Capital Ideas: The IMF and the Rise of Financial Liberalization

By Jeffrey M. Chwieroth | Go to book overview

CHAPTER FIVE

The Limits and Hollowness of Keynesianism
in the 1960s

KEYNESIANISM generally prevailed during the first fifteen years of the Bretton Woods system, with capital controls situated firmly within the boundaries of legitimate policy practice. But the 1960s were a decade of significant transition. The academic and policymaking communities discarded Keynesianism to varying degrees, replacing it with new beliefs more closely in line with the neoclassical synthesis and monetarism. Although monetarism would steadily gain ground in the academic and policymaking communities, in this decade the neoclassical synthesis had a far greater impact. Capital controls remained within the boundaries of legitimate policy practice, but the beliefs underpinning their legitimacy were notably different. Speculation became seen more and more as a “normal,” rather than an “abnormal,” part of the international financial system. Moreover, controls were increasingly defined as being at best a temporary response to the limited difficulties disruptive capital flows posed rather than an essential and permanent solution to more pervasive problems.

The United States and West Germany were important advocates of these beliefs. Their support for two new initiatives from IMF managing director Per Jacobsson led to changes to formal IMF rules that would redefine speculation as “normal” and authorize the Fund to finance disruptive capital flows. Advocates of authorizing the Fund to finance such flows saw it as a way to promote greater capital freedom because it would enable governments to avoid the use of controls without abandoning their policy goals. U.S. officials thus began to back away from their early postwar accommodation of controls and came to support official financing not as a means to buttress “leaky” controls but rather as a means to encourage liberalization. Although these formal rule changes aligned with U.S. interests, they were not imposed on the Fund; instead their origins lie in the entrepreneurial efforts of Jacobsson, who had long been committed to neoclassical orthodoxy.

But the informal staff approach did not align entirely with Jacobsson's views or the formal rule changes. In spite of the emergence of the neoclassical synthesis and monetarism, the staff generally retained a Keynesian understanding of market behavior. Yet in contrast to Keynesian standards of behavior, the staff approach evidenced greater support for adjusting policies in response to disruptive capital flows as well as greater appre-

-121-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
Capital Ideas: The IMF and the Rise of Financial Liberalization
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 314

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.