Increasing Assertiveness in the Developing World
During the global crisis developing country policymakers took advantage of their increased autonomy in a variety of ways. The use of capital controls was one and perhaps the most dramatic ‘indicator’ of increased autonomy, and we consider this matter below. But we turn now to a brief consideration of three other indicators of increasing assertiveness: the use of counter-cyclical macroeconomic policies; innovation in financial architecture; and new activism at the IMF.
The developing countries that have enjoyed the ability to protect and even expand their autonomy during the global crisis used the resulting policy space to pursue a range of counter-cyclical macroeconomic policies. Ocampo et al. (2012) conclude that when we look across the developing world we find diverse, uneven counter-cyclical policy responses. This is a radical departure from the past insofar as developing country policymakers generally had no alternative but to implement strongly pro-cyclical policies, most often as per the conditions of IMF assistance. Policymakers could implement counter-cyclical and other protective policies that were previously unavailable to them precisely because of the enabling effects of prior reserve accumulation strategies.
The sheer scale of the crisis, the bold rhetoric around the need for new strategies to combat it, and the range of unorthodox policy responses pursued across the globe may have provided broader validation for the protective national policy responses pursued in the developing world.
The G-20’s brief ‘Keynesian moment’ in 2008—09 opened space for capital controls and counter-cyclical responses in the developing world. Similarly, the IMF’s rhetorical attention to pro-poor spending during the crisis began to legitimate counter-cyclical responses (Grabel 2013a). Expansionary monetary policies in the USA and other wealthy countries likewise helped to normalize protective responses to the crisis in the developing world. What the IMF’s Lagarde termed the rise of ‘unconventional monetary policies’ (i.e., negative interest rates) in a number of wealthy countries provided cover for other unorthodox policies, such as capital controls. Finally, the rising chorus of criticism around the cross-border spillover effects of monetary policy decisions (especially by the US) have made capital controls appear as a reasonable protective response.