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Abstract
Following the onset of the Asian Financial Crisis the world has witnessed a re-accommodation of the global financial system. In the particular case of middle-income countries they have disentangled themselves from the conditionality of the IMF and grown into more assertive actors in international forums, proposing new alternative mechanisms to become more financially independent and for the provision of development assistance. This article critically reviews the new reality by assessing the strategies deployed by developing countries to reduce the IMF’s influence, and explores the potential consequences of the rise of middle-income nations for Law and Development.
Acknowledgements
I would like to thank Elaine Newby for her valuable comments and editorial assistance as well as two anonymous referees who provided insightful comments, which greatly contributed to improving the quality of this article. I would also like to express my appreciation to Sarah Rogers and Jennifer Messieh, LLB students from the University of Wollongong Law School, for excellent research assistance.
Notes
1. See Trubek and Santos, “Introduction”; and Ohnesorge, “Law and Development Orthodoxies.”
2. Trubek and Santos, “Introduction.” The literature associated with Law and Development is extensive and is generally discussed following this three-moment approach, which basically captures what Ohnesorge calls ‘Law and Development orthodoxies’. Ohnesorge, “Law and Development Orthodoxies.” However, there is a valuable body of research that is not adequately reflected in this approach. See also note 17.
3. Weber, Economy and Society, 337.
4. However, Weber conceded that England was an exception: a country that had achieved development without a ‘rational legal system’.
5. Galanter, “The Modernization of Law,” 167.
6. See, for example, Seidman, “Law and Development,” 315.
7. Trubek, “Toward a Social Theory.”
8. Trubek and Galanter, “Scholars in Self-estrangement.”
9. North, Institutions.
10. Ibid., 54.
11. See, for example, World Bank, World Development Report.
12. Roaf et al., 25 Years of Transition.
13. See, for example, IMF, Summary Proceedings.
14. Antons, “Law and Development Thinking.”
15. ‘Best practice’ is an ambiguous term that was commonly used by the IFIs in the 1990s to encourage developing countries to adopt a set of ‘tested’ principles and regulations in legal areas such as banking law, corporation law, tax law, etc. For example, the Basel Committee on Banking Supervision, an international forum for cooperation on banking supervision, issued in 1997 a document entitled Core Principles for Effective Banking Supervision. According to this document, national authorities should incorporate these principles in their legal system in order to achieve ‘best supervisory practices’. The Basel Committee document provided the blueprint for banking reforms promoted by the IMF. Basel Committee on Banking Supervision, Core Principles.
16. Trubek has discussed the use of the rule of law during the second moment in great detail. Trubek, “The ‘Rule of Law’.”
17. Newton, “The Dialectics of Law,” 199. The first Commonwealth School described by Newton opposed the initial Law and Development movement, which was considered an instance of neo-colonialism. For examples of the Second School, see Peerenboon, China’s Long March; Antons and Gessner, Globalisation and Resistance; and Antons, Law and Development. Upham, who also has studied the link between law and development in East Asia, has questioned the existence of such a connection. Upham, “Speculations on Legal Informality.”
18. Sen, “What is the Role?”
19. IMF, Key Features.
20. For a recent work that discusses the current debate, see Trubek, Law and Development.
21. See, for example, Beattie, “Washington’s Warning Way.” The photo features former Indonesian president Suharto signing the 1998 IMF agreement, while the then IMF Managing Director, Michel Candessus, was standing over him.
22. Some governments used the argument that SBAs were not legal international agreements able to agree reforms with the IMF without consulting legislative bodies. Leckow, “The Stand-By Arrangement,” 38; and Garcia “Understanding IMF Stand-By Arrangements.”
23. See Williamson, “Latin American Reform,” 107.
24. Rapley, Understanding Development, 62.
25. See, for example, Stiglitz, Globalization and its Discontents; and Bello et al., Dark Victory.
26. International reserves figures, which include gold and current US dollars, are based on World Bank data available at World Bank, Data: Total Reserves, http://data.worldbank.org/indicator/FI.RES.TOTL.CD, accessed May 14, 2015.
27. Mexico agreed with the IMF on a Flexible Credit Line arrangement in April 2009 for SDR 31.528 billion. However, this was a precautionary measure taken by the authorities as a result of a sharp drop in GDP growth caused by the GFC. It has been extended four times, most recently in November 2014, but Mexico has not withdrawn money using it. Colombia completed a similar IMF arrangement in May 2010 for the amount of SDR 2.322 billion. Last renewed in June 2013, the credit facility has not been utilised.
28. See “Kirchner and Lula.”
29. See, for instance, the events of default in the following documents: Bolivarian Republic of Venezuela, Prospectus Offer to Exchange its US Dollar-denominated 10.75% Notes due 2013, registered under the Securities Act of 1933 (‘Exchange Notes’) for its Outstanding US-denominated 10.75% Notes due 2013, 2004, http://www.sec.gov/Archives/edgar/data/103198/000095013304000398/w93437b5e424b5.htm, accessed November 25, 2015; and Bolivarian Republic of Venezuela, Listing Memorandum 7.65% Bonds due 2025, 2005, http://www.proveo.org/bond-issues-under-chavez.pdf, accessed November 25, 2015.
30. IMF, Financial Statement 2005, Appendix VII, 157; and IMF, Financial Statement 2009, Appendix VI, 10.
31. See IMF, Committee to Study Sustainable Long-term Financing.
32. IMF, Total IMF Credit Outstanding. The IMF provides financial assistance to its middle-income members from resources in its General Reserve Account. In the case of low-income countries the IMF manages a trust (Poverty Reduction and Growth Trust – PRGT) that provides financial resources for low-income countries with financial problems.
33. See IMF, Committee to Study Sustainable Long-term Financing.
34. Burke, “IMF Income Model.”
35. Peter Doyle, a former IMF European Department senior economist, claimed that, although the IMF had identified well in advance the incubation of the GFC, it did not provide timely warnings to members. Blackden, “Debt Crisis.”
36. IMF, Total IMF Credit Outstanding.
37. IMF, IMF Quota and Governance.
38. The Articles of Agreement is the international treaty that governs the organisation’s management and operations.
39. The IMF quota of each state member is calculated using a complex formula that considers weighted average of GDP (50%), openness (30%), economic variability (15%), and international reserves (5%).
40. IMF, Acceptances of the Proposed Amendment. For an explanation of some of the USA’s reasons for being against the IMF reforms, see Nelson and Weiss, IMF Reforms.
41. Kirton, G20 Governance. See Preface for launch, chap. 1 for early days (ie 1999 to 2008 summary) and chap. 3, Part II, where the lack of standardised criteria for inclusion is revealed, citing Wade. For the initial idea as a bypass of the IMF, see Brown, Beyond the Crash.
42. See Cammack, “The G20, the Crisis.” See also Kirton, G20 Governance, chap. 3.
43. Australian Department of Foreign Affairs and Trade, The G20. http://www.dfat.gov.au/trade/g20/index.html, accessed November 20, 2012.
44. ACTA is a recent example. This plurilateral treaty was negotiated and signed by like-minded countries to strengthen the international legal framework for the speedy enforcement of intellectual property rights, avoiding debate that slows negotiations in forums such as the World Intellectual Property Organisation (WIPO) and the World Trade Organisation (WTO). Antons and Garcia, “Initiatives on IP Enforcement.”
45. China also opposed the Japanese idea of creating an Asian monetary fund. Ciorciari, “Chiang Mai Initiative Multilateralization.”
46. Sussangkarn, “Chiang Mai Initiative Multilateralization.”
47. Bangko Sentral ng Pilipinas, Chiang Mai Initiative Multilateralization.
48. Gómez González, “Banco del Sur,” 46.
49. Rosales, “The Banco del Sur,” 32.
50. See, for example, Webber and Mander, “Argentina backs Banco del Sur Project”; and Artana, “Why Banco del Sur.”
51. Carroll, “Nobel Economist.”
52. BRICS is an informal group born from a Summit celebrated in Ekaterinburg, Russia, in 2009. The group organises annual summits.
53. See World Bank, Global Monitoring Report 2012, 137–159 ; Dehart, “Remodelling the Global Development Landscape”; and Kim and Lightfoot, “Does ‘DAC-ability’ really Matter?”
54. World Bank, Global Monitoring Report, 138. While most of the attention on development cooperation by emerging economies focuses on BRICS countries, there are other developing nations in Latin America, Eastern Europe and the Middle East that provide development assistance. See Zimmermann and Smith, “More Actors, More Money.”
55. DAC monitors and shares information on the architecture of official development assistance provided by state members to help ensure its transparency and effectiveness. DAC has 23 member countries and the European Union; these include Canada, France, Germany, the UK, South Korea, the USA and Japan. See more information at DCD-DAC http://www.oecd.org/dac/.
56. State Council of the People’s Republic of China, China’s Foreign Aid. See also Sanderson and Forsythe, China’s Superbank.
57. See also Dehart, “Remodelling the Global Development Landscape.”
58. See Wolf et al., China’s Foreign Aid, 18. The authors explain the difficulties they faced in defining Chinese foreign aid and the inadequacy of the OECD term ‘official development assistance’. Chinese foreign aid includes arrangements that the OECD calls ‘government-sponsored investment activities’.
59. Kitano and Harada, “Estimating China’s Foreign Aid.”
60. Kilby, “The Changing Development Landscape,” 1004. BRICSAM is generally used to refer to the emerging economies of the BRICS countries plus Mexico. BRICSAM countries often act as an ad hoc group and present a common position in international forums such as the United Nations.
61. OECD , “Busan ‘Partnership for Effective Development Cooperation’”, http://www.oecd.org/dac/effectiveness/49650173.pdf, accessed 25 November 25, 2015
62. However, according to an article published in August 2012, other emerging economies such as Nigeria and Indonesia appointed officials to the panel. Tran, “Nigerian and Indonesian Officials.”
63. See, for example, Trubek et al., Law and the New Developmental State. Another example is a recent publication on law and economics in China by Kennedy and Stiglitz, where the collaborators address questions on law and economic development in relation to the particular characteristics of the Chinese phenomenon. Kennedy and Stiglitz, Law and Economics.
64. See, for example, Tamanaha, “The Primacy of Society”; and Vilhena Vieira, “Inequality and the Subversion.”