Jamie Martin: The Rotten Roots of the IMF and World Bank

The International Monetary Fund and the World Bank have long been criticized for the onerous influence they exert over the domestic policies of many states. Especially since the 1990s, they have been excoriated for imposing policies—such as structural adjustment reforms and austerity measures—on client states that deepen inequality in the Global South, which, in turn, benefits the powerful countries of the Global North. How do we understand the structural origins of this global imbalance? One fairly standard view is to place the blame solely on neoliberalism. This perspective argues that the IMF and the World Bank—institutions that date back to World War II—at one time allowed for a more equitable system of economic governance under the Bretton Woods system of global monetary management, which collapsed in the early 1970s. In its place, the argument goes, free market economic policies began to dominate. Cemented by the elections of Ronald Reagan and Margaret Thatcher, these institutions moved in a decidedly neoliberal direction throughout the 1980s. By the 1990s, the Democratic Party had made its peace with this ideological revolution. Under Bill Clinton, the IMF and the World Bank furthered their embrace of economic shock therapies. In this way, the turn to neoliberalism is blamed for the Third World Debt Crisis, the Asian Financial Crisis of 1997–98, and the pillaging of Russia and the former Eastern Bloc countries after the fall of the Soviet Union.

Yet in his new book, The Meddlers: Sovereignty, Empire, and the Birth of Global Governance, Jamie Martin challenges this standard narrative. Martin, soon to be an assistant professor of history and social studies at Harvard University, argues that if we truly want to understand the disastrous consequences of the IMF’s and the World Bank’s interference in the domestic policies of sovereign states, it is necessary to understand the first international institutions of economic governance, such as the League of Nations and the Bank for International Settlement, which emerged in the wake of World War I. These institutions gave civil servants, bankers, and colonial authorities from Europe and the United States the extraordinary power to enforce austerity, oversee development programs, and regulate commodity prices. Many of them had civilizational, paternalistic, and white supremacist assumptions, which they used to justify meddling in the economies of other states. Martin argues that these institutions were, in fact, repackaging 19th-century practices of financial imperialism in a new, more sanitized form, given the decline of the European empires and the rising claims to self-determination. In making this analysis, Martin offers an alternative perspective on the crisis of global economic governance today, showing how the interventionist powers of the IMF and the World Bank have all along been rooted in empire and colonialism.

I spoke with Martin about his thinking on the relationship between empire and contemporary global economic governance, why the Bretton Woods system is misinterpreted, his definition of neoliberalism, and what he sees as an attractive economic alternative to “the meddlers.” This conversation has been edited for length and clarity.

—Daniel Steinmetz-Jenkins

DANIEL STEINMETZ-JENKINS: It is typical for critics to consider the economic policies of the International Monetary Fund, the World Bank, and the World Trade Organization through the prism of globalization. Most infamously during the 1990s, these institutions wreaked havoc on states in the Global South and the former Eastern Bloc countries through enforced austerity, structural adjustment reforms, and other economic shock therapies. Such policies were routinely criticized for violating the sovereignty of these states. Your book rejects this narrative, because you don’t see such policies as the consequence of the so-called neoliberal revolution of the 1970s. Why is this the case?

JAMIE MARTIN: The kind of far-reaching interventionist powers of international economic institutions that we associate with the Washington Consensus—powers to enforce austerity in borrowing states and demand they enact extensive liberalizing reforms—did not emerge out of the blue in the late 20th century. Instead, they originated many decades before, at the end of the First World War, when powerful states and private actors forged new partnerships to protect their interests at a moment of enormous global economic and political turmoil.

Now, it’s true that during the 1980s and ’90s, the IMF dramatically expanded its reach by making assistance conditional on borrowers committing to extensive market reforms. This took place during three successive periods of global upheaval following the end of the Bretton Woods system: the Third World Debt Crisis, the collapse of the Soviet Union, and the Asian Financial Crisis of 1997–98. During each of these periods, the IMF exercised enormous pressure on states in receipt of loans—from Argentina to Kazakhstan to Thailand—demanding they commit to austerity and major transformations of their domestic economies. Failing to agree to these terms not only jeopardized the IMF’s assistance; it also jeopardized access to other sources of foreign capital, since the existence of a prior arrangement with the IMF was used by other lenders to determine a country’s creditworthiness. It is this IMF that became notorious for intrusively meddling in the domestic affairs of sovereign states for the sake of globalizing a hyper-liberalized form of capitalism under US dominance.