The Transnational Debt Architecture and Emerging Markets: the politics of paradoxes and punishment

Abstract

The Argentine default at the end of 2001 highlighted the ongoing problems plaguing the existing transnational debt architecture, namely the tensions between creditor rights and human rights. While these debates have thrown important light on what needs to be done in terms of improving the transnational debt architecture, few studies have actually attempted to evaluate critically the manner in which transnational debt has been managed since the outset of the Bretton Woods system in 1944. I argue that the postwar informal arrangement governing transnational debt architecture not only helps augment the power of credit to serve as an effective form of social discipline, but that it is also profoundly contradictory. Through an historical survey, spanning the beginning of the Bretton Woods system to the recent Argentine default, I demonstrate that the informal nature of the transnational debt architecture, coupled with the mounting power of global financial capitals over debtor states, has played a major role in bringing about increased levels of volatility and vulnerability in the international credit system.