherence” that marks the Fund’s new stances on fiscal and financial economics? How have the students in these institutes internalized the conflicts between the research of IMF staff on these policy areas and the Fund’s official positions in a time of uncertainty and aperture? If indeed IMF teaching is reflexive, has the BTC teaching incorporated more dissenting views than the IMF Institute or the JVI, given the more systematic embrace of heterodox ideas by the policy mainstream of Brazil, BTC’s co-sponsor? To address these questions this working paper suggests a few recalibrations of the existing literature on the diffusion of economic ideas via IFIs. To this end, it extracts several new analytical propositions from the sociology of knowledge

Neoliberalism in Translation: Economic Ideas and Reforms in Spain and Romania

Most political economists studying the global spread of neoliberalism have seen it as a form of policy diffusion. Recently constructivist political economists have pointed to the important role of the spread of neoliberal economic ideas in this process. However, they have not provided a theoretical framework for understanding the mechanisms through which neoliberal ideas travel across national policy spheres. To address this gap, this dissertation draws on the claim made by some sociologists that ideas do not stay the same as they travel from one social setting to another, but are "translated" by idea entrepreneurs called "translators". More specifically, this dissertation aims to specify what shapes the result of translation, the pace at which it occurs, and the means through which it can shape policy. In doing this, it makes three contributions to the study of political economy. First, it argues that the content of adopted neoliberal ideas is shaped by the context-specific choices made by translators who employ "framing," "grafting" and "editing" as translation devices. Secondly, the pace of translation is shaped by the density of transnational ties between domestic policy stakeholders and external advocates of neoliberalism. Finally, translated neoliberal ideas are likely to serve as templates for economic policies when they are shared by an intellectually coherent policy team inside a cabinet that can effectively control economic policy decisions. To make thesearguments, the dissertation draws on a comparative historical analysis of the spread of neoliberalism in two "crucial cases": postauthoritarian Spain and Romania

The state, inequality and the politics of economic ideas: three blind spots in shadow banking

Despite systemic risks, the international regulatory regime seems to be returning to a benign view of financial innovation, write Cornel Ban and Daniela Gabo

Political economy and the ghosts of the past: revisiting the Spanish and Romanian transitions to democracy

Juan Linz and Alfred Stepan’s opus on democratic transition and consolidation put Spain and Romania at the extreme ends of these processes and paid little attention to the domestic and external economic constraints on the transition process. This paper interrogates these claims. It shows that in retrospect Spain looks a lot less exemplary and Romania a lot less hopeless than this iconic contribution suggested at the time. Moreover, while external economic shocks and local attempts to buffer them through social compensation shaped both transitions, Romanian governments faced balance of payments crises and international policy conditionality constraints, while their Spanish counterparts did not. This difference invites a greater appreciation of the role of political economy analyses when comparing the policy options of political elites ruling in times of democratic transition and consolidation

Emergency Keynesianism 2.0: The political economy of fiscal policy in Europe during the Corona Crisis

Fiscal policy is the sum of decisions on taxation and spending that one takes in an economy, particularly in times of crisis. As such, it is of existential importance in the life of a society. Known for its recent waves of spending cuts and tax increases (austerity) during recessions (Blyth, 2013), 2020 Europe has had a more expansionary fiscal policy than ever before. How do we make sense of this shift? To answer this question, let us draw on select insights from three political economy literatures on fiscal crisis management. The first is the literature on learning. For its proponents, changes in fiscal policy are powered by evidence-based, yet politically mediated cognitive updating in the corridors of power. Plainly put, policymakers are keen students of what changes in their environment. This literature has showed that a great deal of learning took place in the EU since 2010 in particular (Schmidt, 2020; Kahkhaji and Radaelli, 2017; Dunlop and Radaelli, 2019). Its main implication for fiscal policy under corona is that between 2010 and 2015 the EU leaders learned about the limits of austerity and the virtues of more spending and tax cuts in a recession. Consequently, one would expect that when a deep recession arrives again (and it did in the spring of 2020), they would not be tempted to do a rerun of the self-defeating policies of the 2010-2012 period. As Keynes put it, “when the facts change, I change my mind.

The politics of financial regulation expertise: international financial organizations and expert networks

This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.Who controls global policy debates on shadow banking regulation? By looking at the policy recommendations of the Bank of International Settlements, the International Monetary Fund and the Financial Stability Board, we show how experts tied to these institutions secured control over how shadow banking is treated. In so doing, these technocrats reinforced each other’s expertise and excluded some potential competitors (legal scholars), coopted others (select Fed and elite academic economists). The findings have important implications for studying the relationship between IOs technocrats and experts from other professional fields

Banking on Bonds: The New Links Between States and Markets*

Abstract This article examines a neglected structural transformation in European finance: the growing importance of government debt as collateral for Europe's repo markets, where banks borrow cash against collateral. Seduced by the promises of repo market-driven financial integration, the EU institutions and Member States encouraged private finance to generate its own architecture for the European repo market in the early years of the euro, sidelining known problems about systemic fragilities. These fragilities materialized after Lehman Brothers' collapse and were exacerbated by the ECB's collateral policies. The European sovereign debt crisis shows that governments, just like private asset issuers, can rapidly become vulnerable to repo pro-cyclicality and collateral crises

A perfect storm : COVID-19 and the reorganisation of the German meat industry

First published online: 13 May 2022An advocacy coalition of trade unions, churches and NGOs had been trying for a long time to mobilise domestic media and politicians in order to re-regulate the German meat industry. The meat industry’s low-cost business model, using employee posting and subcontracting on a massive scale, has led to extreme forms of unsafe working and poor living conditions for large numbers of Central and Eastern European workers. But it is only in the wake of the COVID-19 pandemic that the German government decided to ban subcontracting, posting and temporary work in this industry. Why did COVID-19 make a difference? In an industry in which the livelihoods of local communities in Germany’s pig belt and in deprived rural parts of Romania have become structurally dependent on subcontracting, institutional change would not have happened without the pre-existing mobilisation of the above-mentioned advocacy coalition. But COVID-19 created a ‘perfect storm’ that empowered this coalition by helping reframe the meat industry issue away from a ‘narrow’ employment regulation problem into a ‘broader’ public health threat. Indeed, after becoming a virus hotspot, the meat industry was no longer just a threat to the livelihoods of its own workers, but to those of the wider local community