Part I traced a system built on the advice of four economists; even know their theories are not theology. The next half-century is a case study in what happens when that advice – however flawed – is abandoned, and in what happens to the few countries that never got the memo.
Part II: Dismantling the Scaffolding, 1971–2026
1971: The Anchor Goes Overboard
The IMF, once the keeper of a par-value system, became chiefly a crisis lender with conditions attached, which is the role that gave much of the global South its most memorable relationship with it.
Polanyi’s fictitious commodity had been invited back into the market, this time with a very large trading floor.
The arithmetic behind the change is known as the policy trilemma: a country cannot simultaneously have a 1) fixed exchange rate, 2) free capital movement and 3) an independent monetary policy, give up on trying, it’s simply impossible.
You want to know why is it impossible? Well, Bretton Woods sacrificed the second of them. The new era sacrificed either the first or the third, depending on the country and the year, which is a polite way of saying that governments gave up the ability to steer their own economies and called it modernization, that’s why.
And it’s the prefect lead-up to the next two decades.
The 1980s: A Decade, Misplaced
When the debt crisis hit in the early 1980s, the IMF and the World Bank attached policy packages to their loans. In 1989, the economist John Williamson labeled a list of ten reforms the “Washington Consensus”, meaning what the capital’s institutions could all agree Latin America needed. In the popular telling, the list hardened into a doctrine of three verbs: “privatize, liberalize, open up”.
As usual, the results were not what the brochure promised. Latin America grew at a sluggish 1% a year per person in the 1980s and only picked up slightly to 1.4% a year in the 1990s, according to the UN Economic Commission for Latin America and the Caribbean (ECLAC). The UN’s 2017 World Economic and Social Survey showed that the region only returned to the 1980 level of GDP per capita in 1994.
The same survey shows what happened to those who skipped the medicine. Contrary to what the Washington Consensus dictated, East Asia, and to a lesser extent South Asia, pursued strategies in which the state played an important role, and a “great divergence” opened across the developing world. South and East Asia grew by an average of 7.2% a year in the 1980s. Latin America, Africa and Western Asia managed 1.5, 1.7 and 1.7%, respectively.
Africa’s story is written in its trade statistics. UNCTAD’s own data show primary goods, meaning everything other than manufactures, making up 76.7% of the continent’s merchandise exports in 2025, and its 2022 Economic Development in Africa Report found commodities above 60% of merchandise exports in 45 of Africa’s 54 countries. Hardly the signature of successful industrial upgrading.
In Zambia, which adopted IMF and World Bank-backed trade reform in 1991, textile and clothing employment fell from over 25,000 in the 1980s to below 10,000 by 2002, despite a roughly 35% population growth between 1991-2002, and a 2006 study for the Friedrich-Ebert-Stiftung (Linked to the German SDP party), estimates the contraction at over 60% within a decade.
By 1998 the World Bank’s own chief economist, Joseph Stiglitz, was lecturing on moving “toward the post-Washington Consensus”. By 2005 a Bank review of the 1990s acknowledged that Latin America’s per capita growth had lagged its 1950-80 record and that sub-Saharan Africa had failed to take off despite significant reform.
The institutions that set the terms, in short, conceded the results were far from optimal, and out of the concession came a gentler “post-Washington” version, padded with “second-generation” reforms. Still, the prescription was Freidrich List in reverse: open first, build later.
It was also Hamilton in reverse: privatize the public’s credit and hope the market recreates it.
The ladder was not merely kicked away. Its carpentry was declared a punishable vice.
The Embarrassing Exceptions: Tokyo, Seoul, Beijing
In 2002, the Cambridge economist Ha-Joon Chang published “Kicking Away the Ladder”, borrowing the title from List’s own image. His thesis was that today’s rich countries industrialized behind protection, subsidies and borrowed technology, and then preached the opposite.
Japan regained tariff autonomy in 1911 and subsequently adopted comprehensive industrial strategy. South Korea in the 1960s and 1970s imposed tight controls on finance and trade. China opened up as an experiment in 1978, beginning with special economic zones.
The most honest data point comes from a CEPR study of 276 Chinese cities. A state-level zone was associated with a roughly 20% higher GDP level but not with a permanently steeper growth path. Shelter helps, in other words, but it is not magic, which is almost exactly what List said. China declared extreme poverty eradicated in 2021, by its own accounting.
Caveats overdue: economists such as Justin Lin and Chang himself still dispute what exactly worked. Cold War patronage cushioned Japan and Korea. And protection without discipline produces expensive cars and idle factories, as Hamilton’s mostly unfulfilled manufacturing plan quietly reminds us.
Not to ignore, the debt sub-structure – albeit for different reasons – that underwrote the achievements of South Korea (primarily private sector debt and household debt), and to a much larger extent Japan (with cash-rich households, yet a humongous public/government debt).
1997–98: Hot Money, Cold Shower
Thailand’s currency collapse in July 1997 spread across Asia through economies that had opened their capital accounts. Most affected countries took IMF packages. Malaysia, in 1998, imposed sweeping controls on capital outflows and pegged the ringgit at 3.80 to the dollar. Joseph Stiglitz called the crisis the most dramatic illustration of the failure of self-regulating markets.
Was Malaysia vindicated? The verdict is contested. One scholar calls the contribution of controls ambiguous, another calls them a pragmatic choice that limited disruption while warning that other countries should be careful about the lesson. Malaysia’s own pre-crisis liberalization and imbalances also mattered. Still, a country defended its economy from speculative cross-border capital flows, and the world did not end. Polanyi would have recognized the scene, if not the language.
An unavoidable sidenote: Shelter from foreign money, of course, says nothing about what happens to the domestic kind. Malaysia’s 1MDB state fund became a byword for plunder.
2008: The Great Subsidy
The 2008 crisis is usually blamed on deregulation, and the popular villain is the 1999 repeal of Glass-Steagall. That is indeed a factor, yet a weak suspect: Lehman and Bear Stearns, among the first to fall, were not commercial banks. The better culprit is the creed behind everything, that finance can price and discipline its own risk. A modern financial system, as one official inquiry put it, was being guarded by antique rules.
What followed was a double movement performed on behalf of the one class that least needed shelter. Central banks and treasuries stepped in, losses were socialized, and the sermon about market discipline resumed on schedule.
So, is there any blame once can throw at the ones who say: “Privatizing profits and socializing losses“?
2010–18: Greece, the Gold Standard Without the Gold
Greece lost market access in 2010 after a deficit of roughly 15% of GDP. Three bailouts followed. The economy shrank by about a quarter, unemployment peaked above 27% in 2013, and debt rose to near 180% of GDP. In 2015 the country closed its banks and imposed capital controls, a Polanyian tool used by a member of the eurozone.
Greek governments overspent recklessly, and any honest account says so. But membership in a currency union removed devaluation and independent monetary policy from the toolbox, and my argument is that this recreates the interwar gold-standard problem: adjustment forced entirely onto wages and public spending.
Here we go again, you know whose heads the losses fall unto.
2022–26: The Fence Returns, Wearing a Disguise
Now let’s talk about “Money as a weapon”, Hello, General Petraeus. After 2022, roughly $300 billion of Russian central bank assets were frozen worldwide, around 210 billion euros of it in Europe, mostly at Euroclear. The EU made the freeze open-ended in December 2025, but a plan to lend against the assets collapsed over Belgian legal worries. Leaders instead agreed a 90-billion-euro interest-free loan for 2026 and 2027, reserving the right to use the assets if Russia “fails to pay” what they insanely imagine in their fantasies as “reparations”.
The lesson for every reserve manager is that a reserve is only as sovereign as its custodian.
Now to the “Gold and the dollar”. Gold surpassed US treasuries in the official reserves in 2025 because of prices, according to the IMF. The central banks purchased gold at a net weight of 289 tons in the second quarter of 2026, which is a record for the second quarter and 62% more than the same quarter in the previous year, despite the first quarter being adjusted downwards to 57 tons, making the half-year total the lowest since 2022. The dollar had 56.7% of the reserve in the second quarter, down from 71% in 1999, whereas the euro had 20.6%, and the renminbi had 2.11%.
So far, it is not a collapse, but it’s still an indicative erosion.
Her comes debt. The IIF puts global debt above $365 trillion in the first half of 2026, with emerging-market debt past $110 trillion, and estimates that the interest bill now exceeds world spending on defense, AI and clean energy.
Enter tariffs. In a ruling by the Supreme Court on 20 February 2026, the emergency powers law is found to have no power to impose tariffs. The temporary measure imposed through Section 122 of 10% expired on 24 July while Section 301 tariffs of 10-12.5% were put in place on 60 economies with no expiration period.
Hamilton legislated tariffs, linked them to credit and public works.. List wanted protection tied to build capacity. Carey wanted a durable system for the home market. What exists is a relay race of legal pretexts: emergency, balance of payments, forced labor.
The 2022 CHIPS Act shows real industrial policy returning, but protection without a plan to build capacity is simply a tax.
Hello BRICS. The New Delhi summit of September 12 and 13 produced no common currency, only work on interoperable payment rails and local-currency settlement, with India cautious about anything that looks anti-dollar. By one analyst’s reckoning, the New Development Bank’s local-currency lending sat near 22% against a target of 30, and about half its bonds were dollar-denominated.
Sorry, de-dollarization, it turns out, is still measured in dollars.
Four Verdicts in 2026
Put the four in a room with this year’s headlines and the conversation would be short and unkind.
Hamilton, who made credit the foundation of a state, would look at $365 trillion of debt and an interest bill larger than defense spending and ask where the productive assets are. A public debt that buys capacity is a bridge. One that merely rolls over is a treadmill.
List would applaud the regional payment rails and the infrastructure corridors, then ask the awkward question about sequencing: which industries, protected for how long, with what test for graduation?
Carey would note, with some satisfaction, that tariff walls and reshored factories are back in fashion, and then point out that a tariff without a domestic market worth serving is merely a surcharge.
And Polanyi would observe that every decade of the last 50 years has produced a protective counter-movement, from capital controls in Kuala Lumpur to tariffs in Washington, and that societies keep reinventing it precisely because nobody designed it. So the choices are, you either plan ahead for economic shocks or deal with an angry, impulsive backlash later.
The Concoction: An Abandoned` Recipe
Strip away the polemics and four ingredients remain, each with an expiry date.
Hamilton: public credit as a sovereign asset. Credible debts and a national institution lending for development in the domestic currency.
List: protection with a timetable. Shelter for named industries, tied to skills and export discipline, plus regional integration, once customs unions and railways, today payment rails and power grids.
Carey: the home market as engine. Shorten the distance between farm, factory and trader, and build domestic demand before chasing foreign markets.
Polanyi: shock absorbers. Capital-flow management, social protection, and the admission that land, labor and money cannot be left to price themselves.
Combined, these suggest a short program for any government that does not issue the world’s reserve currency: sequence capital-account opening instead of leaping into it; build public development finance in local currency; hold reserves across a diversified basket rather than one custodian’s ledger; use industrial policy that sunsets and gets audited; and treat regional settlement systems as insurance, not revolution.
This is my reading of the four, offered as argument, not scripture, of course.
The ladder is shaky, yet still standing. But the main open question is not when does the ladder collapse, it’s too late for this question my friend, if you didn’t feel the shaking yet, then no amount of deep analysis would ever be enough.
The real questions are:
- Who gets to climb it as long as it remains intact?
- Who is keeping it standing, and on whose expense?
- And who gets told it was never there?
The answers are no secret, and I have exerted a modest effort to summarize it as a reference for you here, in a mere two-part article.
Tamer Mansour, Egyptian Independent Writer & Researcher
Follow new articles on our Telegram channel
