Dreher, Axel --- "The Development of IMF and World Bank Conditionality" [2009] ELECD 388; in Yueh, Linda (ed), "The Law and Economics of Globalisation" (Edward Elgar Publishing, 2009)

Book Title: The Law and Economics of Globalisation

Editor(s): Yueh, Linda

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845421953

Section: Chapter 6

Section Title: The Development of IMF and World Bank Conditionality

Author(s): Dreher, Axel

Number of pages: 32

Extract:

6. The development of IMF and
World Bank conditionality
Axel Dreher

INTRODUCTION

After World War II, the international community created the International
Monetary Fund (IMF) and the World Bank, taking account of the
growing interdependence of international economic markets. Since the
1970s, economic, social, and political globalisation has been accelerating
rapidly (Dreher 2006a, Dreher, Gaston and Martens 2008), resulting in
the potential for massive capital withdrawals from a country's financial
markets and infrastructure. In an attempt to battle this contagion, IMF
and World Bank conditions rapidly expanded in number and scope.
Arguably, the expansion of conditionality leads to the globalization
of economic policies. When the IMF and World Bank export policies
favored by their major Western shareholders to developing and transition
countries, policies will to some extent become similar across the world.
This is not what the Institutions have been created for.
As the IMF and World Bank were founded in 1944, there was
no consideration of intrusive conditionality now common under the
International Financial Institutions' (IFIs) programs. However, over
time, conditionality gradually increased and became inseparably associ-
ated with IMF and World Bank loans. This evolution was never without
critics.1 While there are those criticizing conditionality as overly intrusive
(for example Williamson 1983), others claim it would be ineffective (for
example Spraos 1986). As empirical studies have shown, a huge share of
conditionality has indeed not been implemented as negotiated (IFIAC
2000, Dreher 2003). Moreover, there is substantial evidence that IMF and
World Bank programs fall short ...