Legitimacy Gaps in the World Economy: Explaining the Sources of the IMF's Legitimacy Crisis

Since the Asian financial crisis of 1997-1998, the International Monetary Fund (the Fund) has been embroiled in an international crisis of legitimacy. Assertions of a crisis are premised on the notions that the Fund's voting system is unfair, that the Fund enforces homogeneous policies onto borrowing member states and that loan programmes tend to fail. Seen this way, poor institutional and policy design has led to a loss of legitimacy. But institutionalised inequalities or policy failure is not in itself sufficient to constitute an international crisis of legitimacy. This article provides a conceptually-driven discussion of the sources of the Fund's international crisis of legitimacy by investigating how its formal 'foreground' institutional relations with its member states have become strained, and how informal 'background' political and economic relationships are expanding in a way that the Fund will find difficult to re-legitimate. The difference between the Fund's claims to legitimacy and how its member states, especially borrowers, act has led to the creation of a 'legitimacy gap' that is difficult to close. However, identifying the sources of the Fund's international crisis of legitimacy allows us to explore what avenues are available to resolve the crisis

Legitimacy Gaps and Everyday Institutional Change in Interwar British Economy

Who drives domestic institutional change in the face of international economic crisis? For rationalists the answer is powerful self-interested actors who struggle for material gains during an exogenously generated crisis. For economic constructivists it is ideational entrepreneurs who use ideas as weapons to establish paths for institutional change during crisis-driven uncertainty. Both approaches are elite-centric and conceive legitimacy as established by command or proclamation. This article establishes why domestic institutional change in response to international economic constraints must be legitimated by non-elites and how their everyday actions alter policy paths established in crisis. This is illustrated by re-examining a case frequently associated with punctuated equilibrium theories of crisis and institutional change: interwar Britain. In contrast to conventional explanations, I argue that the "legitimacy gap" between elite and broader public understandings about how the economy should work informed institutional experimentation during the 1920s and 1930s and fertilized the "Keynesian Revolution" of the 1940s

Resolving the International Monetary Fund’s Legitimacy Crisis

Since the Asian financial crisis of 1997-1998 the International Monetary Fund (the Fund) has been embroiled in an international crisis of legitimacy. Assertions of a crisis are premised on the notions that the Fund’s voting system is unfair, and that the Fund enforces homogenous policies onto borrowing member states and that loan programs tend to fail. Seen this way, poor institutional and policy design has led to a loss of legitimacy. But institutionalised inequalities or policy failure is not in itself sufficient to constitute an international crisis of legitimacy. This article provides a conceptually-driven discussion of the sources of the Fund’s international crisis of legitimacy by investigating how its formal "foreground" institutional relations with its member states have become strained, and how informal "background" political and economic relationships are expanding in a way that the Fund will find difficult to re-legitimate. The difference between the Fund's claims to legitimacy and how its member states, especially borrowers, act has led to the creation of a "legitimacy gap" that is difficult to close. However, identifying the sources of the Fund's international crisis of legitimacy allows us to explore what avenues are available to resolve the crisis

Policy Change in the Bank for International Settlements

The Bank for International Settlements (BIS) is the premiere international institution for the regulation of the world’s financial system. Originally established to handle German reparations payments, the BIS’s contemporary role is to provide global standards for prudential bank regulation and to facilitate information sharing among a range of state and non-state actors. While privately incorporated and underwritten by its member central banks, the BIS is fundamentally a service provider with quasi-non-governmental organization, ‘quango’, status. This paper traces the evolution of this unique international quango, stressing the development of the Basle Accords of 1988 and 2004, and how the BIS uses informal and formal networks of elite policymakers to create a normative consensus that compensates for its lack of formal enforcement mechanisms

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