Each time is different! the shifting boundaries of emerging market Debt

Global Society

Volumn 26, Issue 1, 2012, Pages 123-143

  Rethel, Lena ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

DEBT; DEVELOPING WORLD; FINANCIAL CRISIS; REFORM PROCESS;

EID: 84857092388     PISSN: 13600826     EISSN: 1469798X     Source Type: Journal    
DOI: 10.1080/13600826.2011.629989     Document Type: Article

References (112)

1. Oliver Wyman, The Financial Crisis of 2015. An Avoidable History, available:,http://www.oliverwyman.com/ow/pdf_files/OW_EN_FS_Publ_2011_State_of_Financial_Services_2011_US_Web.pdf. (accessed 1 May 2011).
2. Suvojit Bagcha, "Punjab Suicides Cast Shadow on Poll", BBC News, 12 April 2009, available: http://news.bbc.co.uk/1/hi/world/south_asia/7992327.stm. (accessed 1 May 2011).
3. See, e.g., Charles P. Kindleberger, Manias, Panics and Crashes. A History of Financial Crises, 4th ed. (Basingstoke: Palgrave, 2000)
4. Barry Eichengreen, Capital Flows and Crises (Cambridge, MA: The MIT Press, 2004).
5. See, e.g., James Brassett, Lena Rethel and Matthew Watson, "The Political Economy of the Subprime Crisis: The Economics, Politics and Ethics of Response", New Political Economy, Vol. 15, No. 1 (2010), pp. 1-7
6. James Brassett, Lena Rethel and Matthew Watson, "Introduction to the Political Economy of the Subprime Crisis in Britain: Constructing and Contesting Competence", British Journal of Politics and International Relations, Vol. 11, No. 3 (2009), pp. 377-381
7. Robert H. Wade, "The First-world Debt Crisis of 2007-2010 in Global Perspective", Challenge, Vol. 51, No. 4 (2008), pp. 23-54
8. Cf. Marieke de Goede, Virtue, Fortune and Faith. A Genealogy of Finance (Minneapolis: University of Minnesota Press, 2005).
9. Within this special issue, this task of repoliticising financial crises is also at the forefront of James Brassett and Nick Vaughan-Williams, "Crisis Is Governance: Sub-prime, the Traumatic Event, and Bare Life".
10. Carmen Reinhart and Kenneth Rogoff, This Time Is Different. Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2009)
11. Despite the regular occurrence of financial crises, it is a common characteristic of the period in the run up to a financial crisis that it is widely maintained that "this time is different", only to end in the typical crisis boom and bust cycle. This eponymous book serves as a harsh critique of the "this time is different" mentality by emphasising the continuity of periodic financial troubles over the centuries. This article agrees with Reinhart and Rogoff on the recurrent character of financial crises and the inherent instability of financial markets. It thus concedes that there is a high degree of continuity, at least on the abstract level, when it comes to the pathology of financial crises. Nevertheless it also suggests that an overly heavy focus on continuity bears the risk of ignoring the fact that each financial crisis has been a unique social experience and that the costs of crisis have been and can be borne in very different ways.
12. Reinhart and Rogoff, op. cit., pp. 136-137
13. See also Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (New York and London: W.W. Norton, 2009), p. 30.
14. Understanding this bias also helps to explain the controversial policy recommendations made by the IMF during the Asian financial crisis, especially policy prescriptions to cut government spending even though overall government deficits were low.
15. Cf. Jeffrey M. Chwieroth, Capital Ideas: The IMF and the Rise of Financial Liberalization (Princeton, NJ: Princeton University Press, 2010)
16. Mark Blyth, Great Transformations. Economic Ideas and Institutional Change in the Twentieth Century (Cambridge: Cambridge University Press, 2002).
17. Reinhart and Rogoff, op. cit., refer to domestic government debt.
18. The situation is even more dire when it comes to emerging market corporate and household debt. For a recent overview of the "state of the art" of developing country debt crises in the economics literature
19. see Barry Herman, Jose Antonio Ocampo and Shari Spiegel (eds), Overcoming Developing Country Debt Crises (Oxford: Oxford University Press, 2010). The issue of rising household debt in developing countries is not even mentioned.
20. See, e.g., McKinsey Global Institute, Debt and Deleveragig: The Global Credit Bubble and Its Economic Consequences, available at:,http://www.mckinsey.com/Insights/MGI/Research/Financial_Markets/Debt_and_deleveraging_The_global_credit_bubble_Update. (accessed 1 May 2011).
21. For a recent contribution see, e.g., Thomas Oatley, "Political Institutions and Foreign Debt in the Developing World", International Studies Quarterly, Vol. 54, No. 1 (2010), pp. 175-195.
22. To get a flavour of this literature see, e.g., Stephan Haggard, The Political Economy of the Asian Financial Crisis (Washington, DC: Institute for International Economics, 2000)
23. Robert H. Wade, "The Asian Debt-and-Development Crisis of 1997-?: Causes and Consequences", World Development, Vol. 26, No. 8 (1998), pp. 1535-1553
24. Stephan Haggard, Chung H. Lee and Sylvia Maxfield (eds), The Politics of Finance in Developing Countries (Ithaca, NY: Cornell University Press, 1994)
25. Jeffry A. Frieden, Debt, Development and Democracy. Modern Political Economy and Latin America, 1965-1985 (Princeton, NJ: Princeton University Press, 1991)
26. Vinod K. Aggarwal, Debt Games: Strategic Interaction in International Debt Rescheduling (Cambridge: Cambridge University Press, 1996)
27. Thomas Biersteker (ed.), Dealing with Debt: International Financial Negotiations and Adjustment Bargaining (San Francisco: Westview Press, 1993)
28. Nancy Birdsall and John Williamson, Delivering on Debt Relief: From IMF Gold to a New Aid Architecture (Washington, DC: Center for Global Development, Institute for International Economics, 2002)
29. Miles Kahler, "Politics and International Debt: Explaining the Crisis", International Organization, Vol. 39, No. 3 (1985), pp. 357-382
30. Charles Lipson, "The International Organization of ThirdWorld Debt", International Organization, Vol. 35, No. 4 (1981), pp. 603-631
31. Barbara Stallings (ed.), Debt and Democracy in Latin America (Boulder, CO: Westview Press, 1989)
32. Christian Suter, Debt Cycles in the World-Economy: Foreign Loans, Financial Crises, and Debt Settlements, 1820-1990 (Boulder, CO: Westview Press, 1992).
33. See Donna Lee, "Global Trade Governance and the Challenges of African Activism in the Doha Development Agenda Negotiations", this issue, for a more in-depth discussion and application to the international trade regime.
34. Mark Blyth, "Torn between Two Lovers? Caught in the Middle of British and American IPE", New Political Economy, Vol. 14, No. 3 (2009), pp. 329-336.
35. Benjamin J. Cohen, "The Transatlantic Divide: Why Are American and British IPE so Different?", Review of International Political Economy, Vol. 14, No. 2 (2007), pp. 197-219.
36. It thus also constitutes yet another attempt to challenge the disciplinary boundaries and common senses of IR/IPE more generally.
37. Cf. Michael J. Shapiro and Hayward R. Alker, Challenging Boundaries. Global Flows, Territorial Identities (Minneapolis and London: University of Minnesota Press, 1996).
38. Cf. John M. Hobson and Leonard Seabrooke (eds), Everyday Politics of the World Economy (Cambridge: Cambridge University Press, 2007).
39. See also Manuela Moschella, "IMF Surveillance in Crisis. The Past, Present, and Future of the Reform Process", this issue
40. World Bank, World Development Report 2002. Building Institutions for Markets (Washington, DC: The World Bank, 2002), esp. chapter 4, pp. 75-96.
41. William Cline, International Debt Reexamined (Washington, DC: Institute for International Economics, 1995)
42. Raúl L. Madrid, Overexposed. US Banks Confront the Third World Debt Crisis (Boulder, CO:Westview Press, 1992)
43. Graham Bird, Commercial Bank Lending and Third World Debt (London: Macmillan, 1989).
44. On the series of defaults on emerging market bonds in the 1820s see, e.g., Frank G. Dawson, The First Latin American Debt Crisis. The City of London and the 1822-25 Loan Bubble (New Haven and London: Yale University Press, 1990).
45. Barry Eichengreen and Peter H. Lindert (eds), The International Debt Crisis in Historical Perspective (Cambridge, MA: The MIT Press, 1989).
46. Susan Strange, Casino Capitalism (Oxford: Basil Blackwell, 1986).
47. See, e.g., Paolo Mauro and Yishay Yafeh, "The Corporation of Foreign Bondholders", IMF Working Paper No. 03/107 (1 May 2003)
48. Barry Eichengreen and Richard Portes, Crisis? What Crisis? Orderly Workouts for Sovereign Debtors (London: Centre for Economic Policy Research, 1995); Christine
49. A. Kearney, "The Creditor Clubs: Paris and London", in Thomas Biersteker (ed.), Dealing with Debt: International Financial Negotiations and Adjustment Bargaining (San Francisco: Westview Press, 1993), pp. 61-76.
50. World Bank, Global Development Finance: Striving for Stability in Development Finance, 2 volumes (Washington, DC: Worldbank, 2003)
51. Frieden, op. cit
52. Madrid, op. cit.
53. See, e.g., the contributions in Haggard et al., op. cit.
54. and in Joan M. Nelson (ed.), Economic Crisis and Policy Choice: The Politics of Adjustment in Less Developed Countries (Princeton, NJ: Princeton University Press, 1990).
55. Rawi Abdelal, Capital Rules. The Construction of Global Finance (Cambridge, MA: Harvard University Press, 2007), p. 231
56. cf. V.V. Chari and Patrick Kehoe, "Hot Money", NBER Working Paper 6007 (1997)
57. Hali Edison and Carmen M. Reinhart, "Stopping Hot Money", Journal of Development Economics, Vol. 66, No. 2 (2001), pp. 533-553
58. Lucio Sarno and Mark P. Taylor, "Hot Money, Accounting Labels and the Permanence of Capital Flows to Developing Countries: An Empirical Investigation", Journal of Development Economics, Vol. 59, No. 2 (1999), pp. 337-364.
59. Cf. Iain Hardie, "The Power of Markets? The International Bond Markets and the 2002 Elections in Brazil", Review of International Political Economy, Vol. 13, No. 1 (2006), pp. 53-77
60. Layna Mosley, Global Capital, National Governments (Cambridge: Cambridge University Press, 2003).
61. The pesofication of Argentine debt in 2002 provides an example of this trend. See Luc Laeven and Thomas Laryea, "Principles of Household Debt Restructuring", IMF Staff Position Note SPN/09/15 (26 June 2009).
62. Lena Rethel, "The New Financial Development Paradigmand Asian Bond Markets", New Political Economy, Vol. 15, No. 1 (2010), pp. 493-517.
63. Edward S. Steinfeld, "Market Visions: The Interplay of Ideas and Institutions in Chinese Financial Restructuring", Political Studies, Vol. 52, No. 4 (2004), pp. 643-663.
64. Rethel, "The New Financial Development Paradigm", op. cit.
65. Barry Eichengreen and Ricardo Hausmann (eds), Other People's Money. Debt Denomination and Financial Instability in Emerging Market Economies (Chicago: The University of Chicago Press, 2005).
66. James A. Hanson, "The Growth in Government Domestic Debt: Changing Burdens and Risks",
67. World Bank Policy Research Working Paper WPS4348 (September 2007).
68. Jeffrey Carmichael and Michael Pomerleano, The Development and Regulation of Non-Bank Financial Institutions (Washington, DC: The World Bank, 2002).
69. Hanson, op. cit., p. 4.
70. Stephen Gill and David Law, "Global Hegemony and the Structural Power of Capital", International Studies Quarterly, Vol. 33, No. 4 (1989), pp. 475-499.
71. World Bank, Global Development Finance, op. cit.
72. see also Liam Clegg, "Post-crisis Reform at the IMF: Learning to Be (Seen to Be) a Long-term Development Partner", this issue.
73. See, e.g., Kathryn C. Lavelle, The Politics of Equity Finance in Emerging Markets (Oxford: Oxford University Press, 2004).
74. Anita Doraisami, "The Political Economy of Capital Flows and Capital Controls in Malaysia", Journal of Contemporary Asia, Vol. 35, No. 2 (2005), p. 255.
75. See also Rawi Abdelal and Laura Alfaro, Capital and Control: Lessons from Malaysia", Challenge, Vol. 46, No. 4 (2003), pp. 36-53.
76. IMF, Global Financial Stability Report. Market Developments and Issues (Washington, DC: The International Monetary Fund, September 2006), p. 46.
77. Lena RethelLena Rethel, "Financialisation and the Malaysian Political Economy", Globalizations, Vol. 7, No. 4 (2010), pp. 461-478.
78. James Crotty and Kang-Kook Lee, "The Effects of Neoliberal 'Reforms' on the Postcrisis Korean Economy", Review of Radical Political Economics, Vol. 38, No. 3 (2006), pp. 381-387.
79. Ismail Ertürk and Stefano Solari, "Banks as Continuous Reinvention", New Political Economy, Vol.12, No. 3 (2007), pp. 369-388.
80. Lena Rethel, "The New Financial Development Paradigm", op. cit.
81. As always there is an exception to the trend, with large swathes of emerging Eastern European household debt being denominated in foreign currency ("A Glow from the East", The Economist, 28 August 2010).
82. McKinsey Global Institute, op. cit.
83. Paul Langley, "In the Eye of the 'Perfect Storm': The Final Salary Pensions Crisis and Financialisation of Anglo-American Capitalism", New Political Economy, Vol. 9, No. 4 (2004), p. 554.
84. See Candace C. Archer, "Responses to Financial Crises: An Evolutionary Perspective", Global Society, Vol. 23, No. 2 (2009), pp. 105-127
85. and André J. Broome, "When Do NGOs Matter? Activist Organisations as a Source of Change in the International Debt Regime", Global Society, Vol. 23, No. 1 (2009), pp. 59-78.
86. Wesley W. Widmaier, Mark Blyth and Leonard Seabrooke, "Exogenous Shocks or Endogenous Constructions? The Meanings of Wars and Crises", International Studies Quarterly, Vol. 51, No. 4 (2007), pp. 747-759.
87. Eleni Tsingou, "Transnational Private Governance and the Basel Process: Banking, Regulation, Private Interests and Basel II", in Andreas Nölke and Jean C. Graz (eds), Transnational Private Governance and Its Limits (London: Routledge, 2007), pp. 58-68.
88. Even though Malaysia introduced capital controls in 1998, these were always intended as only a temporary measure. See Government of Malaysia, White Paper. Status of the Malaysian Economy (Kuala Lumpur: Percetakan Nasional Malaysia Bhd., 6 April 1999).
89. Leonard Seabrooke, "What Do I Get? The Everyday Politics of Expectations and the Subprime Crisis", New Political Economy, Vol. 15, No. 1 (2010), pp. 51-70.
90. Reinhart and Rogoff, op. cit., p. 160.
91. Brassett et al., "Introduction to the Political Economy of the Subprime Crisis"
92. Laeven and Laryea, op. cit.
93. Rethel, "Financialisation and the Malaysian Political Economy", op. cit. Available:,http://data.worldbank.org/indicator/IC.CRD.PRVT.ZS. (accessed 30 August 2010).
94. Paul Langley, The Everyday Life of Global Finance. Saving and Borrowing in Anglo-America (Oxford: Oxford University Press, 2008).
95. Rethel, "Financialisation and the Malaysian Political Economy"
96. Robert Boyer, "Assessing the Impact of Fair Value upon Financial Crises", Socio-Economic Review, Vol. 5, No. 4 (2007), pp. 788-789.
97. Shaun French and Andrew Leyshon, "The New, New Financial System: Towards a Conceptualization of Financial Reintermediation", Review of International Political Economy, Vol. 11, No. 2 (2004), p. 270.
98. OECD, "Policy Brief: Financing SMEs and Entrepreneurs", OECD Observer (November 2006).
99. As they are in many emerging market economies. See, e.g., Ben Thirkell-White, "Indonesia and Malaysia: The Persistence of a Domestic Politico-Business Class", in Justin Robertson (ed.), Power and Politics after Financial Crisis: Rethinking Foreign Opportunism in Emerging Markets (Basingstoke: Palgrave Macmillan, 2008), pp. 187-211
100. Lavelle, op. cit.
101. Edmund T. Gomez and Jomo Kwame Sundaram, Malaysia's Political Economy. Politics, Patronage and Profits (Cambridge: Cambridge University Press, 1997).
102. Reinhart and Rogoff, op. cit., pp. 170, 232.
103. As chapter 3 of the April 2008 Global Financial Stability Report is entitled. See IMF, Global Financial Stability Report. Containing Systemic Risks and Restoring Financial Soundness (Washington, DC: The International Monetary Fund, April 2008).
104. Jacqueline Best, "The Limits of Financial Risk Management: Or, What We Didn't Learn from the Asian Crisis", New Political Economy, Vol. 15, No. 1 (2010), pp. 29-49.
105. Cf. Thomas Laryea, "Approaches to Corporate Debt Restructuring in the Wake of Financial Crises", IMF Staff Position Note SPN/10/02 (26 January 2010)
106. Laeven and Laryea, op. cit.
107. Lena Rethel, "Whose Legitimacy? Islamic Finance and the Global Financial Order", Review of International Political Economy, Vol. 18, No. 1 (2011), pp. 75-98
108. cf. Timothy J. Sinclair, The New Masters of Capital. American Bond Rating Agencies and the Politics of Creditworthiness (Ithaca, NY: Cornell University Press, 2005).
109. Grahame F. Thompson, "'Financial Globalisation' and the 'Crisis': A Critical Assessment and 'What is to be Done'?", New Political Economy, Vol. 15, No. 1 (2010), pp. 127-145.
110. Cf. Nicola Phillips (ed.), Globalizing International Political Economy (Basingstoke: Palgrave, 2005);
111. James Brassett and Christopher Holmes, "International Political Economy and the Question of Ethics",
112. Review of International Political Economy, Vol. 17, No. 3 (2010), pp. 425-453.