WITH THE END of the Cold War, the International Monetary Fund (IMF) emerged as the most powerful international institution in history. The Western countries designated the IMF as their primary vehicle for funneling aid to the countries that had emerged from the ruins of the Soviet empire and made it responsible for creating a strategy for interacting with them. That strategy, as it gradually unfolded, was ambitious: nothing less than the economic transformation of every society in the region. The early years after the collapse of the Soviet bloc were heady ones for the IMF: A vast new territory was becoming integrated with the world economy, international capital movements were rising to the top of the political agenda in Central Europe and Eurasia, and multilateral lending agencies were beginning to figure prominently in cabinet meetings and parliamentary debates. The Fund eventually signed loan and conditionality agreements with every country of the former Soviet Union and Eastern Europe except Serbia and Turkmenistan. Even as this ambitious institutional strategy took shape, however, questions were raised about whether the instrument was equal to the task. Can an international institution really hope to exercise influence in a nation's domestic affairs? If it does so, will that influence be beneficial?
Formal international institutions are the peculiar innovation of the advanced industrial democracies, which have relied on these institutions since World War II as a central pillar of their effort to impose order on the anarchy of international politics. In the aftermath of the worst war the world has ever known, the United States and its allies had sought to promote international cooperation by creating an impressive architecture of international institutions: the United Nations, the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade, the European Economic Community, and numerous specialized agencies. The Cold War between the United States and the Soviet Union quickly became the focus of attention in the international system, and it redefined many of the purposes of these institutions. Still, whenever the United States and its allies tried to foster cooperation after World War II, they created international institutions. International institutions became an essential part of