Ahead of the IMF’s conditionality review, trade unions, think tanks and anti-poverty campaigners call for a new approach that prioritises human rights and sustainable development
OVER 50 civil society organisations, prominent academics, economists, global networks, anti-poverty campaigners and women’s groups have issued a joint call for the International Monetary Fund (IMF) to dramatically rethink a lending policy that has demanded austerity, held down wages, undermined labour movements and threatened human rights.
As the IMF launches a review into loan conditionality – the requirements that the fund imposes upon national governments before it will consider providing economic support – an open letter signed by organisations such as Global Justice Now, the Child Poverty Action Group, Oxfam International and the Common Weal think tank has argued that the restrictive fiscal and monetary policies prescribed by the IMF can have devastating consequences, and have called on the IMF to investigate the impact of their practices of human rights and inequality around the world.
The letter states: “At the heart of our calls rests a need for the systematic integration of global civil society in the consultation process and to ensure that the voices of those impacted by IMF policy are listened to and involved in its design and implementation.
“Restrictive fiscal and monetary policies prescribed in IMF loan conditionality squeeze the fiscal space needed for public investment and too often result in devastating consequences -‐ particularly for marginalised groups – at high political costs.
“Last year, a UN expert warned that lending policies of the IMF actively undermine some human rights and development priorities, as well as promoting failed policies of privatisation and austerity. Moreover, in June 2018 the UN special Rapporteur on Extreme Poverty and Human Rights claimed that the world is now ‘suffering the consequences of the past lopsided approach of IMF to globalization and its single-‐minded pursuit of a model of fiscal consolidation that relegated social impact to an afterthought.’
“The conditionality review must thus revisit and investigate the impacts of IMF policy lending practice on human rights and inequality in the past two decades. We believe that fighting inequality must be integrated into loan programmes and conditions, which should include regular monitoring of the impacts on inequality of such programmes.”
“From trade unions, women’s groups and global civil society organisations to academics and think tanks, voices throughout the world are demanding a change to status quo.” Bretton Woods Project International Development Finance Mamager Miriam Brett
The IMF was formed in 1945 as an international financial safety net, intended to support the Bretton Woods-pegged exchange rate system. However, critics of the Fund have for decades argued that its influence benefited rich industrialised economies, and that the conditionality it imposes upon its client-states forcibly restricts the sovereignty of those nations who vary from the ‘Washington Consensus’ of economic orthodoxy and make impossible demands upon emerging market states.
The unforgiving conditions of the IMF were particularly evident during the 1980s sovereign debt crisis and the financial crisis of many emerging markets during the 1990s, and are formally tied to what the IMF terms ‘structural adjustments’, which typically include: harsh cuts to public spending, the devaluation of currencies, trade liberalisation, altering national law to favour foreign investors, the removal of price controls and state subsidies, and widescale privatisation of public utilities.
Amongst the most notorious recent examples of this program came in 2015, when as one of the three institutional partners comprising the ‘Troika’, along with the European Commission and the European Central Bank – the IMF demanded that the Greek Government impose crippling austerity measures as a condition for $90b in further loans.
These loans did not, in effect, present actual assistance to the Greek economy, as the loans were earmarked almost exclusively designated for repayments to the Troika, European banks and foreign investors for earlier loans made to Greece. As part of this deal, Greece was forced to further cut pensions, public sector jobs and wages, raise taxes and accelerate privatisation, all while submitting national policy decisions to the Troika’s power of veto.
“Last year, a UN expert warned that lending policies of the IMF actively undermine some human rights and development priorities, as well as promoting failed policies of privatisation and austerity.” Civil society joint-letter to the IMF
While the IMF, along with the World Trade Organisation, has been the subject of strident criticism and opposition from leftist and anti-capitalist forces such as the Occupy movement and the anti-globalisation protests of the early 2000s, recent years have seen some signs that thinking within the IMF may be shifting, in light of the widespread outrage which greeted its role in the Greek crisis.
In 2016, a group of IMF economists questioned the neoliberalism typified during what the monetarist Milton Friendman called the “economic miracle” of General Pinochet’s Chile and subsequently embraced by many Western governments.
While defending some aspects of the neoliberal agenda underpinned by IMF practice, the IMF economists acknowledged that increased inequality appeared to be a “trade-off” demanded by neoliberalism for economic growth, but that such inequality hurts the level and sustainability of that growth. The team concluded that even advocates of neoliberalism must pay heed to the distribution of wealth and resources.
Commenting on the letter’s release, Miriam Brett, International Development Finance Manager at Bretton Woods Project, told CommonSpace: “The last financial crisis witnessed the widespread implementation of austerity, privatisation and damaging labour reforms, led by governments and international financial institutions alike.
“The conditionality review offers an opportunity for the IMF to reassess the current approach to conditionality – instead replacing it with a framework that protects human rights, backs inequality reduction and supports the Sustainable Development Goals.
“The IMF’s history of using its financial leverage to squeeze countries to breaking point is well known so if they now understand the damage that their policies have inflicted, it is now time for them to chart a very different course and join the campaign against austerity.” Common Weal head of research Dr Craig Dalzell
“The significance of the IMF in shaping the response to crises cannot be overstated.
“The letter was a collective project, and the variety of groups and organisations that have signed the letter speaks to its significance. From trade unions, women’s groups and global civil society organisations to academics and think tanks, voices throughout the world are demanding a change to status quo.”
Dr Craig Dalzell, head of research at the Common Weal think tank, also commented: “Ten years on from the 2008 financial crisis, the financial and political sectors appear to have learned very little from the experience. ‘Bail out and Carry On’ was the order of the day and this has had profound implications for those of us who were left to carry the actual cost in terms of austerity. And yet, a few voices are now speaking out – sometimes from surprising places. The IMF themselves have admitted that they failed to realise that austerity has done more damage than good.
“Words are nothing without actions, however. The IMF’s history of using its financial leverage to squeeze countries to breaking point is well known so if they now understand the damage that their policies have inflicted, it is now time for them to chart a very different course and join the campaign against austerity and start helping countries invest in and for their people, rather than for their financial sectors and shareholders. Common Weal is proud to be helping to work towards this goal.”
Picture courtesy of William Murphy