Prepublication version of paper. Citation to published version of paper: Grabel, Ilene, “Continuity, Discontinuity, and Incoherence in the Bretton Woods Order: A Hirschmanian Reading,” Development and Change, Special Issue on “Beyond Bretton Woods: Complementarity and Competition in the International Economic Order,” 2019, 50(1), pp. 46-71, http://dx.doi.org/10.1111/dech.12469 .

CONTINUITY, DISCONTINUITY, AND INCOHERENCE IN THE BRETTON WOODS

ORDER: A HIRSCHMANIAN READING

Ilene Grabel*

-------------------------* I thank George DeMartino, participants at the workshop ‘Beyond Bretton Woods:

Complementarity and Competition in the International Economic Order’ (Boston University,

Global Development Policy Center, September 15, 2017), and seven anonymous referees for

invaluable comments. Jeff Chase, Denise Marton Menendez, Meredith Moon, Nyambe

Muyunda, and Brooke Snowden provided excellent research assistance.

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ARCHITECTURAL CONTINUITY AND CRISES

Economic crises call attention to the limitations of prevailing economic orthodoxies and the

institutional and regulatory architectures that undergird them. Consequently crises often generate

proposals for systemic change and sometimes create space for radical ideational change.

The emergence of the Bretton Woods institutions (BWIs), the International Monetary

Fund (IMF) and World Bank, and the associated Bretton Woods order in the closing moments of

World War II is the archetype of crisis-induced change, though transformation was slower and

more contested than commonly understood (Helleiner 2016a). The crisis of the 1970s and the

developing country debt crisis of the 1980s generated demands for ‘South-South’ development

institutions that would be largely autonomous from the BWIs. The Mexican and East Asian

(hereafter Asian) financial crises of the 1990s focused attention on the deficiencies of the BWIs

and the broader inadequacies of the global financial architecture (GFA). Most notable among the

proposals stimulated by the crises of the 1990s was a quickly aborted one for an Asian

alternative to the IMF. After the Asian crisis the focus on regional architectures extended beyond

the region. For example, the United Nations (UN) argued for a multi-layered GFA in which

regional and sub-regional institutions play a greater role (UN 2002, par45).

Enter the global financial crisis (GFC) that began in 2008. As the GFC deepened,

prominent economists and other actors proposed systemic reform which entailed, inter alia,

rebuilding the international monetary system from the bottom up through agreements among

regional arrangements (UN 2009, chs. 4-5, 2014); introducing a ‘super-sovereign reserve

currency’ modeled on the IMF’s Special Drawing Right (SDR) (Zhou 2009); and a ‘New Bretton

Woods’ to promote new thinking and international coordination (Parker, Barber, and Dombey

2008). Representatives of the BRICS (Brazil, Russia, India, China, and South Africa) argued that

the BWIs lacked legitimacy and did not reflect the dispersal in power associated with the rise of

the global South and East (Chin 2014). Building on earlier work, Ocampo (2006, 2017, ch. 6)

argued for systemic reconstruction involving a multi-tiered, layered GFA with a representative

Group of 20 (G-20), BWIs that reflect EMDE voices, and regional and sub-regional financial

institutions mediating between global and national institutions and regulatory bodies. Regional

institutions received support from other quarters. In contradistinction to its hostility toward the

Asian Monetary Fund (AMF) during the Asian crisis, IMF Managing Director Strauss-Kahn

argued during the GFC for collaboration with regional reserve pools, including possible use of

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IMF resources ‘as a backstop to regional pools’ (Strauss-Kahn 2010). The G-20 began to

promote regional financial arrangements in 2009 and continued to do so over the next two years.

Under Managing Director Lagarde the IMF continues to deepen engagement with regional and

transregional institutions by promoting communication among them and with the IMF and

beginning discussions of coordination protocols and a Policy Coordination Instrument (IMF

2017b, a).

Notwithstanding the Bretton Woods era transformations, the most ambitious proposals

for architectural reform that followed 20th century crises and the GFC faded quickly. Recurrent

failure of the reform agenda has led many observers to emphasize architectural continuity. What

I call the continuity thesis refers to the common view that the opportunity for meaningful

architectural change created by the GFC has been lost, and that nothing of significance has

changed, especially as concerns emerging market and developing countries (EMDEs).

Arguments for continuity take many forms. Some focus on continuity in the system as a whole

(Akyüz 2017). Others emphasize the continued role of the US, the dollar, and Federal Reserve

(Helleiner 2014) and the false promise of disruption associated with bilateral swap agreements

by EMDE central banks (McDowell 2018a), including China’s (McDowell 2018b, this

symposium). Still others focus on continuity in the BWIs (Güven 2012, Kentikelenis, Stubbs,

and King 2016) and in networks, such as the G-20 (Vestergaard and Wade 2011). Some

emphasize continued vulnerability to crisis in EMDEs (Akyüz 2017, UNCTAD, 2016, 2017).

And finally, others dismiss the potential and significance of institutional innovations in EMDEs,

such as those associated with the Association of Southeast Asian Nations plus Japan, South

Korea, and China (ASEAN+3) (Grimes 2015), the BRICS (Bond 2016), or ‘rising powers’

(Peruffo and Prates 2016). In this article I challenge this final aspect of the continuity thesis.1

That the BWIs still matter does not contradict the point that long-term project finance and

countercyclical liquidity support in EMDEs have evolved during the Asian and especially the

GFC. These two forms of finance constitute what I refer to as developmental finance. In this

article I update the empirical discussion of innovations in EMDE developmental finance

institutions that appears in Grabel (2013, 2017, ch.6) and focus on implications for the Bretton

Woods order, especially in light of present economic and political fragilities and tensions. This

article also contributes to a growing body of work on the evolution of a multilayered, 1 Elsewhere I challenge this and other aspects of the continuity thesis as pertains to global financial governance (Grabel 2017).

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fragmented, and what I term a ‘pluripolar’ GFA (for complementary treatments, see e.g.,Acharya

2017, Chin and Freeman 2016, Fritz and Mühlich 2018, this symposium, Grabel 2013, Helleiner

2016b, Huotari and Hanemann 2014, Hurrell 2018, Mühlich and Fritz 2016, Roberts, Armijo,

and Katada 2018 , Stuenkel 2016).

In what follows I present an alternative perspective on the continuity/discontinuity

binary. I focus on evolution, not revolution, in EMDE institutions of developmental finance. This

evolution is creating an incoherent architecture of developmental finance. I use the term

incoherence to capture the complex, dense, messy, and redundant (i.e., duplicative) aspects of

this architecture. I also argue, more contentiously, that this incoherence is productive in

particular ways, a point to which I return below. To get at this idea I draw on the extraordinary

insights of Albert Hirschman. Hirschman more than any other development economist

understood the virtues of pragmatic strategies and experiments (small scale and otherwise) that

arose out of the concrete challenges facing economic actors and policymakers, as opposed to

grand, utopian strategies deduced from the economists’ blackboard. Extending Hirschman I

argue that incoherence in the developmental finance architecture opens space for the kinds of

pragmatic experimentalism that he viewed as central to autonomy-promoting development and

social learning. What I term the ‘Hirschmanian mindset’ yields a more subtle and penetrating

analysis of the current conjuncture than is on offer by those who hold tightly to

continuity/discontinuity narratives.

To foreshadow my argument: I argue that a crucial legacy of recent crises is the

willingness and ability of EMDEs to undertake ad hoc, uncoordinated innovation in institutions

of developmental finance. Recent crisis motivated policymakers to establish entirely new

subregional, regional, and transregional institutions; build out existing institutions, substantially

increasing their funding and capacity; expand their mandates into new activities; and, in some

cases (and with support from the BWIs) explore ways in which they might link to and coordinate

with one another and with the BWIs. I argue that these innovations should not be considered in

terms of whether they displace the coherent (i.e., unipolar, monolithic, and streamlined) postwar

architecture centered on the BWIs. They do not. But they do amount to something significant.

That something is an increasingly incoherent GFA in which disparate and, in some cases,

overlapping, redundant, and interconnected institutions complement the BWIs and, in limited

domains, may compete with them. I argue that emergent incoherence and redundancy offers new

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and expanding opportunities for EMDEs. It is in this sense that incoherence is productive.2 This

is not to say that incoherence and redundancy pose no risks, as I acknowledge in the concluding

section. But taken together the experimentation and innovation that is underway is productive

because it ‘thickens’ and diversifies the financial landscape in EMDEs. In addition, a densely

populated landscape expands policy space and enhances opportunities to achieve important

development goals. This is because in a more decentralized, heterogeneous, pluripolar GFA there

are increased opportunities for problem solving and learning by doing and from others; creation

of new partnerships, networks, and coalitions; forum shopping on the part of smaller countries

that traditionally have the fewest options and face the greatest constraints on policy space; and

developmental finance that fill gaps in the developmental finance architecture that for so long

has been monopolized by the BWIs. Finally, the architectural innovations that are unfolding are

complicating the terrain on which the BWIs operate. ‘Competitive pluralism’ (as per Culpepper

(1997) places pressure on the BWIs to respond to concerns and deficiencies that have long been

articulated by EMDE representatives.

My normative stance on incoherence breaks sharply with the embrace of coherent

systems, architectures, models—in short, of a singular weltenshaung--that mark many social

science traditions, especially economics (Grabel 2018). Indeed, some such as Ocampo (2017)

(following Triffin and others) see the period from the breakdown of Bretton Woods to the

present as an interregnum in which a ‘(non)system’ has evolved through ad hoc processes. In

Ocampo’s view the deepening incoherence of the present moves the global monetary system

toward further dysfunction, which is particularly detrimental to EMDEs.

This article speaks to symposium contributions that focus on incoherence and

redundancy. Ban (2018, this symposium) argues that incoherence has been productive in the

European Union (EU) because it has enabled incremental calibrations of interventions and

created space for ideas that counterbalance growth and austerity strategies. Henning (2018, this

symposium) sees the incoherence and ‘institutional regime complexity’ that derive from

experimentation as selective and driven by state strategies for institutional control. In contrast, I

understand incoherence and redundancy as arising from ad hoc, pragmatic, and/or opportunistic

experimentation under uncertainty. Henning anticipates greater coherence (than I do), though he

envisions some institutional messiness on the horizon. He is agnostic on the normative 2 I advance the concept of productive incoherence, respectively, in work on the IMF, EMDE institutions, and capital controls (Grabel 2011, 2013, 2015).

6

consequences of institutional density and redundancy, arguing that whether it is productive is

context and operationally dependent. He advocates formal protocols and informal practices to

foster cooperation and reduce fragmentation. Kring and Grimes (2018, this symposium) treat

institutional innovation as a solution to collective action problems. The neatness of this account

assumes far less messiness than either Henning or especially I would anticipate, and implies that

incoherence is anything but productive. Kring and Grimes’ rationalism allows for the persistence

of dysfunctional or redundant institutional forms if states are pushed into premature decisions

because of idiosyncratic political or economic developments. Fritz and Mühlich (2018) conclude

that incoherence across the full range of global liquidity support arrangements reinforces

inequalities of access and opportunity since some countries have access to autonomy-enabling

forms of support, while others have only the IMF. Wang (2018, this symposium) and Chin and

Gallagher (2018, this symposium) identify messiness, heterogeneity, and incoherence across the

global and within the China-led landscape.

I advance three claims in the article. The first claim is positive. The Asian and especially

the GFC occasioned meaningful though ad hoc, partial, and uneven discontinuities in

developmental finance. The conjunction of discontinuities and continuities in this domain is

imparting incoherence to the developmental finance architecture and the broader GFA. The

second claim is normative. I hold, contrary to the common narrative, that emergent incoherence

is (on balance) productive of development and financial stability rather than debilitating. Actors

in some parts of the global South and East enjoy greater opportunities for institutional

experimentation today, especially in comparison with the limited space available under the

stultifying coherence of the neoliberal era when the BWIs were the only game in town and

neoliberal ideas crowded out alternatives. All of the experiments underway are not equally

likely to survive. But even failures can provide valuable lessons and enduring networks that can

contribute to future successes. Emergent redundancy and new networks of institutional

cooperation have the potential to increase financial resilience.3 The third claim is that productive

incoherence can be understood most fully within a ‘Hirschmanian mindset,’ that is, an

understanding of change and development informed by Albert Hirschman’s key theoretical and

epistemic commitments.

3 We might also understand fledgling networks in terms of their potential to increase robustness and what Taleb (2012) terms ‘anti-fragility.’

7

We begin with a review of key components of a Hirschmanian mindset. This provides an

intellectual scaffold for a bird’s eye survey of innovations in developmental finance. In the final

section I reflect on the implications of this messy, evolving institutional landscape for EMDEs,

the BWIs, and financial stability.

THE HIRSCHMANIAN MINDSET

The Hirschmanian vision that underpins this article’s central claims begins from the presumption

that change and development can come about through ad hoc, disconnected, and experimental

innovations that take root in the concrete demands facing policymakers who possess the capacity

and willingness to engage in problem solving and who adjust pragmatically to perceived

challenges and opportunities. I highlight here the components of a Hirschmanian mindset that are

most germane to the matter at hand (on Hirschman’s vast oeuvre, see Grabel 2017, ch. 2,

Adelman 2013).

Central to Hirschman’s work is the idea that knowledge is incomplete, partial, and

dispersed. For Hirschman, as for Hayek (whom he drew upon admiringly) and Popper, there

were “limits to ‘intelligibility’ of our complex world” (Adelman 2013, 238, Hayek 2014[1944],

181, Popper 1957). This epistemic commitment led Hirschman to reject the social scientific

predilection to design and implement comprehensive programs of social engineering, such as

neoliberalism.4

Hirschman’s Hiding Hand concept reflected his epistemic view (shared with Keynes,

Knight, and Hayek) that actors always operate in a state of uncertainty (Hirschman 1967). But

rather than inhibiting or distorting action, Hirschman saw uncertainty, ignorance, and error as

potential drivers of problem solving by policy entrepreneurs. Once a project is initiated

participants are challenged to develop solutions to unforeseen problems. For example, a new

development bank may screen loans inadequately, and recognition of this can propel

development of better screening methodologies. Moreover, a strategy devised out of necessity

can have positive, lasting spillover effects, even if the project ultimately fails. Abandoned or

failed projects can have beneficial side effects in other contexts owing to the learning and

networks left behind. For example, failure to launch the Bank of the South may have imparted

valuable lessons for the future.

4 Smith 1976[1759], 233-4) was an early critic of social engineering. For contemporary critiques see DeMartino (2011, 9-11,17,fns1,5,141-50, 2013), Easterly (2008), Ellerman (2005), and Rodrik (2007).

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In connection with the above, Hirschman emphasized the value of ‘backwards and

forwards linkages,’ which are new upstream or downstream economic, political, or social effects

or capabilities that result from choices made by state, institutional, or private actors . For

example, creation of a development bank induces demand for loan officers, and thereby for

training investments in this area (i.e., a backward linkage). When loans are made in support of

solar energy, demand for technicians to install solar panels is created (i.e., a forward linkage).

The idea of linkages grew out of Hirschman’s view that growth should be thought of as an

unbalanced process; that strategies should focus around targeted rather than grand plans; and that

careful consideration should be given to the relative value of the linkages created by particular

innovations. Hirschman also underscored the essential role of ‘side effects’ (Hirschman 1967,

149). For example, a new initiative might establish as an unintended consequence networks,

knowledge of what works and what does not, and/or capabilities that can have beneficial

spillovers elsewhere or in later moments. Experience with overlapping liquidity support

initiatives, for instance, may generate lessons about the need for and nature of coordination

among actors.

Hirschman was deeply suspicious of coherence, which is predicated on the notion of the

social world as a neat social system. He believed that it was imperative to learn from small- and

large-scale and parallel experimentation, gradual initiatives, and multiple examples. He

emphasized uniqueness of context, specificity, messiness of experiences, and the possibility of a

great many possible development sequences (Hirschman 1969[1958], 2013[1971], cf. Ellerman

2005, 163-65,234-39, Rodrik 2007, ch. 2). No one made a case for the value of experimentation,

heterogeneity, and what Lindblom (1959) termed ‘muddling through’ more effectively than

Hirschman. Hirschman’s commitments often led him to embrace the diminutive (which he

termed ‘the dynamics of the development process in the small’) as potential building blocks of

meaningful, path-dependent reform and widespread change (Hirschman 1969[1958], ix,

emphasis in original). That said, Hirschman by no means suggested the irrelevance of large-scale

initiatives. That large countries, actors, or institutions have agenda shaping abilities is obvious

(as the case of China makes clear). Hirschman had much to say about both large and small

actors. For instance, he wrote of power asymmetries in international trade (Hirschman

1980[1945]); the diverse linkages and side effects associated with large-scale initiatives, such as

highways versus railways (Hirschman 1967); and disparate capacities to exercise exit and voice

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by large versus small actors. Hirschman’s radical insight is that ‘the small’ matters, too. We

return to this matter in the discussion of some institutions below.

Hirschman’s epistemic and normative views informed his complex understanding of

change and development. He rejected the tendency that often leads analysts to pass judgment ex

ante on the significance of particular innovations, and the related tendency to define change as

either ‘fundamental’ or ‘superficial’ (Hirschman 2013[1968], 37). Much work in the continuity

tradition takes this approach when, for example, discussing BRICS initiatives. Hirschman

despaired of the skeptical mindset that needs to dismiss most changes as superficial, a tendency

that reflected both what he termed ‘futilism’ and epistemic certainty. Hirschman counterposed

‘possibilism’ to the predominant futilism—the view that any initiatives that were not entirely

consistent with the precepts of a grand theory or which were not themselves all encompassing

were bound to fail (Hirschman 2013[1971]).

Hirschman’s (1970) best known work concerns exit, voice, and loyalty. These are

modalities for communicating about and responding to the failures of firms, states, and

institutions. Helleiner (2010) employs Hirschman’s exit, voice, and loyalty to explain why the

Asian and especially the GFC renewed interest among EMDE policymakers in ways to escape

(i.e., exit) the monopoly of the BWIs through institution creation or expansion. Efforts by EMDE

representatives to voice concerns about governance and infrastructure finance were ignored by

the BWIs, thereby undermining whatever loyalty to the institutions existed. Institutional

innovation may enable some countries to exit or at least reduce dependence on the BWIs. More

importantly, innovation creates opportunities for forum shopping and development of

relationships that may enhance EMDE bargaining power (i.e., voice) within the BWIs.

Hirschmanian Proscriptions

To the skeptical academic mind some of the innovations surveyed here (and in this symposium)

might appear as trivial owing to their size, or disappointing because they fail to break with the

BWIs. Hirschmanian urges us to push back against skeptical thinking. In his view the small, the

disappointing, the disparate, and the experimental must not be discounted in advance because

they do not shatter prevailing norms, are not the embodiment of an overarching plan, are not

scalable, or because they are paltry when compared with the magnitude of the problems

confronting EMDEs in a fragile environment. Guidance from Hirschman on these matters takes

the form of proscriptions—to reject evaluative criteria that purport to determine ex ante or even

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ex post whether institutional innovations are coherent, viable, sufficient, scalable, and

significant.

There are several Hirschmanian proscriptions. First, we should not vet new initiatives by

reference to coherence criteria, adjudicating their viability based on the degree to which they ‘fit’

into an overarching system. We should instead presume that any observed institutional

innovations within and across countries conflicts to some degree with established institutions,

just as existing institutions conflict with each other. Tensions between seemingly inconsistent

endeavors might be more apparent than real, and even real tensions might yield unforeseeable

adaptations that solve important problems. Similarly, we should not be concerned with whether

innovations are redundant. Streamlined, coherent systems that purport to embody efficiency are

hardly ideal. A coherent financial monoculture comprised only of the BWIs concentrates power

and is inherently risky, as the last decades reveal.

Second, we should not presume to know whether innovations can exist and survive over

the long term, or whether some or all are unviable owing to pressures emanating from the global

economy, the power of particular nations or actors, or EMDE fragilities. Learning happens,

Hirschman reminds us, through confrontation with obstacles and failures and not just or

primarily through success. Moreover, new capacities, knowledge, networks, and coalitions may

be built even when innovations fail to survive. Hirschmanian linkages or side effects may bear

fruit in unexpected, unpredictable ways over time.

Third, we should not be concerned with whether innovations are adequate in the sense of

addressing the full range of needs for developmental finance. They can’t. But then, what can?

Surely not the BWIs. Challenges to multilateralism posed by the US and rising nationalism

around the world suggest that we might expect less from the BWIs in the near future. It bears

emphasis that finding any innovation (or web of innovations) sufficient on its own requires

utopian thinking and sidesteps power asymmetries inherent in monopolies.

Fourth, we should not judge small-scale innovations against the standard of whether they

are scalable and even universalizable (rather than contingent or context dependent) or speculate

as to whether they are doomed to remain small and fragile, and even then only in the specific

environments where they have arisen. Replicability but with significant variation is a less

ambitious but more achievable goal than scalability. It is true that some objectives, such as the

Sustinable Development Goals (SDGs), require large-scale action and resources. But this does

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not mean that all institutions need to be scalable provided the architecture is sufficiently dense

and permissive, where multiple institutions can support similar goals. Absent a Hirschmanian

sensibility our eyes would be trained only on initiatives scaled to the size of the BWIs, such as

those driven by China.

Fifth, we should not impose a ‘test’ of fundamental change, such as whether any

institutional endeavor disrupts the structural power of the BWIs or the US. They surely don’t. In

addition, we should not dismiss change on the grounds that what appears to be a new

development is simply a repeat of past practices in a new guise (as might be implied when an

EMDE institution replicates features of a BWI). We should presume instead that significance is

always context dependent—and that a reiterated construction always represents novelty owing to

the unique circumstances in which it occurs. In addition, we should presume evolution rather

than fixed identities and realize that significance is revealed only over time in the process of

institutional adaptation. Moreover, we should recognize the mistaken practice of parsing reforms

as significant or insignificant as driven in part by epistemic certainty and futilism which

Hirschman urges us to reject.

Along with Hirschman we might recognize that each of these proscribed tendencies

constrains our appreciation of the possible and the unscripted and blinds us to the potential of

myriad, piecemeal initiatives across EMDEs.

ARCHITECTURAL INNOVATION DURING THE GFC: A BIRD’S EYE VIEW

I turn now to architectural innovations in EMDE institutions of developmental finance as seen

through a Hirschmanian mindset. My discussion is illustrative rather than exhaustive. (See

contributions to this symposium for detailed examinations, and Grabel (2013, 2017, ch. 6). I take

note of changes that exemplify a Hirschman vision. I also examine institutional evolution based

on whether it involves capacity expansion, hybridization, and/or and institutional creation.

Capacity expansion refers to enhancements in the scale of activity of institutions whose existence

predated the GFC. It is most simply achieved through increased funding by participating

governments but also through new revenue streams, expanded geographical reach, or the

introduction of novel mechanisms or programs toward achievement of traditional or newly

identified objectives that reflect a stable institutional mission. Hybridization can occur purposely,

when an institution decides to reach beyond its existing mission, but also unintentionally, when

an institution seeks to maintain its traditional focus but its actions ultimately blur aspects of its

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traditionally understood identity. Institutional creation involves transformation of proposals or

aspirations into concrete institutions by existing or new parties.

Evolutions in Liquidity Support

Liquidity support institutions provide precautionary liquidity and/or countercyclical finance.

Several deserve attention here.

Chiang Mai Initiative Multilateralisation

In 2000 the Chiang Mai Initiative (CMI) built on the failed AMF proposal and a 1977 bilateral

swap agreement (BSA) among five ASEAN central banks. The global crisis twice induced

capacity expansion and institution creation in the CMI. In 2009, CMI was ‘multilateralized’ and

renamed the CMIM. Decisions on disbursing funds from a US$120 billion virtual currency pool

would be made collectively. Multilateralization involved creation of an independent secretariat-

cum-regional surveillance unit, the ASEAN+3 Macroeconomic Research Office (AMRO), which

began operations in 2012. Multilateralization also involved an agreement on voting weights that

reflects the region’s delicate power dynamics. Assistance through CMIM above a certain

threshold requires that a borrower be under an IMF program. The threshold for IMF involvement

has been raised several times (beginning in 2005), indicating growing relative autonomy of

CMIM.

As the GFC worsened, CMIM members increased the capacity of the arrangement and

attempted to address perceived inadequacies. In 2012, CMIM members doubled the amount of

funding that they committed, lengthened the maturity of the IMF-linked and delinked swaps, and

introduced a precautionary lending window. Support through this window is to come without

strict ex ante conditionality, though recipients are expected to pursue what is vaguely termed

‘responsible’ macroeconomic management. The threshold for IMF involvement was raised to

30% in 2012 with a plan to increase it to 40%. However, the move to 40% stalled after

discussion at ASEAN’s 2017 and 2018 meetings, underscoring enduring Japanese and especially

Chinese concerns. For futilists the resilience of the IMF link is indicative of the weak prospects

for independence from the BWIs and suggests that members are unlikely to draw on CMIM

resources (e.g. Henning 2018, Kring and Grimes 2018).

Surveillance capacity through AMRO has evolved gradually. AMRO completes an

annual surveillance paper on each member. The IMF participates in key AMRO meetings;

AMRO reached an agreement with the IMF to observe its meetings with individual countries;

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IMF staff have ‘outreach and dialogue’ with AMRO (Miyoshi 2013, fn25); and central bank

governors and finance ministers meet at AMRO. These processes could enhance the capabilities

of AMRO staff to conduct surveillance independent of the IMF. Moreover, the relationships

developing between AMRO and IMF staff could render the IMF link more palatable should

AMRO be seen to represent members with the IMF in an effective manner.

It would be naïve to imagine that the CMIM will take the IMF’s place in the region. It is

explicitly not intended to do so. But this hardly suggests that the CMIM is fated to remain

marginal. The key is to recognize complementarities that can enhance the CMIM’s influence and

relative autonomy over time in ways that promote regional financial stability. For instance, large

national reserves in CMIM countries, alongside CMIM’s financial resources, create productive

redundancy in the global and regional safety nets, with potential benefits to global financial

resilience. Smaller CMIM members may also benefit from the opportunity for forum shopping

during crises that CMIM affords. Moreover, IMF-linked swaps through CMIM might be

associated with adjustment programs that look substantially different from those negotiated when

AMRO officials do not sit at the table with the IMF. If AMRO is ultimately unable to acquire

influence over the IMF, CMIM and AMRO officials might be motivated to weaken the IMF link.

If the GFC reveals anything, it is that unexpected developments happen when the need

and motivation arises.5 Decisions made in 2009 and 2012 and on-going discussions in CMIM

and AMRO reveal dynamism and a commitment to Hirschmanian experimentation and problem

solving, willingness to undertake institutional creation and expansion, and policymakers’

appetite to build out CMIM and AMRO’s boundaries. CMIM is part of an evolving liquidity-

support architecture within which its contributions could be consequential. It is not (yet) intended

to substitute for other institutions, but the learning by doing, trust, bargaining, relationships and

network creation by officials that takes place through CMIM (even absent disbursements to date)

may create the conditions for more significant cooperation and further institutional development

in this and other regions during future crises. The identities and practices of institutions often

evolve in ways that were not anticipated by their founders, especially when they start at a

manageable scale and develop in line with expanding internal resources and challenges. CMIM

and AMRO seem to be evolving in these ways.

5 Even CMIM skeptics acknowledge that another crisis may propel further development (e.g. Grimes 2015).

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The costs of the EU’s failure to address regional surveillance and the Troika’s heavy-

handedness were not lost on CMIM members as they deepened the arrangement in 2012. Indeed,

a study of ‘Troika Financial Assistance Programs in the Euro Area for CMIM’s Future

Reference’ (ASEAN 2016) was completed in 2016 under CMIM’s auspice. This is consistent

with learning from others, as per Hirschman. CMIM and AMRO began in 2016 to conduct ‘test

runs’ involving IMF linked and delinked funds (ASEAN 2016). These tests revealed important

inadequacies, which are being addressed.6 CMIM and AMRO officials use test runs to identify

operational and coordination difficulties that would become apparent during a crisis, which is

consistent with experimentation and learning by doing. Moreover, CMIM has supported learning

among EMDE officials. Latin American policymakers have watched CMIM closely

(AsDB/IADB 2012). CMIM inspired the decision by the BRICS to launch a similar initiative.

Moreover, representatives from AMRO, the European Stability Mechanism, the Latin American

Reserve Fund, the Arab Monetary Fund, the BRICS, the Eurasian Development Bank, the G-20,

and the IMF met for the first time at the fall 2016 BWI meetings. These now annual meetings

provide the basis for cooperation, dialogue, and deepening of crosscutting liquidity support

networks that may impart important side effects.

In sum, CMIM has evolved incrementally since 2000. The failure of the AMF laid the

groundwork for the CMIM and AMRO. The GFC and Eurozone crisis have propelled further

evolution. Members continue to engage in gradualist problem solving around surveillance, the

IMF, and disbursal criteria. CMIM has deepened its connections to the IMF, US Federal

Reserve, and New York Federal Reserve (Kring and Grimes 2018). This may be taken as

superficial proof of the futilist case, especially for those who see continuity in anything less than

a clean break with the IMF. But CMIM and AMRO have also deepened linkages with other

EMDE liquidity support institutions, and in any event Hirschman would caution us to refrain

from rushing to judgment in evaluating such initiatives.

Latin American Reserve Fund

The Fondo Latinomericano de Reservas (FLAR)--Latin American Reserve Fund was founded in

1978. Its geographic reach expanded in 1988. It is designed to respond to transitory liquidity

issues in member states. Unlike the CMIM, voice has not been contentious. Each member is

6 Personal communication with CMIM official.

15

assigned one vote. FLAR lending is not linked to the IMF. The FLAR’s inclusive governance

and independence from the IMF contribute substantially to its legitimacy among members.

The FLAR has deepened its surveillance capabilities gradually. Since 2011, the FLAR

has had a macroeconomic monitoring unit, the Division of Economic Studies, which reviews and

monitors member performance and prospects. There is no conditionality in the traditional (IMF)

sense.7 Borrowers seeking support under some lending facilities have to present a plan to the

institution’s Executive President. As part of its loan contract a borrowing country agrees not to

impose measures that affect imports from FLAR members. To date there have been no defaults

on FLAR loans. The FLAR’s performance and cohesion is notable when we consider the

political diversity that has long marked its membership.

Over its lifetime the FLAR has lent to all but two of its members. In some cases the

FLAR contributed stabilizing resources when the IMF did not or when members declined to

engage the IMF (Ocampo 2015). Though FLAR resources are relatively small they are

significant relative to the needs of smaller members, and lending has been redistributive

subregionally (ibid.). Mitigation of balance of payments-induced crises in smaller members has

benefited the region’s other economies by stabilizing trade, as has the prohibition on restrictive

intra-FLAR trade practices (Kawai and Lombardi 2012). In some instances FLAR resources

have been leveraged as part of broader support programs, demonstrating FLAR’s complementary

role in an increasingly complex GFA.

The FLAR largely maintained rather than expanded lending levels during the GFC. This

reflects Latin America’s relative vitality rather than any institutional failure. Looking beyond

lending, we find evidence of gradual FLAR evolution and capacity expansion during and since

the GFC. Membership broadened to include additional countries; members approved an increase

in subscribed capital; two members pre-paid their subscribed capital, one increased paid-in

capital, and one doubled its subscribed capital (Ocampo 2015, 160, Titelman et al. 2014, fn9). In

recent years, the FLAR improved the investment conditions of members’ reserves, serving as a

regional financial intermediary (Ocampo 2015, 160). In addition, after more than a decade of

dialogue, the FLAR and the IMF agreed to allow a portion of the capital paid-in to the FLAR to

count towards international reserves with the IMF. This double counting reduces the cost of

FLAR membership, which is particularly important for small economies.

7 Ecuador (2005, 2009) is an exception (Rosero 2014, 75).

16

The absence of some of the region’s largest economies necessarily limits capacity. But

broadening membership to include larger members remains contentious because they would

likely demand greater influence. Some have argued for deepening FLAR resources by

establishing contingent credit lines with member central and private banks, intermediating

funding from or cooperating with the IMF (Rosero 2014), and connecting with other subregional,

regional, and multilateral institutions (Ocampo 2015). Even if expanded, institutions like the

FLAR should be viewed as complementary insurance mechanisms that are part of a global

patchwork of liquidity support. We might envision a capacity-based division of labor in which

regional mechanisms like the FLAR support small- and medium-sized countries and act

independently during localized disturbances—something it has already done—while the IMF

supports large countries and partners with the FLAR during large-scale crises, though without

IMF-driven conditionality (Ocampo 2015, 170).

As with CMIM, the FLAR has deepened networks with EMDE and some advanced

economy (AE) institutions. The FLAR’s capacity has expanded gradually during the GFC. Its

increased role as regional financial intermediary is suggestive of some institutional hybridization.

The institution has retained an independent stance toward the IMF and its approach to voice and

surveillance break with IMF norms. The decision to allow double counting of reserves represents

an effort at Hirschmanian problem solving that reduces burdens for smaller members. The

relatively small size of FLAR resources makes clear that it is not a Latin American alternative to

the IMF (other than for its smaller members, and then only during localized crises). Development

of contingent credit lines would obviously increase institutional reach.

Arab Monetary Fund

The Arab Monetary Fund (ArMF) began operating in 1977. It has several lending facilities. In

2009 it expanded its capacity by introducing a short-term lending window to support countries

facing difficulties accessing international financial markets during the GFC. Loans made under

the short-term (and another) facility are disbursed quickly and do not require a country mission

or conditionality. Other types of loans require an adjustment program and supplementary support

from other institutions (McKay, Volz, and Wölfinger 2011, 21). ArMF staff conduct reviews of

member economies (Miyoshi 2013). Some analysts question whether ArMF monitoring is

sufficiently stringent (McKay, Volz, and Wölfinger 2011), but loan arrears remain small and

concentrated in countries facing unique challenges (e.g., Somalia, Syria, Sudan). The ArMF’s

17

governance structure is not unlike that of the BWIs insofar as larger contributors (Saudi Arabia,

Algeria, and Iraq) together hold 38.5% of votes. Average drawing volume by borrowers is very

small, and smaller, oil-importing members are the most frequent borrowers (Mühlich and Fritz

2016). The ArMF faced growing demands during the GFC, Arab Spring, and periods of rising

food and falling oil prices. Between 2009 and 2015, the institution approved 33 loans to eight

countries totaling US$3.5 billion—a substantial increase over prior activity.

Although the ArMF has no formal relationship with the IMF, the IMF provides technical

assistance (Rhee, Sumulong, and Vallée 2013). The institution’s Articles of Agreement charge it

with providing ‘complementary’ lender of last resort financing for some types of loans (Miyoshi

2013, 31-2). This explicitly complementary role is necessitated by the ArMF’s small

capitalization and is reflected in the frequent parallel use of the IMF and ArMF (Fritz and

Mühlich 2018). The ArMF’s resources could be increased significantly to provide more support

to poorer members given the resources of oil-exporting members.

The ArMF’s introduction of a new lending facility to address the fallout of the GFC

exemplifies pragmatic problem solving. The institution has a complementary and ambiguous

relationship to the BWIs. As with the BWIs, voice is linked to contribution. Some types of loans

involve conditionality and surveillance, though it is conducted by ArMF staff. Some loans

require complementary support from other institutions, including (but not limited to) the IMF.

The small size and frequent parallel drawings from the ArMF and IMF underscore their

complementary relationship. As with CMIM, FLAR, and indeed all EMDE liquidity support

institutions a dense network is developing among them and with the IMF.

Eurasian Fund for Stabilization and Development

Member countries of the Eurasian Economic Community created the Eurasian Fund for

Stabilization and Development (EFSD, formerly known as the Anti-Crisis Fund) in 2009 as the

GFC was unfolding. The EFSD makes loans to member governments to offset the effects of the

GFC, finance stabilization programs, and promote long-term economic stability. It also provides

development bank services in the form of loans to governments and firms for large interstate

projects. Votes at the EFSD are weighted by capital contributions. Russia contributes most of the

capital and holds 85% of the votes.

The Eurasian Development Bank manages EFSD resources and conducts borrower

surveillance (Rhee, Sumulong, and Vallée 2013, 224). All liquidity support disbursements are

18

tied to a heavily monitored adjustment program. Recipients are not required to work with the

IMF, though the EFSD claims that it is ‘guided’ by the IMF. It also uses IMF benchmarks when

assessing various matters, such as corporate governance. An EFSD annual report notes that the

manager ‘consulted with the IMF on a regular basis regarding economic policy guidelines for

Armenia, Belarus, Kyrgyz Republic, and Tajikistan,’ and that EFSD officials have been

discussing coordination initiatives with the Asian Development Bank and the BWIs since 2014

(EFSD website, annual report 2014,12). The EFSD does not extend credits to countries that are

in arrears to the IMF, other multilateral institutions, or EFSD members. However, the EFSD

extended a credit to Belarus when the IMF declined to do so.

The EFSD was created during the GFC as a hybrid institution to address two problems—

the need for liquidity support and long-term project finance. It recently introduced grants for

social programs, which blurs its already hybridized identity. It was explicitly modeled on the

IMF and the European Bank for Reconstruction and Development (Fritz and Mühlich 2018). For

that reason it is unsurprising that the EFSD, like the ArMF, follows the BWI model of tying

voice to contribution; remains firmly committed to conditionality and surveillance; and that IMF

benchmarks and the institution itself play a consultative role and provide technical advice.

The Contingent Reserve Arrangement

Cooperation, experimentation, and institution creation among the BRICS have evolved rapidly

since 2012. The first financial initiative was launched in 2012 when the five members of the

BRICS Exchanges Alliance began cross-listing benchmark equity index derivatives. In the same

year BRICS finance ministries agreed to encourage trade between members in bilateral

currencies and the group also began to discuss formation of a development bank.

In what became known as the Fortaleza Declaration, the group announced in 2014 that it

had reached agreement on two initiatives—the Contingent Reserve Arrangement (CRA) and the

New Development Bank (NDB).8 Long-standing frustration with the BWIs was explicit in the

Fortaleza Declaration, which stated that ‘International governance structures designed within a

different power configuration show increasingly evident signs of losing legitimacy and

effectiveness’ (BRICS 2014). Notwithstanding the bold language, the declaration also made

clear that the CRA and NDB were to be complements, not substitutes for the BWIs.

8 Intra-BRICS cooperation continues to evolve and stall (Wang 2018).

19

The CRA is meant to provide liquidity protection (including precautionary support)

through currency swaps to members during balance of payments crises. Pledges by China,

Brazil, India, and Russia to the CRA are nearly equal to their IMF quotas. No single member is

to have effective veto power over fundamental changes in the CRA. Criteria to be used in

decisions pertaining to support are still under development. Countries applying for support from

the CRA in amounts above 30% of their eligibility must be under an IMF program. The most

controversial aspect of the CRA rests precisely in the decision to replicate the CMIM-IMF link.

The launch of the CRA triggered an avalanche of commentary that broke down along the

lines of Hirschman’s possibilists and futilists. Futilists dismissed the empty symbolism of the

CRA, emphasizing the decision to replicate the CMIM-IMF link, the small size of CRA

resources relative to potential demands, and the dollar-based funding commitments to the CRA

that reinforce the currency’s global role (Chandrasekhar 2014). Skeptics emphasize what they

see as fatal internal tensions that will continue to disrupt the group’s cohesiveness and its

potential to transform financial governance (Huotari and Hanemann 2014). Others emphasize the

‘subimperial’ tendencies of the group while still others dismiss the BRICS in light of growth

slowdowns (Bond 2016).

Possibilists are not persuaded. In the possibilist view, the CRA (warts and all) is part of

an evolving, fragmenting GFA in which institutional experimentation is becoming the ‘new

normal.’ From this perspective, the CRA complements existing institutions and advances the

growing disbursal of economic power while holding the potential to increase the voice of

EMDEs in the BWIs and GFA either directly or through the leverage associated with forum

shopping (Armijo and Roberts 2014, Grabel 2013, Stuenkel 2016). For possibilists, the CRA is

one among many parallel experiments that provide opportunities for learning, problem solving,

and deepening networks even while recognizing that the impact of the BRICS and their various

initiatives will be uneven and contradictory, reflecting enduring tensions within each of its

member states, among its members, and between members and other actors. But that is equally

true of all complex institutions and their endeavors—they are not adequately described by

exclusive reference to their formal mission statements or just one aspect of their practice.

It is unrealistic to treat the BRICS initiatives as a challenge to the US and the BWIs. That

said, the BRICS group has often managed to work around differences and persistent fissures to

reach consensus. And the continual evolution in the BRICS agenda and institutional creation is

20

suggestive of commitment and capacity to engage in problem solving. It is also true that critical

issues (e.g., China’s voice and the CRA-IMF link) must be addressed before the CRA can

disburse funds. But these obstacles are not insurmountable, though a slowdown in several

BRICS economies and the rightward shift of Brazil’s government may slow progress. Despite

the inevitable false starts and reversals the CRA may ultimately develop independent, well-

resourced, and technically competent surveillance capacity and as that occurs, the IMF link may

lessen or be eliminated. For these reasons, the CRA may carry potential to catalyze change

through its own internal performance, learning, through competition or cooperation with other

liquidity arrangements, and through the example it sets for other institutions (Griffith-Jones,

Fritz, and Cintra 2014).

Development Banks

Development banks in EMDEs were created to address the shortage of project and infrastructure

finance, which remains a critical deficiency of the GFA. Discussion here is brief for reasons of

space and because the activities of EMDE and especially Chinese-led development banks are

well known and discussed extensively in the symposium.

Banks That Predated the GFC

Several EMDE development banks vastly expanded their capacity to provide project finance in

response to the problems caused by the flight of private lenders from markets. The expansion of

disbursements played a critical role in sustaining investment and the economy during the GFC.

Examples include the Banco de Desarrollo de América Latina (known by the acronym CAF, for

its original name Corporacion Andina de Fomento--Andean Development Corporation), the

Banco Nacional de Desenvolvimento Econômico e Social (BNDES)-Brazil National Bank of

Economic and Social Development, and the China Development Bank (CDB). CAF could

increase disbursements because it raised new paid-in capital from members in 2009 and 2015.

These three institutions (along with Western multilateral development banks, MDBs)

adopted a pragmatic new role in response to the GFC. This involved increased disbursements of

shorter-term loans and other forms of financing (e.g., trade credits) that had countercyclical

effects. This new role broadened institutional identity. The provision of medium and long-term

project finance when private finance disappeared also played a stabilizing role. In 2015, the CAF

increased its countercyclical activity through what it called fast disbursing and contingent

21

operations of US$2.4 billion. The CAF also expanded its capacity by introducing two new

financial products to support infrastructure finance.

Under Brazil’s former President Lula da Silva, BNDES began to provide countercyclical

finance. BNDES’ countercyclical role became more important during the GFC. BNDES

increased disbursements, coordinated actions with private banks to support distressed firms, and

took other measures to channel liquidity to small and medium-sized banks that were under stress

(Armijo 2017).

The CDB undertook strongly countercyclical initiatives during the crisis by lending

actively in the domestic market and providing support for the country’s export performance. As

signs of an economic slowdown and financial fragility became apparent in 2015 the CDB

responded with new countercyclical support that supplemented other government measures.

During the crisis China launched a variety of bilateral financial initiatives in EMDEs through its

policy banks, especially the CDB, but also the Export-Import Bank (XMB) (Chin and Gallagher

2018). The CDB and XMB together have lent more to EMDEs than the Western MDBs

combined (ibid.). Many of these loans support infrastructure and energy development in EMDEs

and China’s access to raw materials.

The CAF, BNDES, and CDB also increased linkages with other EMDE and Western

MDBs (e.g., through cooperative agreements and co-financing). This parallels developments in

EMDE liquidity support. The CAF signed cooperative agreements with the Green Climate Fund

and the Global Environment Facility, reflecting an increasing emphasis on sustainable financing.

BNDES began to cooperate with Western MDBs and national development banks in the BRICS

countries. The CDB partnered with other Chinese-led initiatives, such as the Asian Infrastructure

Investment Bank (AIIB) and via other partnerships that support the Belt and Road Initiative.

The CAF is becoming increasingly important as a source of capital, though its size makes

it complementary to Western MDBs (Ray and Kamal 2018, this symposium). CAF issues a large

percentage of its bonds in local currencies, which reduces currency risk for borrowers and breaks

with the norms of the Western MDBs. The CDB and XMB lend in dollars and RMB, and there

are plans to lend in local currencies (Chin and Gallagher 2018). The future of BNDES is

uncertain, though not promising, owing to the economic slowdown, scandals that have

undermined support for BNDES, and the current government’s tilt toward the market.

Banks Created During the GFC

22

China was central in the launch of the NDB and is the driver of the AIIB. The NDB finances

investment in infrastructure and sustainable development in the BRICS with an eye toward

allowing other EMDEs to buy in and apply for funding in the future. The NDB approved its first

loans in 2016. Loans have supported small-scale renewable energy and transportation-related

projects and have been made in dollars and ‘green’ RMB-denominated bonds issued in the

Chinese market. The institution received approval from member governments to develop local

currency bond offerings in the Indian, Russian, and South African markets, though these have

not yet been issued. The NDB’s loan portfolio capacity is projected to reach about US$45-65

billion by 2025 (Humphrey 2015). Some analysts suggest that NDB loans could dwarf those of

the World Bank in the next several decades, especially if membership is broadened and the

institution co-finances loans with governments and private investors.9

Simultaneous with its involvement in BRICS initiatives the Chinese government

launched the AIIB in 2016, the equally ambitious Belt and Road initiative, and at least 13

regional or bilateral funds that will radically increase Chinese development, energy, and

infrastructure finance abroad (Gallagher, Kamal, and Wang 2016, 1). The AIIB represents the

largest of China’s contributions to the evolving institutional landscape. Chinese and BWI

officials have made it clear that they see the AIIB as complementary to the Western MDBs. The

decision by the US and Japan not to join suggests that they see it differently.

Taken together, China’s multiplicity of national, bilateral, and transnational initiatives

increase incoherence and redundancy in the GFA. This is because China-led institutions use

diverse operating models: the XMB, CDB, and NDB break in important ways with the norms of

the BWIs and Western MDBs, whereas the AIIB hews more closely to the BWIs playbook

(Wang 2018, Chin and Gallagher 2018). The array of China-led institutions is complementing,

competing, and above all complicating the traditional Bretton Woods landscape, where the line

between AE lending and EMDE borrowing used to be clearly drawn. By all indicators China is

‘poised to be the largest development [and infrastructure] lender in the world’ (Gallagher,

Kamal, and Wang 2016, 1). China’s initiatives express the foreign policy ambitions and

economic objectives of its leadership. They can also be understood as a pragmatic effort to

respond to the infrastructure finance gap and limited voice of China and other EMDEs at the

BWIs and Western MDBs. China has long used incremental strategies and parallel 9 Discussions of the NDB break down along the same futilist and possibilist lines as with the CRA..

23

experimentation, and this experience makes it well suited for its new role in transforming the

development banking landscape (Kozul-Wright and Poon 2015). China is also learning (by doing

and learning from others) about infrastructure and energy finance. Clearly much remains to be

learned when we consider overlending and the environmental footprint of the projects being

financed by China-led institutions.

CONCLUSION

We look out at a world where incoherence, aperture, and conflict pose grave risks. But it is naïve

to think that coherent regimes--such as the monolithic GFA centered on the US and the BWIs--

should be the basis of nostalgic longings to restore order and clarity to the GFA. After all would

it be better for EMDEs if the Trump administration had at its disposal a streamlined Bretton

Woods architecture through which it could leverage its power to constrain policy autonomy,

frustrate progress on the SDGs, and otherwise wreak havoc? And would the aspirations of

EMDEs be better served by the institutionally sparse and centripetal character of the BWIs

during the 1980s and 1990s? That said, those advocating a Hirschmanian reading cannot dodge

the risks of the present conjuncture. Especially today, in the wake of Brexit, nationalist party

success in Europe, and the Trump administration’s attack on the rule of law and effort to

dismantle the institutions of multilateralism, it is not at all difficult to imagine a deglobalized

world of increased autonomy marked by the proliferation of nationalist beggar-thy-neighbor

policies and contagious economic instability.

Incoherence, redundancy, and pluripolarity entail unique and important risks. Institutions

may work at cross-purposes, especially during crisis moments, undermining each other’s efforts

and/or imposing cross-border spillovers that disrupt each other’s economies. Destabilization may

deepen if there are uncertainties about where responsibility lies (and who is responsible for what

measures) during crisis. Similarly, uncertainties or conflict around rules of engagement and

leadership can deepen instability during a crisis, as the Troika experience demonstrates.

Experience with these risks surely drives the IMF’s new engagement with EMDE institutions

(IMF 2017a, Henning 2018). The performance of the global safety net can be enhanced not just

through cooperation and coordination, but also through broad use of test runs as with CMIM-

AMRO.

We should consider the present moment an interregnum between an era dominated by a

dysfunctional Bretton Woods monoculture that underserved EMDEs and ‘something else,’ the

24

parameters of which are as of yet unknown and unknowable. It is safe to assume that the

institutions surveyed here (and in the symposium) are not likely to meld into a new, coherent

system of developmental finance that resembles the pre-GFC world. The initiatives that are

emerging are fragmentary and heterogeneous, some are internally fraught with rivalry and

suspicion, and many are no doubt marked by the same kinds of ambiguity as the BWIs, where

gritty, muddled day-to-day practice conflicts with coherent, pristine mission statements.

I do not take these features as fatal flaws or as support for the continuity thesis. Instead,

guided by Hirschman, I recognize the present period of institutional experimentation, expansion,

problem solving, hybridization, and network creation as a moment of pragmatic innovation that

just might yield institutions, practices, and networks that do better than their predecessors in

promoting financial stability and resilience, and as a consequence of that, provide the possibility

for development that is more stable, inclusive, sustainable, and protective of autonomy. With

Hirschman, I place emphasis on the potential that unscripted adjustments have to enhance

possibilities for learning, network creation, and autonomy-enhancing development.

At a minimum, the flourishing of heterogeneous EMDE institutions generates

opportunities for exit from unresponsive institutions and forum shopping. As a consequence, the

evolutionary changes and discontinuities considered here may increase EMDE resilience,

bargaining power, and voice vis-à-vis the BWIs. To the extent that opportunities for forum

shopping are realized, the BWIs may face pressure to respond to long-held concerns. In any

event, the leverage of larger EMDEs in global and regional financial governance is increasing as

several of the institutions surveyed and especially Chinese-led institutions have come to play a

more prominent role. The vacuum created by the US’ turn from multilateralism suggests that

there will be both greater space and greater need for China and others to step into the void.

The emerging productive redundancy threatens the apparent efficiency of the

streamlined, top-down, centralized Bretton Woods dominated world, which promised efficiency

but in fact generated extraordinary risk and crisis contagion while starving EMDEs of adequate

developmental finance. Redundancy and networks of cooperation may increase overall resilience

because it increases the size and range of liquidity support opportunities while also providing

new avenues to secure finance for infrastructure, energy and at least some of the SDGs.

Engineers naturally understand the need for redundancy in safety systems to ensure that the

systems do well when placed under intense stress. The increasingly dense and networked

25

developmental finance landscape is prudent in the very same way, even if they are by no means

adequate in their current form to ensure stability.

The new initiatives provide Hirschmanian opportunities—for learning by doing and

learning from others, parallel experimentation, and providential problem solving that only comes

about as a consequence of the Hiding Hand. The next crisis may propel new initiatives and a

deepening of embryonic institutions and partnerships that speak to challenges that now appear

irresolvable (such as challenges around the IMF that have dogged CMIM and others). Moreover,

the proliferation of institutions is vital to the creation of new networks within countries and

across national borders that can enhance indigenous and widely dispersed capacity in areas that

are fundamental to autonomy-promoting development. I must reiterate in this context that even

experimental failures can and often do leave in their wake vital linkages and knowledge that may

be available for and enable subsequent endeavors. Ad hoc, pragmatic adjustments and

discontinuities rather than a tightly constrained choreography—that is what Hirschman put his

faith in, messy though it may be. And that is what is just what is emerging across the landscape

of developmental finance.

26

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