In his new book, Brother, Can You Spare a Billion?, Daniel McDowell conducts a historical analysis to explore why the United States has taken a leading role in the international lending business

“For the world economy to be stable, it needs a stabilizer, some country that would undertake to provide a rediscount mechanism for providing liquidity when the monetary system is frozen in panic.” - Charles P. Kindleberger

The International Monetary Fund (IMF) is largely seen as the de facto lender of last resort to foreign economies that are experiencing a financial crisis. But as McDowell explores in his new book, Brother, Can You Spare a Billion?, the United States has played a similar role for decades in providing emergency loans to bail out economies in crisis. Throughout his book, McDowell explores why the United States has pursued this course of action repeatedly throughout history, even when allowing the IMF to take the lead might seem preferable.

McDowell outlines several reasons why the United States should relinquish its lending exercises to the IMF - including the ability for the United States to influence IMF lending, the opportunity to provide political cover for U.S. policymakers, and reducing costs and risks incurred by the United States. Yet, despite these advantages, the U.S. has frequently bailed out foreign economies outside of the IMF. He posits that the United States provides such emergency loans “when it believes a multilateral response via the IMF is either too slow or too small to protect vital U.S. economic and financial interests.”

McDowell identifies major changes to the global financial landscape from the 1960s through the 2008 global financial crisis that repeatedly undermined the IMF’s ability to act as an effective manager of international financial crises. These weaknesses ultimately led the U.S. to act unilaterally and provide foreign loans to protect and stabilize its domestic financial system across this historical period. Will the U.S. continue to supplement the IMF with similar unilateral loans in the future? As McDowell remarks, “All that is missing is another crisis.”

Daniel McDowell is an assistant professor of political science at the Maxwell School of Citizenship and Public Affairs at Syracuse University. His work has been published in International Studies Quarterly, Review of International Organizations, and New Political Economy.

01/23/17