Explaining organizational outcomes: the International Monetary Fund and capital account liberalization
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This article traces the discourse on capital account liberalization in the International Monetary Fund (IMF) during the 1990s. Based on constructivist insights, I argue that rationalist–materialist theories of international organizations neglect the social dynamics of behaviour and change. The empirical focus is on the transformation of IMF policy and discourse towards emphasizing the liberalization of international capital movements. External factors do not explain the rise of the discourse within the IMF. For that, I refer to the role of organizational culture as the crucial variable. However, the attempt to institutionalize capital account liberalization at the global level failed in the wake of the Asian financial crisis. In the second part, I explore the political decision-making process in the Fund’s Board of Executive Directors in order to shed light on the different interpretations of the crisis. I find that, far from imposing a single reading of the causes and effects of the crisis, different interpretations were advanced and contested in the deliberations of the Board. Communicative action explains why the Asian crisis constituted the ‘kiss of death’ for the formal institutionalization of the norm of an open capital account at the international level. Journal of International Relations and Development (2005) 8, 1–26. doi:10.1057/palgrave.jird.1800044 Keywords: capital account liberalization; International Monetary Fund; social constructivism
Introduction Why is the unrestricted movement of international capital not recognized as a global norm? While virtually all developed countries have cumulatively abolished capital controls during the last 30 years, many developing countries still maintain them today. Given the powerful incentives and constraints in the domestic and international arenas for opening the capital account, the reluctance to do away with the remaining restrictions on the free flow of international capital in the developing world is indeed remarkable.1 I suggest Journal of International Relations and Development, 2005, 8, (1–26) r 2005 Palgrave Macmillan Ltd 1408-6980/05 $30.00
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Journal of International Relations and Development Volume 8, Number 1, 2005
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that part of the answer can be found in the direction taken by the international discourse on capital account liberalization during the 1990s.2 In this article, I study the attempt to institutionalize capital account liberalization in the statute of the International Monetary Fund (IMF). I show the indeterminacy of rationalist–materialist explanations of outcomes and change in international organizations.3 International organizations do not simply respond to structural changes based on strategic incentives and material constraints. Rather they also have an ‘inner life’. Organizations operate in a social environment in which material factors and events are interpreted through existing (individual) beliefs and (collective) norms. An influential branch of social constructivism in International Relations (IR)
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