Reaganism and the future of the international payments system

Abstract

When Ronald Reagan faced the delegates to the 1981 World Bank-IMF annual meetings in Washington and declared that, We who live in free market societies believe that growth, prosperity and ultimately human fulfilment, are created from the bottom up, not the government down. ' he was doing much more than simply repeating another of the sunny banalities for which his presidential discourses have been justly famed. Underneath was an ideological commitment to policy action, for whose strength of purpose many of the participants were not prepared. For, on top of the traditional American game of World Bank-bashing, came an unexpected attack on the nature and operations of the IMF. If, within the rather strange contours of current conservative thinking, the World Bank could be singled out forcriticism as an institution of international Keynesianism and an instrument for financing 'socialism' throughout the world, the same charges could hardly be levelled at the IMF, a monetarist institution much beloved of the international banks, not least the American ones. But the major shift of emphasis, from the 1980 meetings with their consensus on the need to expand international liquidity to cope with rising oil prices and the burden of Third World debt charges, to the 1981 meetings with their emphasis on restricting the volume and tightening the terms of access to multilateral sources of credit, is not the result of a passing whim of the incumbent American administration. On the contrary, it is fully consistent with the domestic policy programme and general world-view of the current ruling coalition in the United States. It is symptomatic of the collapse of the Keynesian consensus and the accompanying redistributive ethic, within the US and beyond. This significant shift in the prevailing currents of political opinion in the major capitalist countries will profoundly influence the future course of international monetary and financial affairs.