Contingent Keynesianism: the IMF’s model answer to the post-crash fiscal policy efficacy question in advanced economies

Abstract

Belying the International Monetary Fund’s (IMF’s) reputation as a bastion of neo-liberal policy orthodoxy, this article analyses important yet contingent transformations in IMF fiscal policy thinking which constituted a key intervention in international austerity debates. Applying only to advanced economies, and in the specific post-crash conditions, the Fund came to champion fiscal policy as a more potent and effective counter-cyclical tool. Analysis focuses on alterations to modeling assumptions and analytical techniques, beginning before the crash but accelerating after it, which intellectually bolstered this view. It finds the Fund’s rediscovery of some older (Keynesian) assumptions was both longer in germination and more enduring than some have recognized. It also charts the reconciliation of this contingent Keynesianism to ‘congenital’ IMF concerns for fiscal sustainability. It highlights the variety of economic insights, often with vastly differing policy implications, found within the Fund, and indeed within mainstream macroeconomics. It builds on work questioning the stability, consistency, and coherence of economic ideas suggested by the paradigm framework, and identifies limitations of a paradigm lens for understanding incremental IMF ideational change. It contributes to politics of economic ideas scholarship in highlighting the importance of economic method and modeling assumptions as sites of contestation within gradual but meaningful ideational change.

Keywords:

• IMF
• economic ideas
• global financial crisis
• austerity
• fiscal policy
• economic modeling
• Keynesianism
• neo-liberalism
• paradigm

Acknowledgments

The author would like to thank the RIPE editors and three anonymous referees for thorough and constructive critical engagement with the manuscript which helped refine the analysis and argument and the article’s central claims. He also gratefully acknowledges the support of the Leverhulme Trust for the research fellowship funding (RF-2012-340) entitled ‘It’s Mostly Fiscal—The IMF, Evolving Fiscal Policy Doctrine and The Crisis’ which enabled the research for this article to be undertaken. Ben Clift is grateful to the Department of Politics and International Studies at the University of Warwick for granting the study leave which enabled some of this research to be undertaken, and to Sophie Worrall for excellent research assistant work.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 For a discussion of the understandings of the economy underpinning Keynesian, New Keynesian and New Classical economics see Clift (2018a, pp. 65–74).

2 Interview with IMF Deputy Director, David Lipton, June 2013.

3 Interview with Fund Deputy Director David Lipton. June 2013

4 Interview with former Fiscal Affairs Department Director Carlo Cottarelli, June 2013

5 Interview with IMF Modeller in Chief Doug Laxton September 2013.

6 Interview with Senior IMF modeller Doug Laxton, September 2013.

7 Interviews with Senior Fund modellers and economists, June and September 2013

8 Endorsement of the view was a feature of numerous interviews with IMF economists, including Olivier Blanchard, David Lipton, and Paolo Mauro.

Additional information

Funding

Finally, he gratefully acknowledges the support of the Leverhulme Trust Major Research Fellowship (MRF-2017-063) which facilitated the final phase of completion of this manuscript.

Finally, he gratefully acknowledges the support of the Leverhulme Trust Major Research Fellowship (MRF-2017-063) which facilitated the final phase of completion of this manuscript.

Notes on contributors

Ben Clift

Ben Clift is Professor of Political Economy in the Department of Politics and International Studies at the University of Warwick. He currently holds a Leverhulme Major Research Fellowship for a project entitled ‘The OBR and the Politics of UK Growth amidst Brexit, Uncertainty and Austerity’. His research interests lie at the interface of comparative and international political economy. He is author of The IMF and the Politics of Austerity in the Wake of the Global Financial Crisis (Oxford University Press, 2018), Comparative Political Economy: States, Markets and Global Capitalism (Palgrave 2014), and French Socialism in a Global Era (Continuum 2003). He has published widely on political economy, French and comparative capitalisms, the IMF, the politics of economic ideas, economic patriotism, capital mobility and economic policy autonomy, the political economy of social democracy, and French and British politics in journals including The British Journal of Political Science, Journal of Common Market Studies, The Journal of European Public Policy, The Review of International Political Economy, New Political Economy, Party Politics, Political Studies, Parliamentary Affairs, Government and Opposition and British Journal of Politics and International Relations.