August 2005

Eric Helleiner
Trent University
Canada

Dear Julie and Walden,

I've finally had a chance to read the paper. It is excellent. It captures the shift in the IMF's position very effectively. I have only a few minor comments:

-I think the argument about the conflict with the US elite is particularly important in explaining the IMF's diminished standing. Many of the key Bush policymakers are very sympathetic to the arguments of the Meltzer Commission that was appointed after the Asian crisis by Congress as a condition of Republicans approving the quota increase at the time. Its report calls for a dramatic scale back of IMF activities. Key US Treasury figures in the Bush admin such as Taylor (who just stepped down) were even quoted at the height of the Asian crisis in 1998 (before they assumed power) calling for what you end the paper on, i.e. a gradual decommissioning of the IMF. Their influence since 2000, and that of Republicans in Congress, have constrained the IMF from playing the kind of role it played in the 1990s.

-I think you could make a little more of the importance of the Argentine crisis in reinforcing the diminished standing of the IMF. During the 1990s, the IMF touted Argentina as the model for neoliberal reforms. Its crisis undermined the IMF's legitimacy in this respect. The IMF itself was even forced to acknowledge its errors in lending policy towards the country after the crisis. The Argentine crisis was also interesting, I think, because the Bush administration actively undermined the IMF's bargaining power vis-a-vis Argentina at several key moments in the 2003-2005 debt rescheduling negotiations and supported Kirchner's tough bargaining stance vis-a-vis the IMF and private creditors. It did this partly in order to "bail-in" creditors and signal a break from the IMF bailout role of the 1990s. The US stance in this period provoked strong opposition from some other G-7 countries, but the Bush officials stuck to their position. I'll attach a paper I've just published on this !
topic to this message. (available at: http://www.socioeco.org/forums/d_read/intreg/)

-The paper mentions that Taylor's promotion of "collective action clauses" in new bond issues represented a continuation of the status quo. I see the point you are making, but this might overstate things a little since private international financiers had strongly opposed CACs before this time and seem to have only agreed to this reform because they saw it as less bad than Krueger's SDRM proposal. (Incidently, one of the key reasons that the SDRM proposal provoked opposition in the US was that it would give the IMF more power.)

-Finally, I like your suggestions about the need for regional organizations to play a more important role. It raises the question of whether these organizations will also come to be dominated by regional powers in the same way that the IMF is dominated by the US at the global level. This issue arose in 1997-98 with the AMF proposal when Chinese officials initially signalled their wariness of Japanese geopolitical intentions. So, it might be worth stressing that regional financial institutions must find a way to try to address this issue more effectively.

I hope these very brief comments are helpful. I really enjoyed reading the paper - it is very well done.