The Global Financial Governance Architecture, Developmental Finance, and the Hirschmanian Mindset

Abstract

I advance three claims in the paper. The first claim is positive. The Asian and especially the global financial crisis occasioned meaningful though ad hoc, partial, and uneven discontinuities in developmental finance and financial governance architecture. The conjunction of discontinuities and continuities is imparting incoherence to the financial governance architecture and developmental finance. The second claim is normative. I hold, contrary to the common narrative, that the emergent incoherence is productive rather than debilitating. In the absence of an over-arching, coherent model of financial governance EMDEs today are experiencing a dramatic expansion in policy space and room for institutional experimentation. Especially in comparison with the stultifying coherence of the neoliberal era, EMDEs enjoy a degree of autonomy to pursue economic and human development and to introduce reforms that promote financial stability, resilience in the face of disturbances, and financial inclusion. Emergent redundancy and networks of institutional cooperation are increasing resilience. The third claim is that productive incoherence can be understood most fully within a “Hirschmanian mindset,” i.e., an understanding of social and regime change informed by Albert O. Hirschman’s key theoretical and epistemic commitments. The Hirschmanian vision that underpins the paper’s central theses recognizes that meaningful change can and should come about through the proliferation of small scale, disconnected, experimental, and incremental adjustments in institutions and practices that take root in the concrete demands facing policymakers with the capacity to adjust pragmatically to the changing circumstances and challenges they face.