Professor Ben Clift (Department of Politics and International Studies, University of Warwick)
This paper explores the evolution of economic ideas within the IMF since the crash and the Great Recession, drawing on research contained in my new book, The IMF and the Politics of Austerity in the Wake of the Global Financial Crisis (Oxford University Press, 2018). Its starting point is that economic orthodoxy is historically contingent. Those who can make authoritative knowledge claims, such as the Fund, enjoy a privileged position within the intersubjective process of constructing economic rectitude. Focusing specifically on policy advice to and surveillance of advanced economies, this research analyses how the Fund uses its authoritative voice to fix meanings attached to appropriate post-crash fiscal policy economic policy. The analysis reveals the malleability of conventional wisdoms about economic policy, and the processes of their social construction.
The IMF has long been in the business of developing and corroborating a prescriptive discourse regarding appropriate (and more importantly inappropriate) economic policy. Which economic ideas are drawn on, and how, to inform and underpin economic policy have important implications for macroeconomic policy space. The extraordinary turbulence within the world economy during and after the crash led to unprecedented macroeconomic policy responses, and the Fund played an important role on coordinating and legitimising these novel policy initiatives. It then went on to advocate more policy activism as the Great Recession drew on. This reveals a crucial but under-explored connection between Fund economic ideas and room to manoeuvre for advanced economy governments. The Fund urges advanced economy governments to ensure that the burdens of adjustment and benefits of economic recovery are distributed equitably, to target spending, transfers and automatic stabilisers on lower earners with a higher propensity to spend, and those with fiscal space should ‘backload’ fiscal consolidation. Furthermore, governments should adjust macroeconomic policy settings to further boost demand if growth continues to disappoint. Aggregated together, these policy stances entail an endorsement of activist, redistributive counter-cyclical fiscal policy which contrasts starkly with the IMF’s reputation for austerity.
Another aim of the ‘politics of economic ideas’ approach taken in the paper is to explore how economic ideas, even when espoused by technocratic and self-avowedly ‘scientific’ institutions like the IMF, are always rooted in understandings of the principles of political economy – normatively-informed views of how the economy and policy work. It comes down taking a position on a spectrum of views about how far the market, left to its own devices, will likely deliver the most efficient outcomes, and to what extent (and under what conditions) public power should intervene to improve the growth and economic stability. In assessing fiscal policy’s efficacy, reputable arguments backed by respected methodological techniques can be mounted on both sides of the argument, such that no ultimate ’scientific’ judgement of fiscal policy effectiveness is possible. Therefore, economic assessments are built upon underlying views on the desirability of public spending and state intervention playing a major role in the market economy. It is, broadly speaking, the same ideological debate which pitched Keynes against neo-classical orthodoxy in the 1930s. All of which is uncomfortable territory for a Fund keen to retain a non-political character removed from such ideological considerations, and to assert its intellectual authority as a source of scientific, technocratic economic policy wisdom.
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