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ABSTRACT
This article reassesses the neo-liberal shift within British economic policy-making and the international political economy, focusing especially the role of the International Monetary Fund (IMF) in the 1960s. The IMF has always used the conditions attached to its lending to try and shape borrower's policy; here we explore the evolving content of that conditionality and the economic ideas underpinning it. Using recently released IMF records, as well as other archives, we argue that the negotiations between the IMF and the UK Government in the 1960s can be seen as part of the Fund's drive towards a crucial change from discretionary to rules-based approaches to macroeconomic policy making. This drive took place within a struggle over a specific policy instrument, domestic credit expansion (DCE), at that time regarded as an important measure of monetary policy. The article locates the IMF advocacy of DCE within an attempt by the Fund to constrain discretionary policy-making through increasingly specific and binding rules. In response, UK Government officials began to pre-empt and even deceive the Fund to avoid being tied down. Our analysis unpacks which neo-liberal economic ideas the Fund embraced, noting its rejection of monetarism. In the period charted here (1965–69), the rules-based regime remained compatible with Keynesianism. However, the UK Government's grudging acceptance of this approach provided a crucial condition of possibility for a significant qualitative shift in macroeconomic policy-making when rules later became infused with an increasingly neo-liberal character.
Notes
1. Recent historical work has emphasized the enhanced bargaining power the international status of sterling gave British governments in financial discussions with the IMF (and the United States), contrary to an older literature emphasizing the weakness of the British position (Schenk, Citation2010: 204–05, 414–30).
2. IMF Archives, Staff Memoranda (hereafter SM) 68/128, ‘Fund policy with respect to the use of its resources’, 23 July 1968.
3. TNA: PRO 326/978 Note of a meeting with the Chancellor of the Exchequer 25 February 1969, where it was argued that DCE had to be made ‘intellectually defensible’ because of ‘the tendency by Keynesian economists to ridicule this type of economic indicator and control’.
4. IMF Archives, SM 68/128, ‘Fund policy with respect to the use of its resources’, 23 July 1968.
5. TNA: PRO T236/5740 Note to D. Ricketts 8 May 1959.
6. TNA: PRO T326/728 ‘Monetary seminar (IMF): terms of reference and arrangements for the seminar’.
7. TNA: PRO T326/729 ‘Monetary seminar (IMF): note of proceedings’, 16 Oct 1968, pp. 14–15, 16; ibid., p. 16, and proceedings 18 October 1968.
8. TNA: PRO T326/978 A. Neale ‘IMF Standby and overall credit ceiling’, 12 February 1969, p. 2.
9. TNA: PRO T311/276 ‘Mins of meeting 7 May 1964: redraft of statement of Intent’; T311/27 ‘IMF Standby: notes for Sir Eric Roll 7 July 1964’ IMF Exec Minutes 27 July 1964.
10. IMF Archives EBS/65/59. Letter of Intent from Callaghan to Schweitzer, 27 April 1965.
11. IMF Archives SM/65/37, p. 42.
12. TNA: PRO PREM 13/3151 Draft Letter from Chancellor to Schweitzer, 21 April 1965.
13. TNA: PRO T320/70 Hubback to Goldman ‘IMF consultations’, 8 April 1965.
14. IMF Archives EBS/65/74, pp. 2–3; PRO T312/1392 D. Hubback ‘IMF visit’, 22 February 1965.
15. IMF Archives EBM/65/25, pp. 23–4; EBM/65/26; also TNA: PRO PREM 13/3151 P. Dean to FO ‘IMF UK drawing’, 29 April 1965.
16. TNA: PRO T230/800 D. Hubback, note for record, IMF Consultations, 7 December 1965; ibid., Dean to FO, 6 January 1966.
17. TNA: PRO T230/801 ‘IMF Consultations: Mr Polak's closing remarks’, 18 May 1966.
18. TNA: PRO T230/800 Schweitzer to Chancellor, 14 July 1965; and Hubback to Walker ‘IMF Informal Consultations’, 8 July 1965; also PRO T230/800 D. Hubback, note for record, IMF Consultations, 7 December 1965; ibid., Dean to FO, 6 January 1966.
19. Ibid., P. Brown to Mr Workman ‘IMF visit in December’, 25 November 1965.
20. Ibid.
21. TNA: PRO T230/800 Workman to Hubback ‘IMF Visit: balance of payments’, 26 November 1965.
22. TNA: PRO T230/800 Brown to Workman ‘IMF Visit in December’, 25 November 1965; T230/801 Workman ‘IMF Consultations: balance of payments’, 4 May 1966.
23. TNA: PRO T230/720 I. Bancroft, ‘Note for record of IMF Consultations’, 13 May 1966.
24. TNA: PRO T320/720 Workman ‘IMF Consultations: balance of payments’, 4 May 1966.
25. IMF, UK Country files, 1760, Box # 32, File # 5, David Finch to the Managing Director ‘United Kingdom Consultation under stand-by arrangement’, 16 July 1968.
26. TNA: PRO T331/121 IMF: UK consultations, 21 and 22 May 22 1968; ibid., 23 May 1968, p. 5.
27. TNA: PRO T326/977 ‘DCE: discussions with IMF staff mission’, 23 April 1969; ibid., ‘IMF standby’, 3 May 1969, p. 1.
28. TNA: PRO PREM 13/8151 A. Graham ‘Monetary Policy and the IMF’, 30 April 1969.
29. TNA: PRO PREM13/3151 Note from Andrew Graham to Mr Andrews & Mr Halls on ‘Monetary Policy and the IMF’, 30 April 1969.
30. Ibid., ‘Personal from Chancellor to PM’, 9 April 1969.
31. TNA: PRO T326/978 Mr. Figgures ‘Another IMF Standby’, 31 January 1969.
32. TNA: PRO PREM 13/3151 Telegram ‘Personal from Chancellor to PM’, 29 April 1969.
33. TNA: PRO T326/978 R. Armstrong ‘IMF credit and overall credit ceiling’, 7 February 1969.
34. TNA: PRO T326/729 Monetary seminar (IMF) proceedings, 18 October 1968, pp. 19–23.
35. Ibid., pp. 20, 21. IMF Archives Exec Meetings 17 January 1969.
36. Ibid., Jenkins to PM 29 April 1969; T171/845 D. Dowler to E. Figgures, 8 April 1969.
37. Ibid., Telegram ‘Personal from Chancellor to PM’, 29 April 1969.
38. TNA: PRO PREM 13/3151 ‘Memorandum of Understanding’, 22 May 1969. IMF Archive Country Files: United Kingdom, # 1760, Box 32, ‘Memorandum of Understanding’, 3 May 1969.
39. TNA: PRO T230/2950 F. Cassell to Mr Downey, ‘Possible contents of a Letter of Intent’, 2 January 1974.