Webinar Summary – The Meddlers: Sovereignty, Empire & the Birth of Global Economic Governance
On February 15, 2023, the Boston University Global Development Policy Center hosted Jamie Martin to discuss his new book ‘The Meddlers: Sovereignty, Empire & the Birth of Global Economic Governance.’ The Meddlers charts the transformation of global economic governance from World War I to the birth of the International Monetary Fund (IMF) and the World Bank. Drawing on extensive archival research, Martin shows how the first multilateral institutions helped legitimize 19th century imperial practices of financial coercion in a new era of self-determination and growing democratization. It is this transformation that set the precedent for the powers of today’s global economic institutions.
Martin began the conversation by describing how in the aftermath of World War I, a new international norm emphasizing states’ self-determination and sovereignty emerged. Countries were no longer willing to accept earlier practices of outright coercion, such as when imperial creditors oversaw fiscal policies in colonial and semi-colonial territories in the late 19th century. Instead, states became increasingly sensitive to foreign interference in domestic matters of economic policymaking. While interventions by pre-war institutions were resisted, a new kind of meddling became politically feasible: the seemingly technocratic and legitimate involvement of multilateral institutions. Over time, these organizations developed powers of economic governance familiar to us today: they offered financial support conditional on austerity, pushed for central bank independence, invested in development projects and oversaw the supply and pricing of commodities. These efforts represented a drastic change of the international order. For the first time in history, external actors succeeded in legitimately cracking open the domestic economic policies and institutions of sovereign states.
The successes and failures of these early attempts at global economic governance is what international elites had in mind when the IMF and the World Bank was established. The Meddlers’ contribution becomes even more apparent against the background of what Martin described as the common telling of the IMF and World Bank’s rise to power: their origin is typically traced to the the Bretton Woods conference of 1944. The agreement allowed states to return to a semi-integrated world economy while granting them greater fiscal policy space domestically. In this narrative, however, the compromise only lasts a few years. With the collapse of the Bretton Woods system in the early 1970s, the two institutions lose (part of) their original purpose. Yet, they are quickly mobilized for very different projects, notably as the chief architects and promoters of neoliberal, market-oriented structural adjustment reforms. As the IMF and the World Bank coerce states to overhaul their economies, they are increasingly criticized as meddlers. This story, Martin said, usually locates the powers of the IMF and World Bank in the unique conditions of late 20th century neoliberal globalization and US foreign policy.
In his book, Martin demonstrates that the fraught politics of foreign interference in domestic affairs are anything but a recent phenomenon. In fact, the establishment of the IMF and the World Bank in 1944 itself is only the second wave of economic institution-building.
The first wave of economic institution-building, Martin continued, took place at the end of World War I. The interwar period gave birth to a range of institutions, including the League of Nations and the Bank of International Settlements, but also other lesser-known organizations, such as the Refugee Settlement Commission. Martin argues that attempts to endow these institutions with new power all confronted the same political challenge: how to break the taboo of domestic fiscal, monetary, trade and resource policy being insulated from external authorities. A process of trial and error collectively amounted to a seismic innovation. Over time, these institutions succeeded in intervening in countries’ domestic economic affairs in ways considered legitimate practices of international cooperation—as opposed to imperial practices from the 19th century.
Martin illustrated this by discussing the experience of Austria, which, in the early 1920s, became the first country to receive a financial stabilization loan conditional on austerity. The League of Nations appointed advisors to the government and central bank in Vienna to oversee domestic policymaking and intervene as they saw fit. Their objective was to insulate monetary and fiscal decisions from the quagmire of fragile and volatile domestic politics. Put differently, the League of Nations positioned itself as mediator between borrowing states and their foreign creditors. Yet the approach to Austria was modeled on imperial debt commissions in Tunis, Egypt, the Ottoman Empire, Santo Domingo and China from decades earlier. The League was thus a legitimation machine, transforming 19th century tools of informal financial imperialism into apparently softer practices of international cooperation.
Martin concluded his talk by suggesting that the political struggle over questions of legitimate external interference in domestic affairs, as well as the imperial legacy, clearly remain with us today. The looming sovereign debt crisis in the Global South is a case in point. These governments ultimately have little choice than to ask the Western-led IMF for financial support—even though they would prefer not to do so. Martin, therefore, called for a dramatic rethinking of how the world economy is governed to ensure the institutions of global economic governance are, at last, compatible with countries’ self-determination.
During the Q&A section of the book talk, Martin elaborated on how the seeds for the first wave of institution-building were planted during World War I. The Allied Maritime Transport Council illustrates this. In 1917, the Allied countries faced mounting shipping losses due to the lethal German submarine forces, but none of the Allied powers were completely self-sufficient, and control of the seas was paramount to feed their people. In response to this crisis, the Allied countries rapidly innovated and established the Maritime Transport Council to pool resources and coordinate shipping allocation. Similar initiatives were launched to control prices of raw materials. Even the United States, traditionally anxious about delegating authority to an international body, joined these arrangements. Yet once the war was over, firms were no longer willing to sacrifice profits and private backlash was swift and fierce. Nonetheless, a template for peacetime institutions such as the League of Nations was created.
Martin also touched on the parallels between global economic governance and human rights regimes during the Q&A. He further clarified the domestic politics of the backlash against foreign interference and emphasized the continued asymmetry inherent in the governance of the global international system.
In all, The Meddlers offers a comprehensive political history of the transformation of global economic governance in the interwar period. It helps us look forward by looking back, to a time when the first international institutions came to wield power in global economic governance. Understanding the long history of political struggles over questions of self-determination and sovereignty is crucial to make the 21st century international system fit for contemporary societal issues. As Kevin Gallagher, Director of the Boston University Global Development Center and host of the book talk, wrote in a review for the London School of Economics Review of Books, this makes The Meddlers ‘essential to historians, legal scholars, economists and political scientists who study global economic governance’ but also ‘required reading for policymakers and advocates looking to fully understand a system in need of deep reform.’
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