Aversion of this paper was presented at the Queen Elizabeth House 50th Anniversary Conference, “The Development Threats and Promises”, Queen Elizabeth House, University of Oxford, 4-5 July, 2005.

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From the Introduction:

There is a growing concern that, over the last quarter of a century, the “policy space” available for the developing countries has shrunk so much so that their ability to achieve economic development is being threatened. The current phase of shrinkage in policy space started in the 1980s, when the World Bank and the IMF massively expanded their “programme” (as opposed to “project”) loans in the aftermath of the Debt Crisis in 1982 in the form of the Structural Adjustment Programmes (SAPs) – and many of its subsequent reincarnations, which are too numerous to list – and broadened the scope and enhanced the strength of the conditionalities attached to their loans. In the early days, the conditionalities set by the Bank and the Fund mainly concerned budget deficits, monetary expansion, privatisation, and trade liberalisation. However, over time, there has been a constant “mission creep”, so much so that, following the 1997 financial crisis, the IMF was actually ordering the Korean government to give independence to the country’s central bank, and, even more amazingly, telling the Korean private sector companies how much debts they can have. These days, there is virtually no area on which the Bank and the Fund do not have (often very strong) influence – democracy, judicial reform, corporate governance, health, education, and what not.