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Inventing Conditionality, Exploring Its Politics (1946-1958)


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.
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hal-04081478 , version 1 (25-04-2023)


  • HAL Id : hal-04081478 , version 1


Jérôme Sgard. Inventing Conditionality, Exploring Its Politics (1946-1958). Jérôme Sgard (Ed.). The Debt Crisis of the 1980s. Law and Political Economy, Edward Elgar Publishing, 19 p., inPress, 978 1 83910 362 9. ⟨hal-04081478⟩
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