Global Governance and Financial Crises

Michel Aglietta

The International Monetary Fund (IMF), with her twin rival sister the World Bank, carry on the legacy of the Bretton Woods system, although that defunct monetary order is far distant from present international arrangements. Such persistence in the institutional structure, amidst a sea change in economic conditions over fifty-five years or so, teaches a lot on how a non-sovereign institution impinges upon international relations.

An excessive but popular opinion in explaining the Fund's paramount influence over international monetary matters is sheer hegemony. The IMF is an institution ruled by an intergovernmental council, where crucial decisions are taken by weighted votes and qualified majorities. Because US power has been overriding throughout the existence of the IMF, US values and priorities have been given universal acceptance amongst an increasing membership. There is truth not to be denied in this argument. When the US Treasury took the lead to design a monetary order for the postwar world, it was careful to secure an American predominance in the institutional structure. While aiming at restoring the free flow of American goods and capital as soon as possible, the Treasury wanted also to curb the strength of Wall Street which had consistently opposed New Deal reforms in the 1930s. Therefore the IMF was conceived as an institution to promote collective action in a government-run monetary system under the leadership of the US government.

But the gist of the Bretton Woods monetary order was destroyed by sweeping changes brought about by the surge in capital mobility that the US government had intended to provide with a friendly climate. From the early 1970s onwards, the international monetary system (IMS) has been altered decisively in becoming market-led. The metamorphosis has brought more active players in the international arena and woven more channels of interdependence: competing currencies, influential financial centers, the momentous common beliefs of financial markets, the rising economic power of Asian countries. The complexity of such a world was not foreseen in the Bretton Woods Agenda. The IMF has had to adapt its doctrine and missions while keeping its identity. A broader concept of hegemony is needed to account for this evolution.

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