## postelnyak-june24 ## Source details **Canonical URL:** [postelnyak-june24](https://www.imf.org/-/media/files/publications/fandd/article/2024/06/postelnyak-june24.pdf) ## Other formats - [Markdown version](/-/media/files/publications/fandd/article/2024/06/postelnyak-june24.pdf.md) - [Structured JSON version](/-/media/files/publications/fandd/article/2024/06/postelnyak-june24.pdf.json) --- ### The beginnings (1964–late 1960s) - F&D debut: June 1964. - Intended audience: government officials, bankers, journalists, and students; initially envisioned as a Fund-only product but launched as a joint publication with the World Bank. - Early mission: provide less technical information about the World Bank and the IMF, including origins, financial structures, operations, and explanations of Fund jargon such as Stand-By Arrangements, balance of payments deficits, and multiple currency practices. - Coverage emphasis: Bank-funded project profiles and practicalities of lending for development; portrayal of projects as symbols of modernity and prosperity. - Notable editorial and visual developments: - First illustrated cover: March 1968 (Kenyan villagers at a World Bank–financed water tap). - September 1968: article on irrigation dams in Mexico. - March 1968 and later issues increased use of photographs, maps, charts, and illustrations. - Intellectual debates: - Coverage of Gunnar Myrdal’s 1968 Asian Drama and subsequent Bank rejoinder in June 1969. - By 1970, Robert S. McNamara called for development indicators “that go beyond the measure of growth in total output and provide practical yardsticks of change in the other economic, social, and moral dimensions of the modernizing process.” - Bretton Woods and SDRs: - 1966 article celebrated 20 years of fixed exchange rates, but system under strain. - Special drawing rights (SDRs) featured on the December 1969 cover. - Circulation growth: - Between 1964 and 1968, circulation in English, French, and Spanish rose from 20,000 to 85,000. ### The turbulent 1970s - Global context: collapse of Bretton Woods system, massive oil price shocks, international terrorism. - Institutional change: - Second Amendment to the IMF’s Articles of Agreement (1978) allowed members to choose fixed or floating exchange rate regimes. - IMF surveillance scope expanded to include domestic policies; later broadened to topics like gender equality, governance, and climate change. - IMF lending and policy responses: - Creation of the Extended Fund Facility for longer arrangements and first concessional trust fund (featured in December 1976 issue). - Recycling of petrodollars: IMF supplemented quota resources with funds borrowed from oil exporters. - World Bank evolution: - Shift from large engineering projects to multifaceted operations aimed at small farmers and social services (education, health, irrigation, public transportation). - Editorial and thematic innovations: - June 1975: Arabic language edition added. - New topics spotlighted: weather’s role in development (1969 article), women’s role in economic development (December 1971), guest workers in Europe. - Visual experimentation with fonts and formats (e.g., March 1973). ### The 1980s: The lost decade - Global shocks and policy environment: - Tight US monetary policy at end-1970s led to soaring global interest rates and debt crises in developing economies. - IMF emphasis on “conditionality” and timely, orderly adjustment to avoid piling on debt. - World Bank policy shifts: - Introduction of structural adjustment loans providing budget support for economic reforms; focus on restoring internal and external balance via fiscal consolidation, monetary discipline, devaluation, privatization, and liberalization. - Controversies and distributional concerns: - Critics argued strict conditionality exacerbated hardship for the poor; recognition that programs needed measures to protect the most vulnerable to be politically sustainable. - Debt strategy evolution: - From adjustment focus to the 1985 Baker Plan (grow out of debt) to acceptance under the 1989 Brady Plan and Paris Club Toronto terms that debt relief was necessary. - Environmental and editorial changes: - Growing World Bank involvement in environmental concerns (small unit established in 1970; emphasis increased under Barber Conable, 1986–91). - Opening to external authors beginning June 1983 (Nicholas Kaldor), with guest articles clearly identified to distinguish institutional views. ### The 1990s: Transition - Major theme: fall of communism and transition to market economies. - F&D coverage of A Study of the Soviet Economy and promotion of “shock-therapy” for transition in 1990–91 context. - Transition issues covered: fiscal consolidation, monetary reform, privatization, reorientation of industries, corporate governance. - Emerging markets and crises: - Adoption of liberalization and capital account opening led to crises: 1994 Mexico devaluation followed by Thailand, Korea, Indonesia, Russia, Brazil, Argentina, Uruguay, and Türkiye. - Identified vulnerability: balance sheet mismatches (dollar-denominated loans vs. local-currency assets). - 1997–98 Asian Crisis prompted IMF reforms documented in June 1998 F&D; led to initiatives such as standards and codes, the Financial Sector Assessment Program, and early-warning systems. - Poverty focus and institutional changes: - Recognition that macroeconomic stability is necessary but not sufficient for poverty reduction. - Enhanced Structural Adjustment Facility became the Poverty Reduction and Growth Facility; participatory poverty reduction strategies emphasized program ownership. - Debt relief initiatives: Heavily Indebted Poor Countries Initiative and the later Multilateral Debt Relief Initiative. - Publication and partnership changes: - World Bank withdrew from F&D partnership soon after James Wolfensohn’s 1995 arrival; IMF financed F&D alone thereafter. - Visual enhancements: four-color printing and arresting covers. - March 1996: F&D began supplementing print with digital content. - Circulation metric: - F&D had 110,000+ subscribers following the transition. ### Into the new millennium (2000s) - Editorial evolution: - With greater transparency and publication of IMF documents, F&D shifted from being a mouthpiece to a platform for debate by leading experts; issues became more thematic. - Emerging markets’ rise: - Asian economies recovered from crises; China and India emerged as growth engines. - Major emerging markets increased share of world output but held a minority of IMF quotas and pressed for greater representation. - Trade and globalization: - East Asia’s export-led boom, especially China after its 2001 World Trade Organization accession, fueled protectionist backlash in advanced economies. - IMF and World Bank continued to champion trade and globalization (reference to Trading Up, F&D September 2002). ### Roots of the 2008 crisis and the triple bubble - Trade liberalization was viewed as the prescription for poorer countries; advanced economy workers’ job-loss worries were often dismissed on the grounds that “trade creates enough winners that they could compensate losers.” - Asia’s rise manifested in “global imbalances”—principally, China’s surplus and the US deficit—leading to trade and exchange rate frictions and prompting the IMF in 2006 to convene its first Multilateral Consultation. - The imbalances were a symptom rather than the root cause; by the mid-2000s the world economy was booming only because of a triple bubble: - “Excess saving and production in Asia could be sustained only by the huge current account deficit of the United States, which became the consumer of last resort.” - “Stagnating real wages and a declining share of labor income in the US—including as a result of manufacturing jobs moving to emerging markets—meant that middle-class consumption could be sustained only by ever-increasing amounts of consumer credit (often in the form of equity withdrawals from rising house prices).” - “In the euro area, a similar bubble sustained northern European surpluses and southern European deficits.” - Financial sector excesses and poor regulation enabled and exacerbated these bubbles. - F&D and most observers failed to “connect the dots” and did not foresee that bursting bubbles would lead to the worst crisis since the Great Depression. ### Crisis recognition, IMF response, and recovery - Early warnings and coverage: - F&D’s June 2008 issue identified opaque, complex mortgage-backed securities, excessive leverage, and regulatory failures as sources of US financial problems even before Lehman Brothers’ bankruptcy triggered global panic. - After September 2008, F&D’s December 2008 issue covered the crisis spread globally. - IMF responses detailed in the magazine included: - Overhauling its lending toolkit to make it more flexible and responsive to countries’ needs. - Improving surveillance to better anticipate crises and account for spillovers. - Strengthening oversight of the global financial system together with the Financial Stability Board. - Providing additional support to low-income countries and reviving SDRs—its first allocation since the 1970s—to inject unconditional liquidity. - Policy actions and recovery dynamics: - Managing Director Dominique Strauss-Kahn called for emergency fiscal stimulus; Asia, led by China’s massive fiscal expansion, acted as a locomotive for the global economy. - Major central banks provided emergency liquidity, established cross-border swap lines, and engaged in quantitative easing, actions that were essential to avoid an implosion but that also caused unwanted surges of capital flows to emerging markets. - By December 2009, “the worst of the storm had passed,” but persistent scars remained: structural unemployment, income inequality, protectionism, and anti-globalization sentiment. ### Labor markets, inequality, and political economy - F&D’s coverage highlighted pressures on jobs from migration, outsourcing, technology, and trade, and the policy dilemma: - Greater openness (to migrants, trade, and technology) yields economic benefits but also political costs as middle-class insecurity rises. - For “displaced workers near the end of their working lives, redistribution may be a more practical solution than acquisition of new skills.” - The September 2011 F&D examined public resentment over growing income inequality and perceptions that “banks had been bailed out on the backs of workers,” warning that people might no longer support open trade and free markets if they feel losers are left behind. ### Fragmentation, populism, and secular debates - By 2016, fragmentation was established reality following the United Kingdom’s vote to leave the European Union, and the global recovery faced setbacks from rising nationalism, protectionism, and populism. - F&D explored causes of disaffection, including hollowing out of the American middle class (December 2016) and evaluated the secular stagnation hypothesis (March 2017): whether advanced economies should accept anemic growth or pursue policies to revive productivity. - The December 2018 F&D, Age of Insecurity, examined the erosion of the social contract across generations. ### COVID-19, vaccine protectionism, and subsequent shocks - IMF crisis response: - The IMF applied its crisis playbook during the COVID-19 pandemic, providing emergency financing to an unprecedented number of countries and issuing a record number of SDRs. - The 2022 Resilience and Sustainability Trust provided a partial workaround responding to developing economies’ concerns that allocations are proportional to quota rather than countries’ structural financing needs. - Pandemic impacts and policy debate: - The pandemic amplified divisions and culminated in “vaccine protectionism.” - F&D urged readers to view the pandemic as an opportunity for healing fractures and “building back a better world” (September 2020). - Geopolitical shocks: - Russia’s invasion of Ukraine caused refugees, supply-chain disruptions, food and energy shortages, high inflation, and unstable financial markets; in the context of rising US-China rivalry and drift into distinct economic blocs, the war reinforced pressures for countries to take sides. - F&D explored the war’s implications for policymaking, the global economy, energy insecurity, and trade disintegration. ### Role and evolution of F&D and implications for the IMF - Evolution of the publication: - F&D was originally intended to keep readers informed of World Bank and IMF developments and has evolved into a forum for debate on critical economic issues. - On topics such as the environment, the role of women, and the rise of China, F&D has been “ahead of the curve.” - Implications for IMF staff and policy: - The piece argues that to fulfill its mission in an increasingly complex and shock-prone world, IMF staff “need to look up from their spreadsheets and study issues outside their traditional domain.” - Current coverage focus: - F&D continues to cover a broad array of topics: health, demographics, inequality, digital currency, and artificial intelligence, and its most recent issue assesses implications for the economics discipline itself. - Institutional reflection: - A June 2019 fictional account of John Maynard Keynes visiting the Fund’s 75th anniversary concluded that the institution “remains true to its purpose of serving its membership,” and F&D has likewise “stayed true to its purpose of engaging, educating, and entertaining its readership.” *Anna Postelnyak, “THE LIFE AND TIMES OF FINANCE & DEVELOPMENT,” June 2024, Sections 1–2.* ### Section 1 ### postelnyak-june24 - Section 1 ### The beginnings (1964–late 1960s) - F&D debut: June 1964. - Intended audience: government officials, bankers, journalists, and students; initially envisioned as a Fund-only product but launched as a joint publication with the World Bank. - Early mission: provide less technical information about the World Bank and the IMF, including origins, financial structures, operations, and explanations of Fund jargon such as Stand-By Arrangements, balance of payments deficits, and multiple currency practices. - Coverage emphasis: Bank-funded project profiles and practicalities of lending for development; portrayal of projects as symbols of modernity and prosperity. - Notable editorial and visual developments: - First illustrated cover: March 1968 (Kenyan villagers at a World Bank–financed water tap). - September 1968: article on irrigation dams in Mexico. - March 1968 and later issues increased use of photographs, maps, charts, and illustrations. - Intellectual debates: - Coverage of Gunnar Myrdal’s 1968 Asian Drama and subsequent Bank rejoinder in June 1969. - By 1970, Robert S. McNamara called for development indicators “that go beyond the measure of growth in total output and provide practical yardsticks of change in the other economic, social, and moral dimensions of the modernizing process.” - Bretton Woods and SDRs: - 1966 article celebrated 20 years of fixed exchange rates, but system under strain. - Special drawing rights (SDRs) featured on the December 1969 cover. - Circulation growth: between 1964 and 1968, circulation in English, French, and Spanish rose from 20,000 to 85,000. ### The turbulent 1970s - Global context: collapse of Bretton Woods system, massive oil price shocks, international terrorism. - Institutional change: - Second Amendment to the IMF’s Articles of Agreement (1978) allowed members to choose fixed or floating exchange rate regimes. - IMF surveillance scope expanded to include domestic policies; later broadened to topics like gender equality, governance, and climate change. - IMF lending and policy responses: - Creation of the Extended Fund Facility for longer arrangements and first concessional trust fund (featured in December 1976 issue). - Recycling of petrodollars: IMF supplemented quota resources with funds borrowed from oil exporters. - World Bank evolution: - Shift from large engineering projects to multifaceted operations aimed at small farmers and social services (education, health, irrigation, public transportation). - Editorial and thematic innovations: - June 1975: Arabic language edition added. - New topics spotlighted: weather’s role in development (1969 article), women’s role in economic development (December 1971), guest workers in Europe. - Visual experimentation with fonts and formats (e.g., March 1973). ### The 1980s: The lost decade - Global shocks and policy environment: - Tight US monetary policy at end-1970s led to soaring global interest rates and debt crises in developing economies. - IMF emphasis on “conditionality” and timely, orderly adjustment to avoid piling on debt. - World Bank policy shifts: - Introduction of structural adjustment loans providing budget support for economic reforms; focus on restoring internal and external balance via fiscal consolidation, monetary discipline, devaluation, privatization, and liberalization. - Controversies and distributional concerns: - Critics argued strict conditionality exacerbated hardship for the poor; recognition that programs needed measures to protect the most vulnerable to be politically sustainable. - Debt strategy evolution: - From adjustment focus to the 1985 Baker Plan (grow out of debt) to acceptance under the 1989 Brady Plan and Paris Club Toronto terms that debt relief was necessary. - Environmental and editorial changes: - Growing World Bank involvement in environmental concerns (small unit established in 1970; emphasis increased under Barber Conable, 1986–91). - Opening to external authors beginning June 1983 (Nicholas Kaldor), with guest articles clearly identified to distinguish institutional views. ### The 1990s: Transition - Major theme: fall of communism and transition to market economies. - F&D coverage of A Study of the Soviet Economy and promotion of “shock-therapy” for transition in 1990–91 context. - Transition issues covered: fiscal consolidation, monetary reform, privatization, reorientation of industries, corporate governance. - Emerging markets and crises: - Adoption of liberalization and capital account opening led to crises: 1994 Mexico devaluation followed by Thailand, Korea, Indonesia, Russia, Brazil, Argentina, Uruguay, and Türkiye. - Identified vulnerability: balance sheet mismatches (dollar-denominated loans vs. local-currency assets). - 1997–98 Asian Crisis prompted IMF reforms documented in June 1998 F&D; led to initiatives such as standards and codes, the Financial Sector Assessment Program, and early-warning systems. - Poverty focus and institutional changes: - Recognition that macroeconomic stability is necessary but not sufficient for poverty reduction. - Enhanced Structural Adjustment Facility became the Poverty Reduction and Growth Facility; participatory poverty reduction strategies emphasized program ownership. - Debt relief initiatives: Heavily Indebted Poor Countries Initiative and the later Multilateral Debt Relief Initiative. - Publication and partnership changes: - World Bank withdrew from F&D partnership soon after James Wolfensohn’s 1995 arrival; IMF financed F&D alone thereafter. - Visual enhancements: four-color printing and arresting covers. - March 1996: F&D began supplementing print with digital content. - Circulation metric: F&D had 110,000+ subscribers following the transition. ### Into the new millennium (2000s) - Editorial evolution: - With greater transparency and publication of IMF documents, F&D shifted from being a mouthpiece to a platform for debate by leading experts; issues became more thematic. - Emerging markets’ rise: - Asian economies recovered from crises; China and India emerged as growth engines. - Major emerging markets increased share of world output but held a minority of IMF quotas and pressed for greater representation. - Trade and globalization: - East Asia’s export-led boom, especially China after its 2001 World Trade Organization accession, fueled protectionist backlash in advanced economies. - IMF and World Bank continued to champion trade and globalization (reference to Trading Up, F&D September 2002). *Anna Postelnyak, “THE LIFE AND TIMES OF FINANCE & DEVELOPMENT,” June 2024, Section 1.* ### Section 2 ### postelnyak-june24 - Section 2 ### Roots of the 2008 crisis and the triple bubble - Trade liberalization was viewed as the prescription for poorer countries; advanced economy workers’ job-loss worries were often dismissed on the grounds that “trade creates enough winners that they could compensate losers.” - Asia’s rise manifested in “global imbalances”—principally, China’s surplus and the US deficit—leading to trade and exchange rate frictions and prompting the IMF in 2006 to convene its first Multilateral Consultation. - The imbalances were a symptom rather than the root cause; by the mid-2000s the world economy was booming only because of a triple bubble: - “Excess saving and production in Asia could be sustained only by the huge current account deficit of the United States, which became the consumer of last resort.” - “Stagnating real wages and a declining share of labor income in the US—including as a result of manufacturing jobs moving to emerging markets—meant that middle-class consumption could be sustained only by ever-increasing amounts of consumer credit (often in the form of equity withdrawals from rising house prices).” - “In the euro area, a similar bubble sustained northern European surpluses and southern European deficits.” - Financial sector excesses and poor regulation enabled and exacerbated these bubbles. - F&D and most observers failed to “connect the dots” and did not foresee that bursting bubbles would lead to the worst crisis since the Great Depression. ### Crisis recognition, IMF response, and recovery - F&D’s June 2008 issue identified opaque, complex mortgage-backed securities, excessive leverage, and regulatory failures as sources of US financial problems even before Lehman Brothers’ bankruptcy triggered global panic. - After September 2008, F&D’s December 2008 issue covered the crisis spread globally. - IMF responses detailed in the magazine included: - Overhauling its lending toolkit to make it more flexible and responsive to countries’ needs. - Improving surveillance to better anticipate crises and account for spillovers. - Strengthening oversight of the global financial system together with the Financial Stability Board. - Providing additional support to low-income countries and reviving SDRs—its first allocation since the 1970s—to inject unconditional liquidity. - Managing Director Dominique Strauss-Kahn called for emergency fiscal stimulus; Asia, led by China’s massive fiscal expansion, acted as a locomotive for the global economy. - Major central banks provided emergency liquidity, established cross-border swap lines, and engaged in quantitative easing, actions that were essential to avoid an implosion but that also caused unwanted surges of capital flows to emerging markets. - By December 2009, “the worst of the storm had passed,” but persistent scars remained: structural unemployment, income inequality, protectionism, and anti-globalization sentiment. ### Labor markets, inequality, and political economy - F&D’s coverage highlighted the pressures on jobs from migration, outsourcing, technology, and trade, and the policy dilemma: - Greater openness (to migrants, trade, and technology) yields economic benefits but also political costs as middle-class insecurity rises. - For “displaced workers near the end of their working lives, redistribution may be a more practical solution than acquisition of new skills.” - The September 2011 F&D examined public resentment over growing income inequality and perceptions that “banks had been bailed out on the backs of workers,” warning that people might no longer support open trade and free markets if they feel losers are left behind. ### Fragmentation, populism, and secular debates - By 2016, fragmentation was established reality following the United Kingdom’s vote to leave the European Union, and the global recovery faced setbacks from rising nationalism, protectionism, and populism. - F&D explored causes of disaffection, including hollowing out of the American middle class (December 2016) and evaluated the secular stagnation hypothesis (March 2017): whether advanced economies should accept anemic growth or pursue policies to revive productivity. - The December 2018 F&D, Age of Insecurity, examined the erosion of the social contract across generations. ### COVID-19, vaccine protectionism, and subsequent shocks - The IMF applied its crisis playbook during the COVID-19 pandemic, providing emergency financing to an unprecedented number of countries and issuing a record number of SDRs. - The 2022 Resilience and Sustainability Trust provided a partial workaround responding to developing economies’ concerns that allocations are proportional to quota rather than countries’ structural financing needs. - The pandemic amplified divisions and culminated in “vaccine protectionism.” - F&D urged readers to view the pandemic as an opportunity for healing fractures and “building back a better world” (September 2020). - Russia’s invasion of Ukraine caused refugees, supply-chain disruptions, food and energy shortages, high inflation, and unstable financial markets; in the context of rising US-China rivalry and drift into distinct economic blocs, the war reinforced pressures for countries to take sides. - F&D explored the war’s implications for policymaking, the global economy, energy insecurity, and trade disintegration. ### Role and evolution of F&D and implications for the IMF - F&D was originally intended to keep readers informed of World Bank and IMF developments and has evolved into a forum for debate on critical economic issues. - On topics such as the environment, the role of women, and the rise of China, F&D has been “ahead of the curve.” - The piece argues that to fulfill its mission in an increasingly complex and shock-prone world, IMF staff “need to look up from their spreadsheets and study issues outside their traditional domain.” - F&D continues to cover a broad array of topics: health, demographics, inequality, digital currency, and artificial intelligence, and its most recent issue assesses implications for the economics discipline itself. - A June 2019 fictional account of John Maynard Keynes visiting the Fund’s 75th anniversary concluded that the institution “remains true to its purpose of serving its membership,” and F&D has likewise “stayed true to its purpose of engaging, educating, and entertaining its readership.” *Source: postelnyak-june24 - Section 2* --- _Source: https://www.imf.org/-/media/files/publications/fandd/article/2024/06/postelnyak-june24.pdf_