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Inventing Conditionality, Exploring Its Politics (1946-1958)

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  • Jérôme Sgard

    (CERI - Centre de recherches internationales (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

The conflict between Keynes and White, in the run-up to the 1944 Bretton Woods conference, left the IMF with a substantial capital, though without a rule-book on how to lend. The literature then insists on the introduction of the Stand-By Arrangement (1953), which remains till today the Fund's workhorse lending vehicle. Yet, the literature ignores the second step of the re-invention: policy conditionality, hence the capacity for the IMF to suspend lending when countries diverge from their pre-agreed economic objectives. This book chapter analyzes this brake-through, in the case of a policy loans to Paraguay and Bolivia, in 1956-1958. It then shows how this innovation triggered within a few years: 1/ a redefinition of the IMF as a crisis manager, in an entirely novel relation to borrowing countries; 2/ a full realignment of the relationship between the staff, the management and the key member-states, primarily the US; 3/ the adoption of a new economic framework, known as the monetary approach to the balance of payment; 4/ in parallel, the exploration of the legal and political consequences of defining the Stand-By as a non-contractual transaction, adequate to a relation to self-standing sovereign states.

Suggested Citation

  • Jérôme Sgard, 2023. "Inventing Conditionality, Exploring Its Politics (1946-1958)," SciencePo Working papers Main hal-04081478, HAL.
  • Handle: RePEc:hal:spmain:hal-04081478
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-04081478
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    Keywords

    IMF; conditionality; debt crisis;
    All these keywords.

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