These books join an exciting new stream of research that peels away the edifices of the international financial institutions (IFIs) for a peek inside to see how they actually work. This is a welcome development. For too long, the International Monetary Fund (IMF) and the World Bank were “black-boxed,” as scholars assumed that a set of inputs (the material interests of powerful member states and private financial actors and the technocratic orientation of the IMF staff and management) were combined in straightforward ways to produce policy outputs. Politics popped up when “important” borrowers got better deals from the IMF and World Bank. Otherwise, the IFIs were seen as simply going about their business of trying to promote development and ensure global financial stability.

Mark Copelovitch and the contributors to the Susan Park and Antje Vetterlein volume are motivated to peer into the policymaking process in the IFIs by means of unexplained puzzles. Copelovitch suggests that the “substantial variation in the size and terms of IMF loans” cannot be explained by conventional state-centric explanations (p. 6). In the edited volume, the authors train their sights on the puzzle of policy change within the IMF and the World Bank. Why, for example, did the IMF take an early and aggressive lead in promoting capital account liberalization in the developing world (when the United States and other powerful member states were unenthusiastic) but resist calls for debt relief (which had enthusiastic support of powerful stakeholders)?

In The International Monetary Fund in the Global Economy, Copelovitch develops a rational theory of policymaking at the IMF. The task facing the IMF is clear. If the institution does its job well, liquidity injections will keep its borrowers current on their payments to creditors, and conditions attached to the loans will reassure investors that the borrower is on the right track, thereby catalyzing capital inflows.

For Copelovitch, the preferences of the IMF's staff and management are stable while the environment varies along two dimensions: 1) the intensity and heterogeneity of preferences among the institution's most powerful principals (the G5 countries—the United States, UK, France, Germany, and Japan), and 2) the composition of borrowers' external balance sheets. The first dimension tells us when the major stakeholders will intervene to shape the terms of IMF agreements on behalf of members of their financial communities. When crises threaten the “profitability or solvency” of commercial banks and other large financial institutions domiciled in G5 countries, the agents that represent those countries at the IMF will push for larger loans with fewer conditions (p. 54). In other words, when Citibank gets into big trouble in an emerging market, it leans on US representatives to help arrange a generous bailout package. Unless the other G5 countries have equally intense but contrasting views, the United States is likely to get its way at the IMF, over the objections of staff and management who know that excessively generous bailouts exacerbate the moral hazard problem. The IMF's formal rules provide one reason why its staff bends to the wishes of the key players: The G5 countries only need to garner the support of three other rich countries to control the majority of votes required to approve or reject loan proposals put together by the staff (p. 46).

Copelovitch's theory explains why we observe variation in IMF lending behavior even in cases in which the staff members have full discretion over the terms of the lending agreement. The purpose of IMF lending in emerging markets is to “generate a subsequent inflow of private lending to a borrowing country” (p. 58). The IMF's staff and management tailor the content of conditional loans in order to maximize the chances that private investors will respond positively to lending programs. The author argues that the IMF's officials try to raise the probability of success by looking closely at the composition of the borrowing country's external debt. One important variable is who holds the debt. A limited number of commercial banks are easier to coordinate and cajole than many far-flung private bondholders. The other variable concerns whether the debt is primarily issued by the government or the private sector. The most difficult cases involve many global investors lending to private firms and individuals; IMF programs have to be very large and very tough in order to convince skittish investors to attract new funds and prevent a rush for the exits.

The second half of the book is devoted to testing the argument. Befitting a book with a detailed, sophisticated argument that produces many observable implications, the author has assembled a wealth of quantitative and qualitative evidence. The centerpiece of the quantitative section is a new data set consisting of the relative loan size and number of conditions in 197 nonconcessional IMF programs from 1984 to 2003. The statistical results are buttressed by narratives of four loans to Mexico and three loans to South Korea.

This book is a serious achievement. Copelovitch is the first to explain how IMF decision making has evolved in response to the dramatic changes in the international financial system. In many ways, it is a model of mixed methods research. The case studies are not just an exercise in pattern matching; the author's painstaking reading of transcripts of meetings of the IMF's Executive Board reveals new details about some of the most important loans in the institution's history.

The book is not without weaknesses. The most credible findings concern the relative size of loans. There is less evidence to support the hypotheses linking the key variables (G5 preference intensity and heterogeneity and the composition of the prospective borrower's debt) to conditionality in lending programs. Copelovitch treats conditions as credible signals; when catalyzing investment is expected to be difficult, programs will have to include many conditions to signal the credibility of the reform effort. What he does not mention is that the details of IMF programs were confidential until recently. One could surmise that crafty investors would find ways to get their hands on loan agreements, but the fact that the IMF and borrowing governments went to great lengths to keep the content of lending arrangements secret undermines the signaling argument. In addition, the data are limited to middle-income borrowers. Just over half of all IMF lending arrangements went to low-income countries in sub-Saharan African between 1980 and 2000. The theory is sophisticated and the evidence is rigorously vetted, but the scope of the book is limited.

Owning Development presents a different face of the IFIs. For Copelovitch, staff members rationally adjust their preferences to changes in material circumstances. Park and Vetterlein tell us in the introductory chapter that material circumstances cannot fully explain why the IMF and the World Bank take up certain policy norms and discard others (pp. 14–15). The contributors discuss debt relief, pension reform, gendered and social consequences of development and adjustment, environmental safeguards, current and capital account liberalization, tax policy reform, and new public management.

Aside from the empirical findings in these chapters, the main contribution of the volume is an inductive model of the life cycle of policy norms in international organizations. Evidence of policy failures, exogenous shocks, and mass condemnation of current practices can each trigger contestation of the status quo policy norm. Alternative policy norms are supplied by external actors, including powerful member states and nongovernmental organizations, or by “norm advocates” located inside the organization. The most interesting sections of the volume discuss the struggle to implement the new policy norm. Several chapters describe how advocates “translated” the policy norm to make it congruent with the “neoliberal” ideational culture of the IFIs. Catherine Weaver (Chapter 4) describes the “Faustian bargain” underlying gender norms at the World Bank: To make headway with economists, norm advocates “chose a narrowed approach that validated gender ideas through technocratic projects that could provide quick, quantifiable results and were focused on the impact on national economies” (p. 87).

The other components of the policy-norm life cycle include stabilization via “habitualization and institutionalization” (p. 238) and promotion of the norm outside the institution. Policy norms that have become deeply embedded in the institution's practices still have to be implemented in national settings (the editors refer to this as “cultural validation” of the norm). Chapters by Martin Lardone (on adoption of new public management in Argentina and Chile) and Leonard Seabrooke (on tax policy reform in East Asia) focus on this part of the cycle. Seabrooke collected a mountain of data that reveals an interesting twist: While the IMF's push for a global tax policy standard appears to enjoy high cultural validity in terms of rhetorical support (Seabrooke's data indicate that borrowers frequently ask for “IMF friendly” policies), there is a serious disjuncture between “talking the talk” and “walking the walk.” Implementation of policy reform varies a lot and is, in general, weak.

Situating Owning Development alongside The International Monetary Fund in the Global Economy reveals the former's strengths and weaknesses. Rather than taking the interests of the IFIs as self-evident, the chapters demonstrate that what the Fund and Bank choose to focus on is in good part shaped by how the institution's officials come to understand their world. Material incentives matter, but so do processes of learning and persuasion. Copelovitch's theory does not say anything about the content of IMF programs (conditions, after all, have to target something). The edited volume traces how organizational culture shapes decision making by the IFIs. In Copelovitch's book, private financial actors influence IMF decision making because they control important resources; the chapters assembled by Park and Vetterlein demonstrate that even materially weak actors can construct the interests of the IMF and World Bank through social processes of “discussion, negotiation, and contestation” (p. 13). However, some of the chapters deal with policy norms that are on the fringes of the IFIs' agendas. Material, ideational, and institutional dynamics may move in tandem when policy norms are consequential. The case of capital account liberalization demonstrates that the emergence of the norm was overdetermined, given that economic ideational, powerful stakeholders, bureaucratic incentives, learning, and exogenous technological changes were all pushing in the same direction.

These books are the state of the art in the study of international organizations. And they are complements, rather than substitutes: Copelovitch's holds the interests of the IMF's officials constant to show us how they adjust the institution's policy tools to serve its mandate; Park and Vetterlein's shows how the IFIs' mandates are up for negotiation.