Multilateral Development Finance in Non‐Western Thought: From Before Bretton Woods to Beyond

Abstract

Recent initiatives of China and other emerging powers to create new multilateral development lending institutions (MDLIs) are often portrayed as efforts to build upon and/or reform an idea pioneered by Western officials during the Bretton Woods negotiations. However, recent literature has shown that support for MDLIs also had deeper non‐Western roots in the pre‐Bretton Woods era. What led thinkers outside the West to propose MDLIs in that earlier period? How might their ideas be relevant to current non‐Western initiatives to create new MDLIs? This article addresses these questions with a special focus on the ideas of China's Sun Yat‐sen (1866–1925) and Peru's Víctor Raúl Haya de la Torre (1895–1979). Although their intellectual journeys were quite distinct and their specific proposals differed, these two thinkers advocated the creation of MDLIs for similar reasons that stemmed from their anti‐imperialist sentiments. Their ideas find some echoes in current non‐Western initiatives.

Offshoring the Uncovered Liability Problem: Currency Hierarchies, State-Owned Settlement Banks and the Offshore Market for Renminbi

“…As one of the few globally significant economies where a large part of the financial system remains subject to state control, the history of the PRC's efforts to contest financial globalisation using a nondeliverable currency offers a unique insight into efforts to mitigate the unfunded liability problem. The origins of non-delivery and the preference for capital controls can be traced to Republican-era concerns over the profits made by foreign banks (Helleiner 2019). While these concerns remain, this section shows how volatilities in the international financial system, loopholes in its architecture and the decline of international currencies provided China with an opportunity to use state settlement banks as an interface for contesting financial integration.…”

“…Since the early 2000s, China's international debt as a percentage of GDP declined and about one-third of foreign debt is denominated in RMB (SAFE 2019). Addressing one of the major historical concerns of non-Western economies in the establishment of Bretton Woods Helleiner 2019), China has also succeeded in limiting the share of claims of foreign-owned banks and it has reduced its dependence on FDI in capital formation (Figure 6).…”

“…Critical political economy has debunked many of the monetary policy limitations long associated with being an anchor currency by focusing on how financial innovation and offshore markets served to solidify US structural power (Konings 2008, Strange 1988, Helleiner 1994. These developments can be traced to a failure in the run up to Bretton Woods to develop inclusive multinational institutions that would allay the concerns of non-Western countries including China regarding the exploitative role of foreign banks (Helleiner 2019).…”

Latin American agency: The New Development Bank, Uruguay's accession and Brazilian influence

“…Historically, LAC has been deeply committed to multilateralism, which in the global South is often 'measured in terms of membership' (Braveboy-Wagner, 2009) of IGOs. Unbeknownst to many, the World Bank has well-documented roots in the institutional models and diplomatic initiatives of LAC, including Uruguay (Helleiner, 2017(Helleiner, , 2019Mendez & Turzi, 2020;Villaseñor, 1941). It is thought-provoking that the NDB can trace some of its own roots back to Latin America.…”

Collaborative Platforms and Diversifying Partnerships of South-South Cooperation and Triangular Cooperation: Middle Powers’ Struggles for Nation Branding

“…The emergence of the BRICS and MIKTA, the establishment of the New Development Bank, and the China-led Asian Infrastructure Investment Bank (AIIB) have expedited the shift from neoliberalism to new standards of cooperation through transformation since the early 2010s. This countermovement can be understood as an expression of challenge towards the institutional density of existing international bodies (Wang 2019; Morse and Keohane 2014;Lipscy 2017;Helleiner 2019). Although this challenge may have undermined the authority and legitimacy of current institutions, this does not directly signify that existing bodies are to completely fade away with the advent of these new rival organizations.…”