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Table of Contents
Table of Contents
Table of Contents ................................................................................................................ 4
Affirmative Arguments ....................................................................................................... 6
Coronavirus ................................................................................................................................ 7
Green Investment ..................................................................................................................... 12
Cryptocurrency ........................................................................................................................ 19
Development ............................................................................................................................. 28
Economic Growth..................................................................................................................... 29
Foreign Investment .................................................................................................................. 35
Stability ..................................................................................................................................... 37
Income Inequality..................................................................................................................... 38
Poverty....................................................................................................................................... 41
Blocks to Negative Arguments ......................................................................................... 42
AT Austerity ............................................................................................................................. 43
AT Inequality ............................................................................................................................ 44
AT IMF = Neoliberalism ......................................................................................................... 46
AT IMF Bad General ............................................................................................................... 47
AT IMF cuts funding for health programs ............................................................................ 48
AT Resource Extraction .......................................................................................................... 49
AT Water Privatization ........................................................................................................... 53
Negative Arguments ......................................................................................................... 56
Austerity .................................................................................................................................... 57
Democracy................................................................................................................................. 61
Bail Out ..................................................................................................................................... 63
Economy .................................................................................................................................... 66
Inflation ..................................................................................................................................... 68
Debt............................................................................................................................................ 70
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Corruption ................................................................................................................................ 72
Informal Labor Sector ............................................................................................................. 75
Moral Hazard ........................................................................................................................... 82
Financial Crisis ......................................................................................................................... 85
Resource Extraction ................................................................................................................. 86
Structural Adjustment Programs ........................................................................................... 88
Water Privatization .................................................................................................................. 90
Blocks to Affirmative Arguments ..................................................................................... 92
AT Climate Change.................................................................................................................. 93
AT Cryptocurrency .................................................................................................................. 96
AT IMF prevents recessions .................................................................................................... 98
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Affirmative Arguments
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April 2021
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Coronavirus
COVID-19 lingering in the developing world which will likely crush their
economy
Rowden 20 [Rowden, Rick. 04-09-2020, “Coronavirus: Developing economies are getting
crushed – here’s why their rich neighbors should help them,” The Conversation,
https://theconversation.com/coronavirus-developing-economies-are-getting-crushed-heres-whytheir-rich-neighbors-should-help-them-135601]
Although rich, Western
countries have been among the hardest hit by the coronavirus pandemic, few
countries have been left unscathed. Brazil, for example, has reported thousands of cases and hundreds of deaths, even
as its president continues to play down the threat. As a result of measures to contain it, South America’s largest economy expects no
growth this year – which some economists consider optimistic. Chaos recently erupted in El Salvador after the government promised
$300 in aid to informal workers like house cleaners and street vendors. Even though the country was in the middle of a 30-day
lockdown order, thousands of people formed lines outside of a government office hoping for aid, resulting in police using pepper
spray to disperse crowds.
Overall, analysts expect economies across Latin America to contract 2 to 3
percentage points, with similar impacts in Asia. And while countries in Africa haven’t seen all that
many cases so far, the World Economic Forum warned that the region faces a “COVID-19 time
bomb.” Already it’s been enough to threaten fragile health care systems in countries such as the Democratic Republic of the Congo,
Burkina Faso and Senegal, which will severely strain their economies too. Most developing countries do not have
enough hospital capacity, including intensive care units, or equipment like ventilators needed to
treat large numbers of patients, which could prove be a disaster for these countries. But
experiencing a outbreak isn’t necessary for a country to see its economy crushed by the
crisis. Countries that rely on remittances sent home from abroad, imports and tourism, such as
Leosotho, Tajikistan and some small island nations have seen few cases but are still suffering
from the impact. An interconnected world While it should be enough to offer these countries aid because it’s the right thing to
do, it’s also in the self-interest of the U.S. and other wealthy countries. For example, a significant share of imports and
exports for both the U.S. and Europe come from developing countries other than China. So the
ability of developing countries to continue producing the things we buy and buying the
things we produce is dependent upon the health of their economies. This becomes more critical now
when it comes to essential goods like prescription generic drugs from India and manufactured goods such as communication
equipment and office machinery from Taiwan. But, just as Western
economies begin to recover from the current
coronavirus wave, they will continue to be affected by continued turmoil elsewhere and will
likely face severe shortages of essential raw materials, for example of copper from mines in Peru,
Chile and Mongolia. Beyond the economic effects and financial contagion, there are also national security concerns. The
collapse of economies in Latin America and Africa could lead to massive migrations as
people try to flee troubles at home. In other words, the ability of rich countries to weather the
pandemic is inextricably linked to the ability of developing countries to do the same – and
they’re going to need massive assistance.
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COVID-19 will reverse 30 years of poverty reduction in the developing world
Williams-Grut 20 [Williams-Grut, Oscar. 10-13-2020, “IMF: COVID-19 'will erase 30 years of
progress fighting poverty,” Yahoo Finance, https://news.yahoo.com/imf-covid-19-poverty-worldeconomic-outlook-october-2020-growth-economy-142127336.html]
A daily
wage laborer works to construct a village pond under the National Rural Employment
Guarantee Act in Araipur Gherva village on the outskirts of Fatehpur, in the northern Indian state of Uttar
Pradesh, Sunday, June 28, 2020. The Act aims at removing poverty by assuring at least 100 days' employment to every rural
household. (AP Photo/Rajesh Kumar Singh) A daily wage laborer worker at a construction site in Uttar Pradesh, north India. The
IMF said day labourers will be particularly vulnerable to falling into extreme poverty. Photo: Rajesh
Kumar Singh/AP The COVID-19 pandemic could reverse 30 years of progress made fighting
global poverty, the International Monetary Fund (IMF) has warned. The IMF said on Tuesday said that as many as 90
million people could be plunged beneath into extreme poverty this year, meaning they will
be forced to survive on less than $1.90 a day. “The pandemic will reverse the progress made
since the 1990s in reducing global poverty and will increase inequality,” the IMF wrote in its bi-annual
World Economic Outlook report. The agency said day labourers and migrant labourers were particularly vulnerable to falling into
poverty. “People
who rely on daily wage labor and are outside the formal safety net faced sudden
income losses when mobility restrictions were imposed,” the report said. “Among them, migrant
workers who live far from home had even less recourse to traditional support networks.” The IMF
said emerging market countries and developing economies would suffer more severe
downturns than developed economies as a result of COVID.
IMF bailout is necessary to prevent the developing world from collapse
Rowden 20 [Rowden, Rick. 04-09-2020, “Coronavirus: Developing economies are getting
crushed – here’s why their rich neighbors should help them,” The Conversation,
https://theconversation.com/coronavirus-developing-economies-are-getting-crushed-heres-whytheir-rich-neighbors-should-help-them-135601]
A global bailout So far, though, we’re just seeing a trickle of aid. The
International Monetary Fund announced it
would make US$50 billion available to low-income and emerging market economies. And the
World Bank and IMF are encouraging their members to place a moratorium on foreign debt
payments by African countries. This won’t be enough. During the 2008 global recession and financial crisis, the IMF responded by
issuing $250 billion worth of its in-house currency to aid developing countries. The current crisis, however, combines a recession, financial crisis and an
unprecedented health pandemic – a triple whammy that has closed borders, shut down entire economies and resulted in massive unemployment. A
group of economists recently proposed that the IMF should quickly deploy double that amount to
help them stabilize their economies, stem financial outflows and finance domestic stimulus
packages. Based on my own calculations, I believe that actual need could be more like $1 trillion. And using the
IMF’s own currency, known as special drawing rights, is a low-cost way to provide aid. This is
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an unprecedented
global crisis of truly historic proportions, and it is not hyperbolic to say
that the decisions that must be taken in the next weeks literally hold millions of lives in the
balance. If the rich countries thought they only needed to worry about themselves, they should
think again.
IMF committed to helping poor countries out of the pandemic
Reuters 21 [No Author, 02-26-2021. “IMF, World Bank to step up efforts against global climate
risks,” Reuters, https://www.dailysabah.com/business/economy/imf-world-bank-to-step-upefforts-against-global-climate-risks]
She said the fund would also launch a new "Climate Change Dashboard" this year to track the economic impact of climate risks and
the measures taken to mitigate them, a key step toward ensuring a needed shift to a low-carbon economy. Malpass last week told
Reuters the Bank and the
IMF were also looking at ways to factor climate change into negotiations
about reducing the debt burdens of some poor countries hit hard by the coronavirus
pandemic. Last month, the head of the IMF urged policymakers worldwide to embrace more
spending to help revive their stuttering economies amid the pandemic.
Debt issues is a major problem country’s will face post-pandemic.
International debt forgiveness key
Volz 20 [Volz, Ulrich. Fall 2020, “INVESTING IN A GREEN RECOVERY,” International
Monetary Fund, https://www.imf.org/external/pubs/ft/fandd/2020/09/investing-in-a-greenrecovery-volz.htm]
The COVID-19 crisis has dramatically worsened public finances, which in many countries were
already shaky in the run-up to the current crisis. The IMF projects global public debt to
increase to more than 100 percent of GDP this year, up 19 percentage points year over year.
Going forward, many countries will require debt relief to respond effectively to the crisis and
undertake meaningful investment to climate-proof their economies. For now, the international financial
architecture still lacks an adequate system for addressing situations where sovereign debt becomes unsustainable. Ways need to be
found to systematically deal with the coming debt crisis in developing economies. Moreover, in the face of stretched public finances,
it is crucial to align all public expenditures as well as the tax system with the climate goals. Importantly, this should include the
phasing out of all fossil fuel subsidies. According to IMF estimates,
global fossil fuel subsidies amounted to $5.2
trillion, or 6.5 percent of world GDP, in 2017. Putting an end to these would not only deliver
significant public savings, but also lower emissions. Furthermore, as shown in the IMF’s October 2019 Fiscal
Monitor, meaningful carbon taxes—the IMF suggests $75 per ton of CO2—are a powerful tool to reduce carbon emissions and
generate additional environmental benefits, including lower mortality from air pollution. Carbon
tax revenues could be
redistributed to support low-income households or communities that are hit particularly hard by
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the transition to a low-carbon economy or the physical effects of climate change. The currently
relatively low level of oil prices would provide a good opportunity to levy or increase carbon taxes at a reduced political cost.
IMF has committed to helping poor countries respond to the COVID-19
pandemic
IMF 21 [No Author, 03-03-2021, “The IMF's Response to COVID-19, International Monetary
Fund, https://www.imf.org/en/About/FAQ/imf-response-to-covid-19]
The IMF has responded to the coronavirus crisis with unprecedented speed and magnitude of
financial assistance to help countries, notably to protect the most vulnerable and set the stage for
economic recovery. As IMF Managing Director Kristalina Georgieva has noted ahead of the IMF/World Bank Annual Meetings, “the global
economy is beginning to climb back from the depths of the crisis but this calamity is far from over.” In this unprecedented time, the IMF is
striving to support countries by providing policy advice, financial support, capacity
development, and debt relief for the poorest. The Fund’s actions are focused on the following tracks: Emergency financing–
The IMF is responding to an unprecedented number of requests for emergency financing. The Fund has temporary doubled the access to its emergency
facilities—the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) —allowing it to meet increased demand for financial assistance from
member counties during the crisis. These facilities allow the Fund to provide emergency assistance without the need to have a full-fledged program in
place. Emergency financing has been approved by the IMF’s Executive Board at record speed – to 80 countries. From June, the
IMF has been
also approving financial assistance under its other lending arrangements, bringing the total
number of countries to 85 (for the most recent detailed data, please see the IMF’s COVID-19 Financial Assistance and Debt Service
Relief Tracker). Grants for debt relief – The IMF has extended debt service relief through the Catastrophe
Containment and Relief Trust (CCRT) to 29 of its poorest and most vulnerable member countries
on their IMF obligations, covering these countries’ eligible debt falling due to the IMF for the period between April 2020 and April 2021.
This debt relief helps the benefitting countries channel more of their scarce financial
resources towards vital emergency medical and other relief efforts while these members
combat the impact of the COVID-19 pandemic. IMF staff are working with donors to increase
funds for further debt relief through this trust, so that the duration of grant-based debt relief to our
most vulnerable members can be extended to up to a two year period, ending April 2022. Calls for
bilateral debt relief – The IMF Managing Director and the President of the World Bank recognized the heavy burden this crisis is having on Low Income
Countries and, on March 25, 2020, called on bilateral creditors to suspend debt service payments from the poorest countries. The G20 responded to this
call on April 15, 2020, by agreeing to suspend repayment of official bilateral credit from the poorest countries until the end of 2020, which in October
was extended until end-June 2021. The Debt Service Suspension Initiative (DSSI) means that G20
bilateral official creditors will,
during this period, suspend debt service payments from the poorest countries (73 low- and lower middleincome countries) that request the suspension. It is a way to temporarily ease the financing constraints for these countries and free up scarce resources
that they can instead use to mitigate the human and economic impact of the COVID-19 crisis. The International Institute for Finance (IIF) responded to
this initiative by recommending that private-sector creditors grant debt payment forbearance in a similar way. In May, the IIF released Terms of
Reference for private sector participation on a voluntary basis. The IMF, together with World Bank, have expressed support for a further extension of the
DSSI until end-2021. The G20 have agreed to examine the need for a further extension by the time of the IMF-World Bank Spring Meetings in April
2021. Enhancing liquidity– The IMF has approved the establishment of a Short-term Liquidity Line (SLL) to further strengthen the global financial
safety. The facility is a revolving and renewable backstop for member countries with very strong policies and fundamentals in need of short-term
moderate balance of payments support.
IMF has provided emergency financing to 85 countries in need
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IMF 21 [No Author, 03-03-2021, “The IMF's Response to COVID-19, International Monetary
Fund, https://www.imf.org/en/About/FAQ/imf-response-to-covid-19]
The IMF is responding to an unprecedented number of calls for emergency financing – from over
100 countries. The Fund has doubled the access to its emergency facilities—the Rapid Credit Facility (RCF) and Rapid Financing
Instrument (RFI)—allowing it to meet increased demand for financing during the crisis. These facilities allow the Fund to provide
emergency assistance without the need to have a full-fledged program in place. 8. From June, the
IMF has been also
approving financial assistance under its other lending arrangements, bringing the total
number of countries to 85 (for the most recent detailed data, please see the IMF’s COVID-19 Financial Assistance and
Debt Service Relief Tracker).
International loans were crucial to respond to financial crisis.
Triggs 21 [Triggs, Adam. 03-10-2021. “The problem with linking debt forgiveness to the
Sustainable Development Goals.” Brookings Institution, https://www.brookings.edu/blog/futuredevelopment/2021/03/10/the-problem-with-linking-debt-forgiveness-to-the-sustainabledevelopment-goals/]
Indonesia’s approach is not unusual according to recent data from the ADB. More than one-third of the external support received by Asia’s
developing countries during COVID-19 came from the ADB. More than 20 percent came from bilateral loans and foreign aid. Around 18 percent came
from the World Bank while only 9 percent of international support came from the IMF, only slightly more than what
came from the China-dominated AIIB (at 6 percent). While it is unclear how much support came from bilateral currency swap lines, these findings
highlight two things. RELATED CONTENT stacks of coins in front of a globe FUTURE DEVELOPMENT Managing developing countries’ sovereign
debt José Antonio OcampoMonday, March 8, 2021 A teller counts U.S. notes at the Dahabshill money transfer office in capital Mogadishu February 16,
2015. Somalia's prime minister last week urged the U.S. government and U.S. banks to support money transfer firms that offer a lifeline for many in the
war-torn Horn of Africa nation. About 40 percent of all Somali families rely on remittances from another country, and the estimated annual total of $1.3
billion is more than all foreign aid and investment in Somalia combined. Funds sent back home to Somalia are crucial for many families and businesses in
a country that lacks a proper financial system due to the years of fighting. REUTERS/Omar Faruk (SOMALIA - Tags: BUSINESS POLITICS) FUTURE
DEVELOPMENT Modeling remittances flows with web scraping Jesús Crespo Cuaresma and Max ThomasbergerFriday, February 26, 2021 Piggy bank
in an ocean of coins with gathering storm clouds in the background. FUTURE DEVELOPMENT COVID-19’s ‘thundering’ effect on taxes Rabah Arezki
and Grégoire Rota-GraziosiThursday, February 18, 2021 First,
they show just how crucial these international
institutions have been during the pandemic. The funds sought from global, regional, and
bilateral institutions amount to 40 percent of the amount developing countries spent during
COVID-19 through fiscal and monetary policies. Less funding from these institutions would
have meant weaker responses to COVID-19. Second, the findings reveal that developing countries
will give preference to international finance that comes without strings attached over
finance that does. Developing countries have options.
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Green Investment
Following the pandemic, fighting Climate Change will be a global priority
Monteiro 20 [Monteiro, Ana. 04-29-2020, “Nations Must Promote ‘Green Recovery’ From
Virus, IMF Chief Says,” Bloomberg News, https://www.bloomberg.com/news/articles/2020-0429/nations-must-promote-green-recovery-from-virus-imf-chief-says]
With the world
economy reeling from the fallout from the Covid-19 pandemic, nations must do all
they can to promote a recovery that also fights against the climate-change crisis, International
Monetary Fund Managing Director Kristalina Georgieva said. “Taking measures now to fight the climate crisis is not just a ‘nice-tohave,’ it is a ‘must-have’ if we are to leave a better world for our children,” she said in prepared remarks to be delivered at the
Petersberg Climate Dialogue Wednesday. The IMF’s
fiscal affairs department recommends nations mandate
commitments to reduce carbon emissions when they provide financial lifelines to companies that
are carbon-intensive, adding that record-low oil prices make this an opportune time to phase out subsidies.
IMF committed to fighting Climate Change—helping countries transition
away from fossil fuels, implement carbon taxation, etc.
Reuters 21 [No Author, 02-26-2021. “IMF, World Bank to step up efforts against global climate
risks,” Reuters, https://www.dailysabah.com/business/economy/imf-world-bank-to-step-upefforts-against-global-climate-risks]
The leaders
of the International Monetary Fund (IMF) and the World Bank on Friday vowed to
step up efforts to combat climate change by looking more closely at climate-related financial
stability risk and using other tools at their disposal. World Bank President David Malpass told finance officials
from the Group of 20 (G-20) economies that the institution, the biggest provider of climate finance to the developing world, would
make record climate investments for a second consecutive year in 2021. To get more bang for their buck in mitigation and adaptation,
the World Bank is helping countries update their commitments or "nationally determined commitments" under the Paris climate
accord, he said during a videoconference. The bank is also launching new reviews to integrate climate into all its country diagnostics
and strategies, he said, with an initial focus on developing countries with the largest carbon emissions and the largest climatevulnerable populations, Malpass said. He said the
bank would work with the IMF and others on the reviews,
and planned to complete up to 25 over the next year. "A key focus will be to help countries
achieve a just transition from coal to affordable, reliable and sustainable energy. We are also
developing a framework for fiscal policy and sustainable growth, including carbon taxation and
its redistributive impact," he said. IMF chief Kristalina Georgieva told G-20 officials she strongly
supported a proposal by Italy, which is leading the group this year, on global climate risks and
environmental taxation. "We will play our part in the areas ... such as integrating climate in public
revenues and spending policies, climate-related financial stability risks and data," she said. Georgieva
told a climate summit last month that climate change posed a fundamental risk to economic and
financial stability, but investing in green infrastructure could expand global economic output by
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an average of 0.7% annually over the next 15 years and create millions of jobs. She said the fund
would also launch a new "Climate Change Dashboard" this year to track the economic
impact of climate risks and the measures taken to mitigate them, a key step toward
ensuring a needed shift to a low-carbon economy. Malpass last week told Reuters the Bank and the IMF
were also looking at ways to factor climate change into negotiations about reducing the debt
burdens of some poor countries hit hard by the coronavirus pandemic. Last month, the head of the
IMF urged policymakers worldwide to embrace more spending to help revive their stuttering
economies amid the pandemic.
IMF committed to research and investment to fight the Climate Crisis
Gopalakrishnan 19 [Gopalakrishnan, Tarun. 10-22-2019, “International Monetary Fund,
pension funds and climate: The heat is on,” Down to Earth,
https://www.downtoearth.org.in/blog/climate-change/international-monetary-fund-pension-fundsand-climate-the-heat-is-on-67363]
The International
Monetary Fund (IMF) meetings over the past week saw continued focus on
the climate crisis. The fund has previously discussed financial sector-focused solutions, putting
out papers earlier this year mapping global ‘dirty energy’ subsidies and examining fiscal
policies to deliver Paris Agreement commitments. The announcement that its monetary and capital
markets department would be looking into the pricing of climate risks in global stock and
bond markets is a promising continuation of the Fund’s engagement. Investor accountability has emerged as
one of the sharpest tools against climate denialism. Exxon Mobil Corp, for example, is currently defending itself in court over allegations that it
defrauded shareholders by misreporting its own cost estimates of climate change. Similar work has already begun in the area of institutional investments,
such as sovereign funds, and pension funds. This area of focus grew, in part, out of work by the United Nations Environment Finance Initiative (UNEP
FI); in particular, its Task Force on Climate Related Financial Disclosure (TCFD).
Climate investment will spark global economic growth and help aid the
recovery against coronavirus
Harvey 21 [Harvey, Fiona. 01-24-2021, “Helping poorest tackle climate crisis will boost global
growth, says IMF head,” The Guardian,
https://www.theguardian.com/environment/2021/jan/25/helping-poorest-tackle-climate-crisiswill-boost-global-growth-says-imf-head]
Helping the most vulnerable people to cope with the climate crisis can boost the global
economy during the Covid crisis and governments should make this a priority, the head of the
International Monetary Fund has said. Kristalina Georgieva said international responses to the pandemic must
urgently take account of the need to adapt to the impacts of extreme weather and other climate
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shocks, as well as reducing greenhouse gas emissions. Otherwise, the world risked billions of dollars of economic damage in the
near future, as most countries were unprepared for the effects of a rapidly heating climate, she warned. “The good news is
that it can be win-win-win-win,” she said. “Building resilience can be good for nature and
ecosystems; it can be good for economic growth; at a time when economies have lost lowskilled jobs, it boosts job creation; and the fourth win is that it can bring health benefits
[such as reduced air pollution].”
Investment in green technology more efficient than investment in coal sector
and has a long-term spillover effect
Volz 20 [Volz, Ulrich. Fall 2020, “INVESTING IN A GREEN RECOVERY,” International
Monetary Fund, https://www.imf.org/external/pubs/ft/fandd/2020/09/investing-in-a-greenrecovery-volz.htm]
There is no trade-off between choosing a sustainable recovery and economic progress. Many
green technologies have matured, and low-carbon energy is, in most cases, cheaper now than
fossil-fuel-based energy. Recent evidence suggests that well-designed green projects can generate more employment and
deliver higher short-term returns per dollar spent, compared with conventional fiscal stimulus.
Moreover, today’s investment in climate change mitigation and adaptation generates substantial longterm returns and cost savings, whereas the cost of inaction or late action on climate change is
high. Steps taken now to mitigate climate change represent an investment that will generate
dividends into the future, while continued inaction will give way to disastrous global warming and much greater costs down the line.
Likewise, failing to invest in making our economies and societies more climate resilient undermines our future growth and wellbeing. The Global
Commission on Adaptation calculated that every
dollar invested in building climate resilience could result in
between $2 and $10 in net economic benefits. There is, however, a major problem: Many countries lack the
means to finance a recovery and undertake critically needed investments in climate adaptation
and mitigation.
IMF necessary to help poor countries finance green tech investment
Volz 20 [Volz, Ulrich. Fall 2020, “INVESTING IN A GREEN RECOVERY,” International
Monetary Fund, https://www.imf.org/external/pubs/ft/fandd/2020/09/investing-in-a-greenrecovery-volz.htm]
International financial institutions should also ramp up support to climate-vulnerable countries. The
sad truth is that the impact of climate change is the greatest in countries that contributed the least to
global warming caused by human industry and agriculture. A rapid scaling up of investment in climate resilience is a
matter of life and death for these countries. Unfortunately, climate-vulnerable developing economies are those
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struggling the most to finance adaptation and resilience. These economies are particularly exposed to climate-related
financial risks, and both governments and firms are already facing a climate risk premium on the cost of capital (Kling and others 2020; Beirne, Renzhi,
and Volz 2020). There is a real danger that climate-vulnerable developing economies will enter a vicious circle in which greater climate vulnerability
raises the cost of debt and diminishes fiscal space for investment in climate resilience. The
financial risk of climate-vulnerable
countries is already high and is likely to increase further as financial markets increasingly price
climate risks and global warming accelerates (Buhr and others 2018). International support for
increased funding in climate resilience and mechanisms to transfer financial risks is
urgently needed and could help these countries to enter a virtuous circle. Greater resilience funding could
reduce both vulnerability and the cost of debt, providing these countries with extra room to scale up investments to tackle the climate challenge. The
IMF and multilateral development banks will also need to develop new instruments,
including extended emergency facilities, to support climate-vulnerable developing
economies when they are hit by disasters. Over the past two decades, about 20 countries—most of them
small island nations—suffered losses amounting to more than 10 percent of their GDP. The most
extreme case is Dominica, where Hurricane Maria caused estimated damage in 2017 equaling 260 percent of GDP. In 2004, Hurricane Ivan wiped out
about 150 percent of Grenada’s GDP. But even in less extreme cases, disasters
can wreak havoc on public finances and
make sovereign debt unsustainable. We urgently need a discussion around the treatment of climate debt; that is,
public debt incurred as a direct result of climate disasters or necessary adaptation measures.
IMF committed to green tech investment as a short-term solution to the
pandemic induced recession and a long-term solution to Climate Change
Hawkins 20 [Hawkins, Johns. 10-15-2020, “Some say neoliberals have destroyed the world, but
now they want to save it. Is Scott Morrison listening?” The Conversation,
https://theconversation.com/some-say-neoliberals-have-destroyed-the-world-but-now-they-wantto-save-it-is-scott-morrison-listening-148167]
The IMF’s
biannual World Economic Outlook projected a deep recession for 2020, as a result of the
COVID-19 pandemic. Global economic output is expected to shrink by 4.4% this year. The IMF noted
while the recession has reduced emissions, the decline is temporary. It warned policies to reduce
greenhouse gas emissions were “grossly insufficient to date” and global temperatures could increase by up to 5℃ by the end of this
century. This would lead to “physical and economic damage, and increasing the risk of catastrophic outcomes across the planet”. It
said “an
initial green investment push, combined with steadily rising carbon prices, would deliver
the needed emissions reductions at reasonable output effects”. It went on: The package would initially
boost global GDP, supporting the recovery from the COVID-19 crisis, but then weigh on global
activity for a period, as the impact of the investment push wanes and carbon prices continue to
rise. In the second half of the century, the reduction in emissions would place the global
economy on a stronger and more sustainable path. So in other words, the IMF recognises that now
is a good time to undertake green investment, because it has long-term benefits and can act
as a useful short-term stimulus. The outlook suggests the stimulus effect of the investment push fades
after the first decade. But any slowing in annual economic growth is trivial. The longer term economic benefits
of avoiding catastrophic climate change far outweigh any transitional costs. And in a transition to a
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low emissions economy, fears of net job losses appear misplaced. The IMF says says “the
evidence indicates that
environmental policies have succeeded in reallocating jobs from high- to low-carbon sectors”.
IMF’s specific proposal for green investment
Hawkins 20 [Hawkins, Johns. 10-15-2020, “Some say neoliberals have destroyed the world, but
now they want to save it. Is Scott Morrison listening?” The Conversation,
https://theconversation.com/some-say-neoliberals-have-destroyed-the-world-but-now-they-wantto-save-it-is-scott-morrison-listening-148167]
The IMF’s
proposed package involves the following tools: an 80% subsidy rate for renewable
energy production a 10-year green public investment program in renewable energy, lowcarbon transport and energy efficient buildings carbon pricing, calibrated to achieve an 80%
reduction in emissions by 2050, after accounting for emission reductions from the green fiscal stimulus
compensation for poor households whose purchasing power is dampened by a carbon price. The
IMF says the plan is “growth friendly”, especially in the short term. The policies are designed to increase the price of fossil fuel
energy relative to low-carbon energy, and reflect the harm fossil fuels cause through air pollution and global warming. The IMF
is
not alone in its thinking. Some 27 Nobel laureates in economics have endorsed a price on carbon.
And recent research has conclusively found carbon pricing lowers growth in greenhouse gas
emissions.
IMF committed to green investment as part of COVID recovery
IMF 21 [No Author, 03-03-2021, “The IMF's Response to COVID-19, International Monetary
Fund, https://www.imf.org/en/About/FAQ/imf-response-to-covid-19]
In the immediate crisis-containment phase, the scope to implement green recovery plans may be limited, given the overriding priority
However, as countries move from
containment and stabilization to recovery, green recovery plans will likely be reflected in IMFsupported programs where structural reforms are critical for macroeconomic developments.
Reforms could include public investment projects focused on boosting climate-smart
technologies or helping adaptation (e.g. irrigation); drafting a medium-term climate plan; or
financing additional climate spending with green bonds. The inclusion of specific reforms as conditionality
of providing urgent relief to households and firms, which should not be delayed.
will depend on the criticality of the reforms for achieving the goals of the program, taking into account the circumstances of the
member.
April 2021
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IMF will help countries recover from COVID-19 pandemic—invest in
adaptation measures, carbon pricing, financial sector surveillance, and
equipping central banks with tools necessary to deal with crisis
IMF 21 [No Author, 03-03-2021, “The IMF's Response to COVID-19, International Monetary
Fund, https://www.imf.org/en/About/FAQ/imf-response-to-covid-19]
Climate change is a fundamental risk to economic and financial stability. It is also an opportunity to
reinvigorate growth and create new green jobs. The IMF is committed to helping its members accelerate the
transition to the new climate economy — one that is low carbon and climate resilient, that helps
fight the causes of climate change and adapt to its consequences. This means actions in four key areas: First,
integrating climate in our annual country economic assessments – our Article IV consultations. In
highly vulnerable countries we focus on adaptation; and we are building up mitigation analysis,
including carbon pricing, in our assessments of large emitters. Second, including climate related
financial stability risks in our financial sector surveillance – through standardized disclosure of
these risks, enhanced stress tests and assessments of supervisory frameworks. Third, scaling up
climate in our capacity development to help equip finance ministries and central banks with
the skills needed to take climate considerations into account. Fourth, mainstreaming climate
indicators in macroeconomic data. We will launch a Climate Change Dashboard this year—with indicators to track the
economic impact of climate risks and the measures taken to mitigate them.
IMF in unique position to help in the fight against Climate Changespecifically its work with finance ministers and central banks address
economic incentives that allow Climate Change to continue
IMF in 2020 [No Author, 2020 “Climate change is a linchpin of the Sustainable Development
Goals,” IMF Annual Report 2020,
https://www.imf.org/external/pubs/ft/ar/2020/eng/spotlight/climate-change/]
Climate change remains a clear and present threat, yet actions to fight it have fallen short. Measures taken now to fight the climate
crisis will create more resilient economies and help the recovery from the global pandemic be fair, smart, and green. The IMF
has
contributed to global efforts by delivering analysis and enhancing country engagement on climate
change. It will step up its efforts as the institution looks ahead to the United Nations Climate Change Conference in November
2021. The IMF’s work with finance ministries, central banks, and financial regulators uniquely
positions it to help counsel on these policies. On climate change mitigation, the IMF provided
practical, country-specific guidance on fiscal and other policy options to implement
mitigation strategies, such as carbon pricing and fossil fuel subsidy reform. To help countries cope
with natural disasters when they happen, the IMF has deepened the financial safety net by increasing access limits for emergency
financing. To help
countries adapt and build resilience to climate change, the IMF, together with the
April 2021
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World Bank, provided overarching assessments of preparedness, macroeconomic impact,
mitigation, adaptation, and financing strategies for small, vulnerable, and capacity-constrained
countries. As part of this work, the IMF has published Climate Change Policy Assessments for
Grenada, Micronesia, and Tonga this year. The transition to a low-carbon economy will mean
countries have to manage a number of risks. The IMF has proposed a carbon price floor
arrangement among countries to effectively and equitably scale up global mitigation action.
Other policy work has focused on financial regulation to internalize risks from exposure to “brown” assets such as fossil fuels, as well
as on measures to ease the social impact of carbon mitigation or the need to diversify in economies that depend on fossil fuel exports.
Carbon Tax is the single best way to fight against Climate Change
Davidson 19 [Davidson, Jordan. 10-11-2019, “IMF Says Carbon Tax Is Most Powerful Way to
Fight Climate Crisis,” EcoWatch, https://www.ecowatch.com/carbon-tax-imf2640931703.html?rebelltitem=1#rebelltitem]
The International
Monetary Fund (IMF) released a report that says action is needed
urgently to tackle the climate crisis. It said that countries around the world need to drastically
reduce their carbon emissions immediately and the most effective way is through a
carbon tax and with global cooperation, as Reuters reported. The report did not mince words when it came to
the threat the climate crisis poses. "Global
warming causes major damage to the global economy and the
natural world and engenders risks of catastrophic and irreversible outcomes," the IMF said in its semiannual fiscal monitor report released ahead of next week's IMF and World Bank fall meetings of finance leaders and policymakers,
according to Reuters. The
IMF's report said a meaningful carbon tax is the "single most powerful way"
to hand the climate crisis, since it allow businesses and households to find the lowest-cost ways
of reducing energy use and transitioning towards cleaner alternatives. "We view fiscal policy as a
crucial way of combating climate change," said Paolo Mauro, deputy director of Fiscal Affairs Department at the
IMF, as CNBC reported. "You can reshape the tax system and you can reshape fiscal policy more
generally in order to discourage carbon emissions."
April 2021
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Cryptocurrency
Absent international regulation and framework, unregulated cryptocurrency
will cause collapse of international monetary system
Goldsmith 20 [Goldsmith, Jacob. 2020, “THE IMF MUST DEVELOP BEST
PRACTICES BEFORE GOVERNMENT-BACKED CRYPTOCURRENCIES
DESTABILIZE THE INTERNATIONAL MONETARY SYSTEM,” Emory Law
Review, https://law.emory.edu/eilr/_documents/volumes/34/2/goldsmith.pdf]
The near constant currency
manipulation, amid global adoption of government-backed cryptocurrency, results in the
collapse of the international monetary system, setting the globe back nearly eighty years.
While this scenario may seem far-fetched, the characteristics of cryptocurrency make it a distinct possibility.7 Cryptocurrencies, and the
technology underlying them, are promising technological advancements.8 However, some of the characteristics that make the
technology so promising are also the characteristics which could lead to a minor problem spiraling out of control. Government-backed
cryptocurrency poses a threat to the stability of the international monetary system and,
barring rapid and proactive measures, the international community risks sustaining
significant injury to the infrastructure of the international economy.
IMF was the first actor to propose regulating cryptocurrency
The response
of regulators, commentators, and investors to the proposition of government-backed
cryptocurrency has been a mix of curiosity and kepticism.78 Central banks engaged in research to determine the
potential effects on that specific country and its population have been the primary participants in the discussion of government-backed cryptocurrency.79
A few governments have taken the view that, while private cryptocurrencies may create issues, the market for such digital assets is “too small to [cause]
sufficient concern [that] warrant[s] regulation and/or a ban at this juncture.”80 The first
official analysis to emerge from an
international organization was an annual IMF Article IV81 consultation for the Marshall
Islands, in September 2018.82 The IMF report was relatively skeptical of the Marshall Island’s
proposed cryptocurrency, the SOV.83 The IMF expressed concerns about the interaction between cryptocurrencies and AML/CFT
regulations,84 concerns which would arise with any government-backed cryptocurrency should it look anything like Bitcoin.85 However, such concerns
were amplified given the circumstances and regulatory concerns already present in the Marshall Islands.86 Two
months later, in
November 2018, the IMF released a Staff Discussion Note entitled “Casting Light on Central
Bank Digital Currency,” thereby bringing oversight of government-backed cryptocurrency into
the international conversation.87 The IMF analysis in this Staff Discussion Note was far more indepth than in the Marshall Islands’
Article IV Report. The analysis focused on possible Central Bank Digital Currency (CBDC) designs, as well as the potential advantages and
disadvantages of government-backed cryptocurrency.88 While extremely insightful when compared to alternative works available at the time, this Staff
Discussion Note explicitly “abstract[ed] from cross-border considerations by assuming that [government-backed cryptocurrency] is for domestic use
only.”89 Limiting
analysis within the domestic context is puzzling given the borderless characteristics
of digital currencies, and is insufficient when measured against the dangers presented by crossborder transactions involving government-backed cryptocurrencies.
April 2021
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Single actor and international response is necessary to regulate
cryptocurrency and prevent cross-border inefficiencies.
Cuervo et. al 20 [Cuervo, Cristina; Morozova, Anastasiia; Sugimoto, Nobuyasu. 01-202020, “Regulation of Crypto Assets,” International Monetary Fund,
https://www.imf.org/en/Publications/fintech-notes/Issues/2020/01/09/Regulation-ofCrypto-Assets-48810]
Given government-backed cryptocurrencies’ integration potential, and the subsequent issues that may arise, the international
community must adopt some form of oversight or established best practices as soon as possible.95
While a country-by-country approach may allow for more freedom of choice for each individual
government and eventually result in a sufficient level of concern,96 a single agency is much
better equipped to tackle such pressing matters.97 Furthermore, if a single agency is the force
pushing countries to adopt a system of “best practices,” there will be the additional benefits
conveyed by having a uniform approach to oversight across jurisdictions.98 A single agency must
take the lead in creating and enforcing an international scheme of oversight relating to government-backed cryptocurrencies—at least
as a starting point. Given the issues, discussed below in Part III.B, that private
cryptocurrencies currently present to
governments around the world, the lack of an urgent response to the dangers of governmentbacked cryptocurrencies should not come as a surprise.
IMF is the best actor
No U.S. government agency currently regulates Bitcoin or any other cryptocurrency, as a form of currency. However, an attempt to regulate Bitcoin as a
form of currency can be identified in Germany.238 Germany recognizes Bitcoin as a “private currency,” which only grants Bitcoin the status of a
“financial instrument.”239 Thus, while Germany technically recognizes Bitcoin as a form of currency, it does not recognize Bitcoin or any other private
cryptocurrency as a form of legal tender.240 At
the international level of currency “regulation,” the IMF is
probably the most authoritative organization. The IMF was created following WWII to address
problems created after the collapse of the gold standard.241 The organization was given a mandate to regain control
over the international monetary and financial systems, so as to provide stability and predictability for all international actors and states.242 While not
IMF is the closest thing to a regulatory agency of monetary policy on the
international stage.243 The IMF is a cooperative fund which works with all 189-member
countries, assessing their economic and currency policies, while providing suggestions and
undertaking studies, so as to accomplish its mission.244 The primary goal of the IMF is to provide
stability to the international monetary system.245 More specifically, one of the primary responsibilities of the IMF is to
coordinate and maintain order in the international foreign exchange market.246 The primary goal and responsibility of the IMF
seems to parallel well with some of the issues presented by private cryptocurrency.
officially a regulatory agency, the
IMF leading the charge for future cryptocurrency integration with global
financial markets by end of 2025
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Hui 20 [Hui, Ada. 10-12-2020. “IMF, World Bank, G20 Countries to Create Central Bank Digital
Currency Rules,” CoinDesk, https://www.coindesk.com/imf-world-bank-g7-countries-to-createcentral-bank-digital-currency-rules]
International financial authorities and 20 of the world’s largest economies are establishing
official standards for regulating and issuing sovereign digital currencies. The Group of Twenty
(G20) – an organization of finance ministers and central bank governors representing the European Union and 19 countries
across every continent – said in a report Tuesday it is working with the International Monetary Fund
(IMF), the World Bank and the Bank for International Settlements (BIS) to formalize the use of central bank
digital currencies (CBDC) in banking systems. According to the report, by the end of 2022 the G20 members,
the IMF, the World Bank and the BIS will have completed regulatory stablecoin frameworks and
research and selection of CBDC designs, technologies and experiments.. Stablecoins are digital currencies
that are often linked to physical currencies such as the U.S. dollar. The IMF and the World Bank will have the
technical capabilities to facilitate CBDC transactions involving the countries by the end of
2025, the report said. The countries will “examine the scope for new multilateral platforms, global
stablecoin arrangements and central bank digital currencies to address the challenges that crossborder payments face without compromising on minimum supervisory and regulatory standards
to control risks to monetary and financial stability,” said the G20 Financial Stability Board (FSB), a body formed
after the 2008 financial crisis.
Centralization of cryptocurrency prevents misuse for crime and stabilizes the
currency from volatility
Goldsmith 20 [Goldsmith, Jacob. 2020, “The IMF Must Develop Best Practices Before
Government-Backed Cryptocurrencies destabilize the International Monetary system,” Emory
International Law Review, https://law.emory.edu/eilr/content/volume-34/issue-2/comments/imfbest-practices-cryptocurrencies-international-monetary-system.html]
In switching the discussion from private cryptocurrencies to government-backed cryptocurrencies, one of the biggest doubts raised by
the core adopters 258 of Bitcoin is the addition of a central authority. 259 Government-backed
cryptocurrencies will
likely exist on a centralized network, as opposed to the decentralized, peer-to-peer network seen
with private cryptocurrencies. 260 As a result of the centralization of any proposed government-backed cryptocurrency,
such cryptocurrency is unlikely to be pseudo-anonymous. 261 Even if the government were to propose a cryptocurrency with similar
characteristics to Bitcoin, with public and private keys, the
centralization of the underlying blockchain
network would almost certainly allow the government to eliminate any façade of pseudoanonymity. 262 At the same time, elimination of such pseudo-anonymity may help to mitigate the
concerns surrounding use in connection with criminal activity. 263 Another issue which would potentially
be addressed via government backing of a cryptocurrency is providing stability to the value of the
coin. 264 Private cryptocurrencies, such as Bitcoin, have been associated with price volatility,
partially derived from their lack of inherent value. 265 In contrast, central bank actions may
allow governments to address such volatility concerns in the context of government-backed
cryptocurrencies. 266
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It is essential for the IMF to enter the cryptocurrency space to provide
stability and oversight
Goldsmith 20 [Goldsmith, Jacob. 2020, “The IMF Must Develop Best Practices Before
Government-Backed Cryptocurrencies destabilize the International Monetary system,” Emory
International Law Review, https://law.emory.edu/eilr/content/volume-34/issue-2/comments/imfbest-practices-cryptocurrencies-international-monetary-system.html]
The IMF was, and is, tasked with ensuring the stability of the international monetary system. 305 By
signing the Articles of Agreement, states bind themselves to the IMF and as such, the IMF may impose obligations on signatories. 306 The IMF
imposes obligations on member countries via numerous articles in the IMF founding document,
including Article IV 307 and Article VIII. 308 The most important obligation relating to potential concerns about an intentional
injection of instability is that IMF member-states must, “avoid manipulating exchange rates or the international monetary system in order to prevent
effective balance of payments adjustment or to gain an unfair competitive advantage over other members.” 309 Two other IMF member-states obligations
which would help to maintain stability in the international monetary system are a “commitment to pursue policies that are conducive to orderly economic
growth and reasonable price stability, … and to provide the IMF with data about its economy.” 310 To enforce these obligations and further its founding
purpose, the IMF has a few mechanisms of power at its disposal. One
of these powers, termed “surveillance,” 311
involves the IMF’s process of the regular monitoring of economies and associated provision of
policy advice, which “is intended to identify weaknesses that are causing or could lead to
financial or economic instability.” 312 One of the most important Articles with respect to the IMF
and its capacity to implement oversight of government-backed cryptocurrency is Article IV. 313
Article IV, Section 5(a), mentions “separate currencies” and seems to grant “a means by which
the IMF can exercise indirect control over currencies not formally within its reach.” 314 Thus,
even if a government does not consider its cryptocurrency to be an “official currency” of the country, the IMF may still exercise
authority as it relates to oversight and/or best practices. Private cryptocurrencies are currently regulated on a
country-by-country basis. 315 However, this is not the ideal regulatory scheme for any form of cryptocurrency given the characteristics of the technology
and the widespread risk posed by such characteristics. 316
IMF would provide legitimacy and standardization to government-sponsored
cryptocurrency—prevents instability in the long-run
Goldsmith 20 [Goldsmith, Jacob. 2020, “The IMF Must Develop Best Practices Before
Government-Backed Cryptocurrencies destabilize the International Monetary system,” Emory
International Law Review, https://law.emory.edu/eilr/content/volume-34/issue-2/comments/imfbest-practices-cryptocurrencies-international-monetary-system.html]
April 2021
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The IMF,
in pushing for an oversight framework, should focus on providing legitimacy to
government-backed cryptocurrencies. Providing legitimacy to valid government-backed
cryptocurrencies will supply the necessary consumer confidence in such currency markets.
Consistent consumer confidence in the reliability of government-backed cryptocurrencies will help to provide stability to the currency
markets. Given that the
primary purpose of the IMF is to ensure the stability of the international
monetary system, it would certainly be appropriate for the IMF to assert their authority
here. If the IMF fails to assert its leadership in this arena, it could lead to instability within the
international monetary system, a less consequential parallel of which can be seen in the unstable private cryptocurrency
market. Proliferation of government-backed cryptocurrencies could potentially de-stabilize the entire international monetary system,
as outlined throughout this Comment. For
government-backed cryptocurrencies, the international oversight
framework is most likely to emerge from consultations by and with the IMF. Government-backed
cryptocurrencies share a number of characteristics with legal tender or currency as they currently exist. 317 The IMF, given its
historical importance in transitioning the world from the gold standard to the current
system of paper fiat currency, has plenty of experience re-working their mechanisms to adapt to
changing times and changing technology. This demonstrated experience will be invaluable should we continue
transitioning towards digital currency. Further, as referenced frequently, there is a need for international consensus
on how to deal with these government-backed cryptocurrencies, as regulation on a country-bycountry basis simply cannot get the job done.
Crypto regulation is key to preventing financial instability
Cuervo et. al 20 [Cuervo, Cristina; Morozova, Anastasiia; Sugimoto, Nobuyasu. 01-202020, “Regulation of Crypto Assets,” International Monetary Fund,
https://www.imf.org/en/Publications/fintech-notes/Issues/2020/01/09/Regulation-ofCrypto-Assets-48810]
The rapid growth of crypto assets has raised questions about the appropriate regulatory perimeter and the ability of the existing
regulatory architecture to adapt to changing conditions (Figure 1).
Effective regulation of financial services
promotes long-term economic stability and minimizes the social costs and negative
externalities from financial instability. The same underlying principles for regulation should apply
to nascent products and services based on innovative technologies, notwithstanding design
challenges. The purpose of this note is to identify selected elements of regulation and supervision that authorities should consider
when deciding on a regulatory framework for crypto assets. The note is structured in two main sections: the first briefly summarizes
some of the most relevant risks related to crypto assets, while the second concentrates on how regulatory frameworks could address
these risks. To illustrate the analysis, some country examples are compiled in the Appendix. The definition
of a crypto asset
is far from globally uniform and we have therefore opted for a broad approach. In this note, the term
crypto asset denotes digital assets that use cryptography for security and are coins or tokens of
distributed ledgers and/or blockchains, including asset-backed tokens. We also recognize the distinction
between “coins” and “tokens” but may use the two terms interchangeably.2
International cooperation and oversight is key to regulation and preventing
arbitrage
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Cuervo et. al 20 [Cuervo, Cristina; Morozova, Anastasiia; Sugimoto, Nobuyasu. 01-202020, “Regulation of Crypto Assets,” International Monetary Fund,
https://www.imf.org/en/Publications/fintech-notes/Issues/2020/01/09/Regulation-ofCrypto-Assets-48810]
This paper also aims to cover more imminent issues to the regulatory and supervisory community and thus does not discuss the challenges that could arise
in the long term. For example, in June 2019, the Financial
Stability Board (FSB) published a report4 that considers
the implications of decentralized financial technologies and concludes that full decentralization
seems unlikely to achieve an economically significant scale in the near future. Therefore, in this note
we describe regulation with the assumption that some intermediaries will exist for the time being to provide financial services to end users. In fact, the
risks discussed here are only a starting point for regulatory discussions. The evolving nature
of crypto assets will require a
continuous assessment of risks and re-evaluation of regulatory approaches. Industry and technological
developments may accelerate specific activities (see Box 2), potentially shifting the focus of authorities from some risks to others. As technologies
and products evolve, there will be areas where further adaption will be needed, but in all cases,
this note takes the approach that similar activities and risks should be regulated in the same way
to prevent the development of excessive risk taking, contagion, financial instability, and material
regulatory arbitrage. Finally, given the cross-border and cross-sectoral nature of the activities,
closer international cooperation and coordination is needed to address regulatory gaps and
prevent potential regulatory arbitrage. Activities related to crypto assets already are and will continue to be more cross-border
and cross-sectoral—by design— than traditional financial activities. This requires closer international cooperation and
coordination5 to address regulatory gaps. Consistent regulatory approaches can prevent the
potential risk of a race to the bottom by regulators and policymakers and address regulatory
arbitrage by financial entities.
Crypto-assets have been used in the past to commit crime—lack of
international oversight prevents monitoring across jurisdiction making it
nearly impossible to prevent crime
Cuervo et. al 20 [Cuervo, Cristina; Morozova, Anastasiia; Sugimoto, Nobuyasu. 01-202020, “Regulation of Crypto Assets,” International Monetary Fund,
https://www.imf.org/en/Publications/fintech-notes/Issues/2020/01/09/Regulation-ofCrypto-Assets-48810]
Crypto assets potentially also create risks of misuse for money laundering and terrorist
financing.12 This is due, in part, to the different levels of anonymity or “pseudo-anonymity” that crypto
assets offer that make regulatory action challenging: while the authorities may be able to trace
transactions on the blockchain, depending on the level of anonymity that they offer, they
may not always be able to establish who the two parties to a transaction are, and, ultimately, who owns
the crypto assets. In addition, the fact that they are “internet-based” means that users have the ability to transact
globally more rapidly. The use of decentralized technologies also makes it possible for users to transact in crypto assets without going
through financial intermediaries (and by extension, bypassing anti–money laundering/combating the financing of terrorism [AML/CFT] obligations).
April 2021
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These features, and the fact
that, crypto assets currently fall under different regulatory frameworks
globally, resulting in uneven or no monitoring and information sharing across jurisdictions,
make such assets particularly attractive to individuals who wish to evade existing controls to
commit crimes (such as fraud, cyber-crime, and tax evasion, to launder illegal proceeds or even to fund terrorism).
Global regulation and cross-border interaction necessary to prevent abuse of
crypto assets
Cuervo et. al 20 [Cuervo, Cristina; Morozova, Anastasiia; Sugimoto, Nobuyasu. 01-202020, “Regulation of Crypto Assets,” International Monetary Fund,
https://www.imf.org/en/Publications/fintech-notes/Issues/2020/01/09/Regulation-ofCrypto-Assets-48810]
Regulators need to continuously monitor the crypto-asset landscape to understand the
direction of industry developments. In this sense, ongoing efforts to address data gaps to monitor markets and potential contagion
effects to the existing financial sector are welcome. Regulation should not be seen as stifling innovation, but rather
as building trust. As for the more traditional financial sector, regulation can instill trust in the
business and foster a safer development of the sector by providing clear guidelines that remove
uncertainty and thus foster confidence. Regulators need to take a proactive approach to
address any risks potentially emerging from industry developments and swiftly build
capacity and expertise in new instruments and new technology given the high reputational
risks involved. Capacity and resources of supervisory authorities, as well as potential
damage to trust in the financial sector will need to be evaluated in each case. Moreover,
regulators also need to clearly communicate the role of regulation and supervision to the public,
emphasizing the risks which are borne by investors and consumers. That is important to avoid misunderstanding or
over-trust in any new regulation or the role of the authorities. Finally, the cross-sector and cross-border dimensions of crypto
assets make domestic and international coordination and cooperation key. In some cases, it may be challenging
to determine the geographic location33 and therefore the jurisdictional powers over some of these assets. While regulation should be tailored to
jurisdiction-specific features, a consistent
approach and international cooperation will be key to prevent
and minimize regulatory arbitrage and potential inconsistencies in the application of laws
and regulations. Given the cross-border and global accessibility aspects of crypto assets,
domestic regulatory measures that do not consider cross-border issues and overseas
regulatory measures may create opportunities for cross-border regulatory arbitrage. ‘
Action has already been taken
Cuervo et. al 20 [Cuervo, Cristina; Morozova, Anastasiia; Sugimoto, Nobuyasu. 01-202020, “Regulation of Crypto Assets,” International Monetary Fund,
https://www.imf.org/en/Publications/fintech-notes/Issues/2020/01/09/Regulation-ofCrypto-Assets-48810]
April 2021
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Most jurisdictions have issued public statements warning about the risks of crypto assets (generally referring to investor protection and financial integrity
risks), with many also highlighting that some crypto assets could resemble securities and would trigger a securities regulatory approach (for example, the
US SEC and the UK FCA).15 Prohibition. Several
jurisdictions have decided to ban any crypto-asset activity,
although it is unclear if enforcement is always feasible and cross-border activities are covered.
Some of the jurisdictions that chose this approach are Algeria, Bahrain, Bangladesh, Bolivia, China, Colombia,
the Dominican Republic (for regulated financial institutions), Indonesia, Iran, Iraq, Morocco, Nepal,
Kuwait, Kyrgyzstan, Macao SAR, Maldives, and Qatar. Guidance. Many authorities have issued high-level
guidance on the treatment of crypto assets. To frame the guidance, some jurisdictions classified the assets according to their main characteristics and
economic purpose (for example, the Swiss FINMA, MAS, and UK FCA). The most common
classification, inspired by the
Swiss approach, refers to (i) securities assets, meaning those that fall within the jurisdiction’s
definition of a security; (ii) payment assets, for those intended to be used as a means of payment;
and (iii) utility assets, which are intended to provide digital access to an application or service.
Guidance generally focuses on identifying whether existing legislation and regulations apply to any of these types of crypto assets. Other jurisdictions are
not explicitly classifying crypto assets but are identifying the characteristics that would make them securities and thus fall under existing securities
regulations. Tailored regulation. Some
jurisdictions are creating specific regulatory frameworks for
crypto assets (for example, Malta and Thailand16). These provide more details on specific
requirements that may apply to 16Japan: Amendment of the Payment Services Act and the Financial Instruments and Exchange
Act, 2019; Malta: Virtual Financial the different activities and service providers related to crypto assets, including public offerings and secondary market
trading. For instance, the regulation issued by the commodity futures trading supervisory agency under the Ministry of Trade of Indonesia sets out the
minimum requirements for crypto assets traders, trading platforms (including futures exchanges), clearing houses, and crypto storage providers
(custodians). These requirements
include registration and licensing, reporting, systems, organizational
structure, governance, certification, security, storage, investor/customer education, transparency,
minimum capital, and AML/CFT obligations. Enforcement. Several authorities are using their enforcement and sanction powers
to develop or enforce their position on crypto assets and related activities, on a case-by-case basis (for example, US SEC and CFTC). Standard
setters and coordination/monitoring bodies have also been actively engaged in developing reports
and guidance regarding crypto-asset risks, although standards have only been issued by FATF:
IMF is the best-actor to regulate cryptocurrency globally set up common
norms, incentivize international cooperation, etc.
Goldsmith 20 [Goldsmith, Jacob. 2020, “THE IMF MUST DEVELOP BEST
PRACTICES BEFORE GOVERNMENT-BACKED CRYPTOCURRENCIES
DESTABILIZE THE INTERNATIONAL MONETARY SYSTEM,” Emory Law
Review, https://law.emory.edu/eilr/_documents/volumes/34/2/goldsmith.pdf]
Development of a cohesive and consistent international standard for best practices will allow
government-backed cryptocurrency to flourish, while limiting the potential dangers posed to
the international monetary system. The organization best-equipped to handle international
oversight of governmentbacked cryptocurrencies is the International Monetary Fund
(IMF).27 The IMF can provide protection to consumers, investors, and states by providing
legitimacy to these government-backed cryptocurrencies and by helping the international
community deal with the risks associated.28 This Comment justifies, in the context of private cryptocurrency
regulatory schemes, IMF leadership in developing an international framework of “best practices”
and proposes the IMF “pick up the pace” in creating such an oversight framework.
April 2021
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27
Expansion of cryptocurrency provides access to monetary system for millions
of poor households
Vigna & Casey 15 [Vigna, Paul; Casey, Michael J. 02-26-2015, “Bitcoin for the
Unbanked,” The Wall Street Journal,
http://www.foreignaffairs.com/articles/143162/paul-vigna-and-michael-j-casey/bitcoinfor-the-unbanked]
Roughly 2.5 billion adults in the world don’t have access to banks, which means somewhere in the order of 5
billion people
belong to households that are cut off from a financial system that the rest of us take for granted. They can’t start savings
accounts. They don’t have checking accounts. They can’t get credit cards. They live in places where banks don’t want to go, and
because of this, they remain effectively walled off from the
global economy. They are called the unbanked. But they are not
of the biggest and most exciting prospects bitcoiners talk about is using their
cryptocurrency to bring these billions of people roaring into the twenty-first century.¶ The
unreachable, not by a long shot, and one
Caribbean is an area of the emerging-market world where a strong case can be made for locals to use bitcoin to get around a restrictive
financial system. ¶ Jamal Ifill, a young, soft-spoken artist with a head full of dreadlocked hair and a warm smile, has been blowing
glass in Barbados for 11 years and has had his own one-room studio-cum-showroom for five years. One of his latest pieces is a twofoot-high, rectangular, latticework lamp that to our New York eyes looked like one of the Twin Towers. He sells his artwork locally
and has attracted some attention; a piece he made was presented to Princess Anne when she visited the island in 2011.
Access to cryptocurrency back banking key to reducing global poverty
Rastegar 18 [Rastegar, Angela. 07-13-2018, “Three ways cryptocurrency can end
poverty,” Hackernooon, https://hackernoon.com/bros-lambos-and-ngos-three-wayscryptocurrency-can-end-poverty-f873664fce5b]
Crypto could be used to provide a financial identity to the 40% of adults who are unbanked, most
of whom live in developing economies. These 2 billion adults cite barriers such as fees, distance to
banks, lack of unnecessary documentation, and (most commonly) not having enough assets to
warrant an account. Financial inclusion is important for reducing poverty, by allowing people
to manage savings, receive loans, and build credit. Companies like Philippines-based Coins and US-based
BanQu are using blockchain technology to help the unbanked by creating financial alternatives in
an efficient, transparent and scalable manner. GiveCrypto could accelerate these efforts, and create a flow of
capital to kickstart accounts. Still, additional innovation would be needed to (at some point) allow these individuals to transact (most
likely, by interacting with a financial institution). Today, the cost of service to bank the world’s
poorest is extremely
high — so helping these individuals turn crypto into purchases in an affordable way would require
further innovation.
April 2021
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Development
IMF helped to stimulate economic growth in Ghana
Twumasi 19 [Twumasi-Baffour, Priscilla. 06-30-2019. “Why Ghana is likely to go on needing
the IMF – however difficult the relationship,” The Conversation,
https://theconversation.com/why-ghana-is-likely-to-go-on-needing-the-imf-however-difficult-therelationship-119094]
In its World Economic Outlook the IMF
is forecasting that Ghana will be the fastest growing economy in the
world this year with a projected growth rate of 8.8%. As with previous IMF/World Bank sponsored programmes,
Ghana is once again out-performing itself. As usual, the government is very optimistic about the prospects of the country
following its exit from the programme. The obvious question being asked is: what is different this time? The programme appears different in a number of
ways. First,
it was based on a combination (domestic and foreign) of sources of finance. Second,
conditionalities attached to it were informed by homegrown policies. This was unlike previous programmes where
conditionalities were based on the Washington consensus. Lastly, Ghana has also made important changes. It passed a new
law – the first of its kind in the country – to govern government spending. The Act seeks to ensure fiscal responsibility,
macroeconomic stability, and debt sustainability. A key provision gives parliament the power to censure the Finance Minister
if spending exceeds defined limits.
IMF will be essential for Ghana’s continued development
Twumasi 19 [Twumasi-Baffour, Priscilla. 06-30-2019. “Why Ghana is likely to go on needing
the IMF – however difficult the relationship,” The Conversation,
https://theconversation.com/why-ghana-is-likely-to-go-on-needing-the-imf-however-difficult-therelationship-119094]
Given the chronology of Ghana’s relationship with the IMF – and the cycle of achieving targets under its programmes before falling
back on bad habits – most
believe it’s just a matter of time before the country goes back to the IMF
asking for help. The likelihood of this happening is increased by the fact that the country goes to
the polls in 2020. This means there is bound to be a tendency for government to overspend. Whatever happens next, it’s
important to note that the structure of the economy has not changed. It is still highly susceptible to external shocks, particularly
commodity prices. To the extent that these external shocks are unavoidable, the
critical partners in the country’s development process.
IMF and World Bank will remain
April 2021
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Economic Growth
Mukherjee 08 finds in an analysis of 112 developing countries over 25 years
proves, when controlling for governmental system IMF loans work and are
effective in promoting economic growth and reducing infant mortality. The
problem of slow growth is due to autocratic regimes not the IMF
Mukherjee 08 [Mukherjee, Bumba. 2008, “International economic organizations and economic
development: an assessment.” (International Monetary Fund)(World Bank)(On Multilateralism).
SAIS Review, 28(2), 123–137. https://doi.org/10.1353/sais.0.0013
However, I have conducted
a simple analysis of existing data to assess the effect of aid and loans from
the IMF and the World Bank on two widely accepted indicators of economic development—
economic growth and the logarithm (log) of infant mortality—for a sample of 112 developing
countries from 1975 to 2002. More specifically, I have analyzed how the IMF and World Bank’s aid and loan amount (as a percentage of
the GDP of recipient nations) influenced the mean growth rates and log of infant mortality in these countries between 1975 and 2002. The size of the
sample is dictated primarily by the extent to which data is available for (i) the two indicators of economic development mentioned above and (ii) the
amount of financial assistance that the two Bretton Woods institutions have offered to individual countries from 1975 to 2002.14 The countries in the
sample are listed in Table 1. Table 2 presents the mean economic growth rate (see column A) and the mean log of infant mortality (column B) during the
years between 1975 and 2002 in which countries in the sample received financial assistance from the IMF and/or the World Bank. Columns C and D in
Table 2 report respectively the mean growth rate (column C) and mean log of infant mortality (column D) in the years between 1975 and 2002 in which
countries in the sample did not receive financial assistance from either of the two international economic organizations. Note from columns A and C that
there is almost no difference between the mean growth rate of developing countries during the years in which they received financial assistance and the
time period in which they did not receive aid or loans from the Bretton Woods institutions. Comparison of the averages reported in columns B and D
reveal an even more disturbing result. In particular, these two columns show that the infant mortality rate is statistically higher during the years in which
countries receive financial assistance from the Bretton Woods institutions relative to the years in which they do not get aid or loans from these
organizations.15 None of the results presented above are surprising to some scholars. As mentioned earlier, numerous academics have long claimed that
financial aid and loans from the IMF and World Bank have a negligible or even negative impact on economic development in developing countries.
Although the results in Table 2 appear to confirm the views of the critics of the IEOs, we should be cautious before drawing too strong of conclusions
from these results. This is because the findings reported in Table 2 are far from complete. The results mask the possibility that there may be a critical
difference between the impact that the IMF and World Bank have on development in developing nations that are democracies compared to nondemocratic states. [ … ] When we divide the sample of 112 developing countries in Table 1 into democratic and autocratic states based on the wellknown Freedom House democracy index,16 we get more nuanced results about the impact of the IMF and World Bank’s financial assistance on
economic development. Table 3 shows that the mean
growth rate among developing democracies in the years
in which they received financial help from the IMF and the World Bank is approximately
two times higher than the mean growth rate among autocracies during the time period in which these
autocratic states obtained financial assistance from the same institutions. The illustrations in Figures 1 and 2 confirm the results in Table 3. Figure 1 is a
scatter-plot derived from a regression model that tests the impact
of aid and loans (as a percent of the GDP of recipient
nations) from the IMF and World Bank on the economic growth rate of democracies in the
sample from 1975 to 2002. This figure clearly illustrates that financial assistance from the IEOs has a
strong positive effect on economic growth in democracies in the developing world; the
aforementioned correlation is captured by the positive slope of the line that passes through
the individual scatter plots. Figure 2, in contrast, shows that financial assistance from the IMF and the World Bank has had a negligible
effect on growth in autocracies in the sample; indeed the line that passes through the individual scatter plots in this case is completely flat. Table 3 also
reveals that aid and loans
from the IMF and World Bank reduce infant mortality in developing
nations that are democratic. Unfortunately, funds from the Bretton Woods institutions lead to an increase in infant mortality in
developing countries that are autocratic. This tragic result is shown in figure 3 where the upward sloping line indicates a positive correlation between
funds from the Bretton Woods institutions and the extent of infant mortality in non-democratic developing states. Taken together, the results in Table 3
and Figures 1–3 suggest that economic
development among democracies in the developing world benefits
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from aid and loans from the Bretton Woods institutions. However, financial assistance from these institutions, on average,
has negligible or disastrous economic effects in autocratic states in the developing world. These findings are extremely important. This is because, barring
a few political scientists,18 analysts often under-estimate the possibility that the effect
of the IMF and the World Bank’s funds
on development may be mediated by the political regime-type of the countries that receive
financial assistance. Indeed, as discussed in the next section, the results reported in Table 3 have vital policy implications for future U.S.
administrations. Why does financial assistance from the IMF and the World Bank have a positive effect on economic
development in democracies in the developing world but not in those that are autocratic? Two main reasons, which are certainly not
exhaustive, can be put forth to answer this question. First, policy-making within democracies is a transparent
process. Policies are openly debated in the legislature and even in the media before they are
actually implemented. And, compared to leaders in autocracies, democratic leaders are politically accountable
to their electorate. Hence, when democratic leaders receive aid or loans from the two IEOs to
follow certain policies that foster economic development, they cannot easily divert the
obtained financial assistance for rent extraction or personal use. This, in turn, ensures that
financial assistance from the two institutions is more often invested for promoting economic
development rather than for rent-seeking. Unlike democracies, policy-making in autocratic regimes is not transparent. Leaders of
autocratic regimes face relatively less formal political constraints and are thus less accountable to their citizens compared to democratic leaders.
Consequently, autocrats
may find it easier than democratic leaders to divert the IMF and the World
Bank’s funds for rent-seeking and corruption instead of investing the financial aid for promoting
development.
Zimbabwe and Tanzania prove empirically. When money is given to
autocratic state (Zimbabwe) that money is misused, but when given to
democratic state (Tanzania) money is used for education investment that
spurs economic growth
Mukherjee 08 [Mukherjee, Bumba. 2008, “International economic organizations and economic
development: an assessment.” (International Monetary Fund)(World Bank)(On Multilateralism).
SAIS Review, 28(2), 123–137. https://doi.org/10.1353/sais.0.0013
A simple example will help illustrate the above argument. Consider two
countries in Africa that have similar levels
of per capita income but have different political regimes. The first country is Tanzania, which has
made a relatively successful transition to democracy since 1995. The second country is
Zimbabwe, which is essentially a dictatorship. Let’s begin with Zimbabwe. Worsening economic conditions in
Zimbabwe in 1998 and 1999 forced Zimbabwean government officials to request financial assistance from the IMF in the summer of
1999. After some tough negotiations, the
IMF finally relented and provided a stand-by loan of $193
million during the fall of 1999 to help the country overcome its economic crisis.19 When
Zimbabwe’s government received the loan, government officials and the country’s leader,
Robert Mugabe, promised the IMF that they would curb corruption since the IMF perceived
quite justifiably that corruption was exacerbating the country’s economic and financial
crisis. Indeed, the IMF’s loan was provided in part to invest in and improve formal mechanisms of governance in the country to
reduce corruption. Unfortunately, rather than being used to root out corruption, the IMF’s funds were misappropriated and largely
stolen. Despite pressure from the IMF for better governance in Zimbabwe, incidences of graft actually increased under Mugabe, who
became progressively more despotic. Unlike
Zimbabwe, the IMF’s loan of $ 110 million in 1999 to
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Tanzania—a multiparty democracy—was genuinely used to promote development by the
Tanzanian government.20 In particular, the IMF’s loan allowed Tanzania to increase spending on
education and eliminate school fees for elementary school education. The loan also helped to
release funds for the Tanzanian government to increase the number of primary schools in the
country from 11,608 in 1999 to 12,689 schools by 2002, a net increase of 1,081 primary
schools.21 Increased investment in primary education, which was bolstered by funds from
the IMF, led to a substantial increase in enrollment of poor children into primary schools.
Over time, this has helped to reduce child labor and thus poverty. While the dichotomy between Tanzania and
Zimbabwe is simply one example, it does illustrate how a country’s political regime is a critical
factor in determining whether funds from the Bretton Woods institutions are channeled for
worthwhile projects or are misappropriated.
Dictators abuse IMF funding during times of domestic economic crisis. Not
the IMF’s fault
Mukherjee 08 [Mukherjee, Bumba. 2008, “International economic organizations and economic
development: an assessment.” (International Monetary Fund)(World Bank)(On Multilateralism).
SAIS Review, 28(2), 123–137. https://doi.org/10.1353/sais.0.0013
The second reason that may explain why financial assistance from the Bretton Woods institutions fails to enhance development in autocratic regimes
stems from the finding by some scholars that funds from inter- national organizations are often used by dictators to perpetuate their rule rather than for
fostering economic development.22 Specifically, as suggested by the Zimbabwe example, dictators
in developing countries
often turn to the IMF or the World Bank for financial help during times of domestic
economic crisis. Instead of using the financial aid or loans to resolve the crisis and promote
development, dictators often misappropriate the funds for personal use (e.g. Mugabe) or use the
money to reward supporters and bribe opposition groups in the society. In other words, funds
from the IMF and World Bank are not used for development but are diverted by dictators when
their political power is seriously threatened—and this typically occurs during the onset of an economic crisis—to minimize
threats to their political survival. A recent essay by the political scientists Smith and Vreeland (2005) provides several examples and a careful empirical
study to show that IMF agreements and loans help dictators to survive longer in office, especially when they are experiencing economic difficulties.23
Since dictators
are more likely to “waste” funds from the IMF and the World Bank for their
political survival compared to leaders of democratic states, it should come as no surprise that
financial assistance from the Bretton Woods institution has little or no impact on economic
development in autocratic states. Taken together, then, the empirical analysis in this section raises a key question that is important for
policy-analysts to answer: given that the effectiveness of the Bretton Woods institutions in successfully promoting development depends critically on the
political institutions—specifically the type of political regime in place—in developing countries, what should future administrations in the U.S. do to
enhance the IMF and the World Bank’s ability to alleviate poverty across the developing world?.
IMF programs promote economic growth. Prefer our study because it
controls for selection bias through propensity score matching. Multiple
warrants
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Bird & Rowlands 16 [Bird, Graham; Rowlands, Dane. 09-05-2016, “The Effect of IMF
Programmes on Economic Growth in Low Income Countries: An Empirical Analysis,” The
Journal of Development Studies, vol. 53,
https://www.tandfonline.com/doi/full/10.1080/00220388.2017.1279734]
Although there are nuances in the findings reported in the previous section, we generate some results that are reasonably robust. These allow us to reach a
number of fairly firm conclusions about the IMF’s relationship with LICs and the effect of IMF programmes on economic growth. First,
lowincome countries participate in IMF programmes in circumstances that differ from those
found in middle-income and emerging economies. Similarly, the circumstances in which they participate in concessional
programmes differ from those in which they use non-concessional ones. These findings are important not only from the viewpoint of designing
programmes to meet the needs of LICs, but also when it comes to evaluating the effects of programmes and dealing with selection bias. An inappropriate
participation model will reduce the confidence that can be attached to results concerning the effects of programmes, and this point needs to be kept in
mind when assessing the results reported across studies. Our results reinforce those of some other studies. But unlike some of these studies, our
estimations pass tests of statistical significance (Dicks-Mireaux et al., 2000) and address the problem of potential selection bias (Bird & Mosley, 2006).
They also relate to regular concessional IMF programmes and not just those associated with shock-related lending (Bal Gunduz et al., 2013).
Second, propensity score matching analysis shows that concessional programmes have a robust,
statistically significant and positive effect on LIC growth over the three year horizon analysed in this paper, which
contrasts with the (often statistically significant) negative effects associated with nonconcessional programmes. Third, the effect of IMF
programmes on economic growth in LICs depends on the severity of the economic conditions
surrounding the initial referral to the Fund. There is reasonably strong evidence of a positive effect that is at its strongest and
most significant for countries with a high estimated probability of signing a programme, and therefore initially exhibiting relatively weak economic
performance. Fourth,
the generally positive effect of concessional IMF programmes on economic
growth is more pronounced for countries that have poorer prior growth performance,
rising debt levels, and lower levels of pre-existing aid dependence. The effects of these contingent factors are
generally quite nuanced and sometimes sensitive to the participation equation that is used.
IMF programs promote economic growth –disproportionately in poor
countries and more significant when coupled with internal policy reforms
Bird & Rowlands 16 [Bird, Graham; Rowlands, Dane. 09-05-2016, “The Effect of IMF
Programmes on Economic Growth in Low Income Countries: An Empirical Analysis,” The
Journal of Development Studies, vol. 53,
https://www.tandfonline.com/doi/full/10.1080/00220388.2017.1279734]
Fifth, programmes
accompanied by a relatively low level of IMF financing are consistently
associated with positive growth effects. The effects of more generously resourced concessional programmes on LIC
growth are less consistent and more sensitive to the participation equation used. This initially counter-intuitive finding
could result from the heavier reliance on adjustment that is implied by less financing. It may also
reflect the possibility that programmes involving relatively larger amounts of IMF resources tend to occur in countries
that have, on average, more severe initial economic conditions. If so, it is unlikely that reduced IMF
funding would have a generally favourable impact on the growth effects of programmes. Sixth, the
implementation of IMF conditionality seems to matter. Our results provide some evidence
April 2021
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that completed programmes that follow periods of unsuccessful IMF programme
completion have stronger growth effects. The positive and statistically significant growth effects are also more
robustly associated with countries that have had recent prior agreements, and thus more likely to be engaged in a sustained period of
adjustment. This result is consistent with one of the results reported by Bal Gunduz et al. (2013). It implies that an important part of
the positive effect occurs through the modality of sustained policy reform under the auspices of the IMF. It also
implies that the policies embodied in concessional IMF programmes do not entail excessive compression of domestic aggregate
demand. Seventh,
the positive effects on LIC growth are much more apparent for the poorer LIC
countries. The positive and statistically significant effects are between 1.2 and 2.4 per cent,
occur for the current and two subsequent years of a programme, and are generally quite
robust to the selection equation used. Eighth, the positive effect of concessional programmes on economic growth
were greater in the pre2000 period than in the post-2000 one. In principle this result could be because the reforms to IMF
conditionality introduced under the umbrella of the streamlining initiative served to reduce
the impact of IMF programmes on economic growth. However, the global economic environment in the first
part of the 2000s, and up until the crisis towards the end of the decade, was relatively benign for LICs. Fewer of them therefore had
reason to turn to the IMF for assistance and, for those that did, the value added of programmes in terms of increasing the rate of
economic growth might have diminished. It was during the early 2000s period that the world made the most progress towards reaching
the MDGs, due in large part to economic growth in key countries such as China and India. With less favourable conditions in the post2008 period, there may be a renewed opportunity for LICs to use the IMF’s concessional programmes to advantageous effect. Finally,
our results are relevant in the context of both the 2010 IMF reforms mentioned in the Introduction
and the setting of the Sustainable Development Goals established in 2015 as well as the related
Addis Ababa Agenda (AAA). Within the constraints of its existing mandate, and through its programmes, we show that the
Fund can exert a significantly beneficial effect on economic growth in LICs. This result implies that the IMF has the capability to
assist poor countries in seeking to achieve the SDGs. This beneficial effect can occur not only directly by raising sustainable rates of
economic growth but also indirectly by helping to achieve the SDGs that are themselves connected to economic growth.
Early IMF programs were an undoubted early success
Hessler 18 [Hessler, Uwe. 04-09-2018, “IMF bailouts — roads to stability or recipes for
disaster?” Deutsche Well, https://www.dw.com/en/imf-bailouts-roads-to-stability-or-recipes-fordisaster/a-45338114]
Researchers have found that IMF programs were relatively successful especially in the lenders'
early years. Mohisin S. Khan, IMF director for the Middle East and Central Asia, for example, has looked into the
bailouts for 69 developing countries during the period of 1973 to 1988. He found that the IMF
programs' short- and long-term impacts were largely positive on the countries' current
accounts, balance of payment and inflation figures. Among those rated as "IMF success stories,"
were loan programs for Mexico in the 1980s, as well as for India and Kenya.
IMF loans promote long-term economic growth
April 2021
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Hackler et. al 20 [Hackler, Lauren, Frank Hefner, and Mark D Witte. “The Effects of IMF Loan
Condition Compliance on GDP Growth.” The American Economist (New York, N.Y. 1960) 65,
no. 1 (2020): 88–96. https://doi.org/10.1177/0569434519836994.]
Despite criticisms of IMF conditional lending programs, evidence for improved economic growth indicators in the long run has been cited in other
studies. Atoyan and Conway (2006) after
examining the IMF’s impact in 95 countries from 1993-2002 show that, in
loans lead to
long-run improvement. The three measures investigated were real per capita economic growth
rate, the ratio of the fiscal surplus to GDP, and the ratio of the current account surplus to GDP.
They compared these indicators in participating and nonparticipating countries during the period of IMF programs issued in 1993 to
2002. Matching participant and nonparticipant countries in their research allowed Atoyan and Conway (2006) to determine how the measures were
changed independent of IMF influence. When the participant was compared with the counterfactual
(nonparticipants), the authors found improvements, in the long run, to the ratio of fiscal surplus to GDP
and improvements to the ratio of the current account surplus to GDP. These results support the assertion that
“IMF programs have an increasingly positive impact on real economic growth in
participating countries as the time horizon grows longer”
the short run, there is little evidential support for economic improvements. However, an argument can be made that IMF
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Foreign Investment
IMF funding incentivizes other foreign investment—reassures creditors and
encourages lending
IMF 21 [No Author, 03-03-2021, “The IMF's Response to COVID-19, International Monetary
Fund, https://www.imf.org/en/About/FAQ/imf-response-to-covid-19]
The demand on IMF resources remains under further review to ensure that the IMF can lend its full support to its members in managing the economic and
social fallout of the COVID-19. If, at some point, the membership decides that more resources are needed, this can be done in various ways. For example,
in response to the Global Financial Crisis, the membership agreed to increase the IMF’s resources by increasing both IMF quotas and borrowing. BACK
TO TOP Where can countries get help if financing provided by the IMF isn’t enough? In
most IMF-supported programs, the IMF
is not the only source of financing. IMF financing catalyzes external financing from the
private and official sectors (that is, the presence of an IMF-supported program reassures other
creditors and encourages them to continue to lend). This, together with policy adjustment,
enables the member country’s economy to return to medium-term external viability.
IMF programs increases the likelihood of foreign aid—signals capital
investment, partnerships, etc.
Bird & Rowlands 16 [Bird, Graham; Rowlands, Dane. 09-05-2016, “The Effect of IMF
Programmes on Economic Growth in Low Income Countries: An Empirical Analysis,” The
Journal of Development Studies, vol. 53,
https://www.tandfonline.com/doi/full/10.1080/00220388.2017.1279734]
The effect can be particularly pronounced in those LICs with relatively severe economic problems and with an inferior growth record. These are likely to
be the countries that exhibited relatively little success in achieving the Millennium Development Goals. They are also the countries
that are
more likely to encounter problems in sustaining economic development. While, up to a point, the
IMF may help in alleviating the external financing constraints that LICs encounter, the Fund’s
assistance may work best by having a positive catalytic effect on foreign aid. A partnership
between the IMF and aid donors that seeks to exploit institutional comparative advantage
seems likely to be more efficient in the pursuit of the SDGs than one that sees the IMF as a
leading source of finance and aid donors as the designers of economic reform. Increasing the IMF’s
lending capacity to small LICs may be helpful in some circumstances, (particularly where they are exposed to shocks) but it may not necessarily result in
a stronger effect on economic growth. The
Fund’s influence over economic reform, and in particular reform
aimed at securing appropriate structural change, remains important. The partnerships that are
stressed in seeking to achieve the SDGs therefore involve not only the IMF’s relationship with
aid donors, but also with the governments of client LICs. The problem here is that by reducing the importance attached to
its preferred structural reforms as incorporated in conditionality, the Fund may make its relationship with governments less conflictual but may also risk
sacrificing some of the success that has been exhibited in improving growth performance in LICs. While we find that completion matters, it is
fundamentally the implementation of appropriate economic reform that is important. Thus, the
completion rate of IMF
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programmes may be raised by ‘softening’ conditionality but this will not necessarily bring with it
improved growth performance if the programmes that are more fully completed are themselves
less appropriate for achieving sustainable economic growth. Of course an associated caveat is that once growth
enhancing structural economic reform has been adopted, it may no longer be necessary to include structural conditionality as a key component of Fund
agreements. In these circumstances the
Fund’s role may be in helping to maintain macroeconomic
stability and avoiding slippage in structural reform.
IMF plays roll in financial stability and through their conditional loan
programs
Mukherjee 08 [Mukherjee, Bumba. 2008, “International economic organizations and economic
development: an assessment.” (International Monetary Fund)(World Bank)(On Multilateralism).
SAIS Review, 28(2), 123–137. https://doi.org/10.1353/sais.0.0013
The World Bank has actively provided financial aid and loans to developing countries since the 1950s for poverty alleviation
programs, structural adjustment, rural development schemes, training bureaucrats and for improving infrastructure. The IMF, in
contrast, was primarily focused on preserving global financial stability between 1950 and 1970. After
the oil crisis of the
1970s, however, the IMF also started providing financial aid and conditional loans to developing
countries to foster economic growth in these countries. The IMF and the World Bank have
provided vast amounts of aid and loans to several developing nations during the previous
three decades. A recent study reveals that the average overall use of IMF credit per decade increased, in
real terms, by 21% between the 1970s and 1980s, and increased again by just over 22% percent
from the 1980s to the 1991–2005 period.8 Another study has suggested that since 1950 the continent of Africa
alone has received more than a staggering $300 billion from the IMF, the World Bank and affiliate
institutions.9 Have the IMF and the World Bank “wasted” billions of U.S. dollars or has the money been “wisely invested” by these
two IEOs for promoting economic development across the developing world?
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Stability
IMF surveillance programs prevent currency volatility
Nsouli 07 [Nsouli, Saleh M. 06-29-2007, “What is the IMF doing to help countries maximize the
benefits of globalization?” International Monetary Fund,
https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp062907]
the IMF has put in place a Medium-Term Strategy aimed at working with its
member countries to minimize the risks of globalization and maximize the benefits. Based on this, it has
To address these concerns,
undertaken a number of reforms in the way it operates to adapt its role to the new global world environment and enhance its tools. Let me highlight three key areas of reform.
First, the Fund has introduced a number of changes to modernize and strengthen its surveillance
activities, namely the way it monitors and assesses countries' policies and provides policy advice.
• To help foster a dialogue on global issues requiring multi-country policy actions and coordination, a new surveillance tool—named "Multilateral
Consultations"—has been set up. The first Multilateral Consultation focused on the issue of global external
imbalances. Discussions with systemically important countries and groups of countries were successfully concluded, showing the value of this new tool. A set of
comprehensive actions were agreed upon, including particularly tighter fiscal policy in the United States; greater exchange rate flexibility in Asia; structural reforms
to improve potential growth and fiscal sustainability in Europe and Japan; and the gradual
increase in expenditures on social systems and infrastructure in oil-exporting economies. Important steps
have already been taken in these areas. • Exchange rates have been at the heart of Fund surveillance, and with the
greater levels of trade and financial flows, this has become all the more important. The Fund has, therefore,
given greater prominence to its work on exchange rate issues. The Executive Board just replaced the 1977 Decision on Surveillance Over Exchange Rate Policies with the 2007
Decision on Bilateral Surveillance over Members' Policies. The new Decision provides more complete guidance to members for the conduct of their exchange rate policies, so as to
cover all major causes of external instability rooted in these policies. The 1977 Decision enjoined members to avoid exchange rate manipulation for specific purposes, in particular
to gain an unfair competitive advantage over other countries. The new Decision adds a principle recommending that members avoid exchange rate policies that result in external
instability, regardless of their purpose, thereby capturing exchange rate policies that have proven to be a major source of instability over the past decades. The new Decision is also
much more comprehensive than the old one, covering not only exchange rate policies but also domestic policies. Paradoxically, this will help prevent surveillance from spreading
itself too thin, since it will help identify which domestic policies are really critical for external stability. Overall, the Decision crystallizes a common vision of the best practice of
surveillance, as it has evolved over the last 30 years, for greater clarity and, hence, more
accountability. • Further, to guard against the risks of financial crises in emerging market economies, a
new Fund financing facility is being considered to help assure financing to countries pursuing
appropriate policies in the event they face a crisis. Together with the 2007 Surveillance Decision, the facility could contribute to enhancing
crisis prevention in emerging countries. • To tackle the challenges raised by integrated financial markets, the IMF is
giving increased emphasis to financial sector issues in its bilateral, regional, and
multilateral surveillance work. To this end, financial sector analysis is being strengthened, in particular by devoting particular attention to the linkages
between the financial sector and real economy. Also, the analysis of financial sector vulnerabilities is being made an
integral part of the Fund's macroeconomic analysis and policy advice in the surveillance of
individual economies. To support the effort, a Monetary and Capital Markets (MCM) Department was established by merging and consolidating two departments
that were previously undertaking monetary and financial assessments.
April 2021
International Monetary Fund
38
Income Inequality
IMF programs decrease income inequality in following years after
implementation
Bird et. al 20 [Bird, Graham; Qayum, Faryal; Rowlands, Dane. 05-01-2020. “The effects of IMF
programs on poverty, income inequality and social expenditure in low income countries: an
empirical analysis,” Journal of Economic Policy Policy Reform,
https://www.tandfonline.com/doi/pdf/10.1080/17487870.2019.1689360?casa_token=xMI8M1XX
GpwAAAAA:axwJUO7p6TvjWNu_G9PbJUSuIZcT647yOTSBQodAI8srj8LwdkyvDNyBhIcKxJ-_sNUX09yDfv8iQ]
METHODOLOGY The key
methodological issue to deal with is selection bias; IMF programs are
typically adopted during periods of economic distress that would independently have required
policy adjustments that could affect poverty, inequality, and social spending. Identifying persuasive
counterfactual comparisons is particularly problematic when the IMF is brought in as a last resort. While there are a variety of statistical methodologies
available to deal with selection bias,8 all of them require a well-performing model that distinguishes between program and non-program countries.9 For
our analysis we adopt the propensity score matching (PSM) approach. This procedure estimates the effect of a treatment or policy by accounting for the
covariates that predict receiving the treatment. The first step in our analysis is therefore to estimate a participation equation that allows us to identify
countries with broadly similar propensities to participate in IMF programs. The second step tests whether the outcome variables being evaluated differ
significantly between countries with programs and those without, conditioned on their having similar participation propensities. We estimate the
participation equation upon which the propensity scores are based using a logit regression model that relates the probability of participating in an IMF
program to a range of factors that both economic theory and existing empirical studies suggest are significant and important. We also allow the
participation equations to differ between concessional and non-concessional IMF programs. A similar approach is used in Bird, Mylonas, and Rowlands
(2015), whose equations we modify for the analysis here. Having estimated the participation equations, we divide our sample into treatment and control
groups to calculate the impact of IMF programs on our selected measures of poverty, income inequality and social expenditure; not only in the year of
signing but also in the following two years. This we do by taking the difference in the means of the observations between the treatment and control
groups. ATE Yð Þ¼ E Yit1jDit¼ 1; p xð Þit ½ E Yit0jDit¼ 0; p xð Þit ½ where Y refers to the indicators of poverty, income inequality and social
expenditure, D indicates the existence of an IMF program, and p(xit) stands for the propensity score. We use a binary indicator of participation in IMF
programs and explore their effects on the Gini index, the income share of the lowest quintile, poverty headcount ratios, poverty gaps, infant mortality
rates, the human development index, as well as the level of government spending on education and health. Using a range of outcome variables enables us
to compare our findings with those reported in other studies (Garuda 2000; Martin and Ubiergo 2004; Hajro and Joyce 2009; Oberdabernig 2013;
Clements, Gupta, and Nozaki 2013). There
are 48 countries in the full sample and 35 in the concessional-only
sample. The estimations cover the years 1990–2015. Details of the countries included in our sample, as well as the
sources of our data are provided in a data appendix that is available in the online version of this paper. [ … ] Having estimated the participation equations,
our next
step involves matching propensity scores and identifying countries with similar
probabilities of signing an IMF program. This then allows us to compare what happens to our variables of interest in countries
that signed (the treatment group) and did not sign (the control group) programs. In this analysis we use the “nearest neighbor” matching technique,
although studies suggest that with large sample sizes such as ours, different matching algorithms yield similar results. Table 3 presents the average
treatment effects for non-concessional and concessional IMF programs generated from the PSM analyses.12 The Table
shows the effects
of the programs on our various measures of poverty, income inequality and social spending in the
year of signing, as well as in the first and second calendar years after signing. In the year of signing we discover no statistically significant effects
on any of the indicators except for a small increase in HDI associated with non-concessional programs and a decline in the income share of the bottom
quintile associated with concessional programs. Results for the year in which a program is signed need to be interpreted with caution since programs
signed early in the year have had longer to exert an impact than those signed towards the end of the year. It may therefore be
safer to put more
emphasis on the results relating to the first and second calendar years after signing. In the first
and second years following the signing of a non-concessional program, income inequality
(Gini Index) is significantly lower; the decline of almost 8 points in the second year represents
18% of the mean Gini value in the sample. Similarly, the income share of the lowest quintile increases by 1.67% for nonconcessional programs. These measures of relative poverty are largely unchanged for concessional programs.
April 2021
International Monetary Fund
39
There is also consistent evidence that non-concessional programs are associated with a significant decline in the measures of absolute poverty. For
example,
the difference in the poverty gaps (based on $1.90 per day) for countries with a nonconcessional agreement and those without is about 3.2, which represents nearly 40% of the
average poverty gap for the sample. Concessional programs, by contrast, are not generally associated with any statistically significant
changes in poverty measures (although the average treatment effects show a decline in poverty the first year and an increase in the second year). The
infant mortality rate and HDI do not seem to respond to either IMF program type, as is the case
with public spending on health.
IMF programs are not found to increase poverty or inequality
METHODOLOGY The key
methodological issue to deal with is selection bias; IMF programs are
typically adopted during periods of economic distress that would independently have required
policy adjustments that could affect poverty, inequality, and social spending. Identifying persuasive
counterfactual comparisons is particularly problematic when the IMF is brought in as a last resort. While there are a variety of statistical methodologies
available to deal with selection bias,8 all of them require a well-performing model that distinguishes between program and non-program countries.9 For
our analysis we adopt the propensity score matching (PSM) approach. This procedure estimates the effect of a treatment or policy by accounting for the
covariates that predict receiving the treatment. The first step in our analysis is therefore to estimate a participation equation that allows us to identify
countries with broadly similar propensities to participate in IMF programs. The second step tests whether the outcome variables being evaluated differ
significantly between countries with programs and those without, conditioned on their having similar participation propensities. We estimate the
participation equation upon which the propensity scores are based using a logit regression model that relates the probability of participating in an IMF
program to a range of factors that both economic theory and existing empirical studies suggest are significant and important. We also allow the
participation equations to differ between concessional and non-concessional IMF programs. A similar approach is used in Bird, Mylonas, and Rowlands
(2015), whose equations we modify for the analysis here. Having estimated the participation equations, we divide our sample into treatment and control
groups to calculate the impact of IMF programs on our selected measures of poverty, income inequality and social expenditure; not only in the year of
signing but also in the following two years. This we do by taking the difference in the means of the observations between the treatment and control
groups. ATE Yð Þ¼ E Yit1jDit¼ 1; p xð Þit ½ E Yit0jDit¼ 0; p xð Þit ½ where Y refers to the indicators of poverty, income inequality and social
expenditure, D indicates the existence of an IMF program, and p(xit) stands for the propensity score. We use a binary indicator of participation in IMF
programs and explore their effects on the Gini index, the income share of the lowest quintile, poverty headcount ratios, poverty gaps, infant mortality
rates, the human development index, as well as the level of government spending on education and health. Using a range of outcome variables enables us
to compare our findings with those reported in other studies (Garuda 2000; Martin and Ubiergo 2004; Hajro and Joyce 2009; Oberdabernig 2013;
Clements, Gupta, and Nozaki 2013). There
are 48 countries in the full sample and 35 in the concessional-only
sample. The estimations cover the years 1990–2015. Details of the countries included in our sample, as well as the
sources of our data are provided in a data appendix that is available in the online version of this paper. [ … ]
The connections
between IMF programs and poverty, income inequality and social expenditure are
complex and often contradictory. There is considerable ambiguity in terms of what relationships might be
expected on the basis of theory. Moreover, it may be unreasonable to expect that IMF programs will,
over a two or three-year span, exert a discernible and significant effect on poverty and income
inequality in either direction However, a common caricature of the IMF’s involvement in low income countries is that its
preoccupation with macroeconomic stabilization implies that IMF programs will have severe negative effects in the form of increasing
poverty, increasing income inequality and cutting social expenditure by the government. This caricature has been reinforced by
empirical studies that claim to have identified negative consequences, and, despite the nuances of some of these results, this image of
the effect of IMF programs has become something of a conventional wisdom. Our
findings suggest that this image
of IMF programs needs to be re-assessed. We attempt to deal with a potential selection problem by adopting a
propensity score matching approach which allows us to compare countries with and without IMF programs, but with approximately
similar probabilities of participating in one, based on their underlying economic circumstances. Our
analysis does not find
any strong and universally negative association between Fund programs and a wide range
of key social indicators that we examine. Instead, the effects are highly nuanced and contingent on country and
program characteristics; the estimated treatment effects exhibit considerable variance. While our findings do not allow firm
and universal conclusions to be reached about the effects of IMF programs on poverty and
income inequality, they do raise questions about the degree of confidence that should be placed in
April 2021
International Monetary Fund
40
what has tended to become the conventional wisdom. The next round of research needs to more fully account for
the above mentioned variances and examine the circumstances under which IMF programs are most and least likely to be beneficial in
the pursuit of the Sustainable Development Goals. This will no doubt involve an approach based on structured case studies. The
significant variances that we report suggest that the effect of IMF programs on poverty, income
inequality and other social indicators depends on a collection of contingent factors that are not
adequately represented in large sample analysis
April 2021
International Monetary Fund
41
Poverty
IMF funding helps countries with liquidity problems address their concerns
and helps budget reforms to deal with problems affecting their country
Bird et. al 20 [Bird, Graham; Qayum, Faryal; Rowlands, Dane. 05-01-2020. “The effects of IMF
programs on poverty, income inequality and social expenditure in low income countries: an
empirical analysis,” Journal of Economic Policy Policy Reform,
https://www.tandfonline.com/doi/pdf/10.1080/17487870.2019.1689360?casa_token=xMI8M1XX
GpwAAAAA:axwJUO7p6TvjWNu_G9PbJUSuIZcT647yOTSBQodAI8srj8LwdkyvDNyBhIcKxJ-_sNUX09yDfv8iQ]
METHODOLOGY The key
methodological issue to deal with is selection bias; IMF programs are
typically adopted during periods of economic distress that would independently have required
policy adjustments that could affect poverty, inequality, and social spending. Identifying persuasive
counterfactual comparisons is particularly problematic when the IMF is brought in as a last resort. While there are a variety of statistical methodologies
available to deal with selection bias,8 all of them require a well-performing model that distinguishes between program and non-program countries.9 For
our analysis we adopt the propensity score matching (PSM) approach. This procedure estimates the effect of a treatment or policy by accounting for the
covariates that predict receiving the treatment. The first step in our analysis is therefore to estimate a participation equation that allows us to identify
countries with broadly similar propensities to participate in IMF programs. The second step tests whether the outcome variables being evaluated differ
significantly between countries with programs and those without, conditioned on their having similar participation propensities. We estimate the
participation equation upon which the propensity scores are based using a logit regression model that relates the probability of participating in an IMF
program to a range of factors that both economic theory and existing empirical studies suggest are significant and important. We also allow the
participation equations to differ between concessional and non-concessional IMF programs. A similar approach is used in Bird, Mylonas, and Rowlands
(2015), whose equations we modify for the analysis here. Having estimated the participation equations, we divide our sample into treatment and control
groups to calculate the impact of IMF programs on our selected measures of poverty, income inequality and social expenditure; not only in the year of
signing but also in the following two years. This we do by taking the difference in the means of the observations between the treatment and control
groups. ATE Yð Þ¼ E Yit1jDit¼ 1; p xð Þit ½ E Yit0jDit¼ 0; p xð Þit ½ where Y refers to the indicators of poverty, income inequality and social
expenditure, D indicates the existence of an IMF program, and p(xit) stands for the propensity score. We use a binary indicator of participation in IMF
programs and explore their effects on the Gini index, the income share of the lowest quintile, poverty headcount ratios, poverty gaps, infant mortality
rates, the human development index, as well as the level of government spending on education and health. Using a range of outcome variables enables us
to compare our findings with those reported in other studies (Garuda 2000; Martin and Ubiergo 2004; Hajro and Joyce 2009; Oberdabernig 2013;
Clements, Gupta, and Nozaki 2013). There
are 48 countries in the full sample and 35 in the concessional-only
sample. The estimations cover the years 1990–2015. Details of the countries included in our sample, as well as the
sources of our data are provided in a data appendix that is available in the online version of this paper. [ … ] A standard IMF program can
affect poverty and inequality both directly and indirectly. Unfortunately, these influences are complex, and predicting
their overall effect is difficult. The direct effects stem from the financing and conditionality associated with a Fund agreement. In many instances,
countries (especially poorer ones) approach the IMF to alleviate immediate financial constraints, and in the wider context of economic instability and
structural malaise. In
cases of severe illiquidity, program funding can avoid an otherwise more
severe reduction in government expenditures and may help to alleviate the impact of
economic adjustment on poverty in both the short and long run. Wellresourced programs (or those
accompanied by non-IMF resources) presumably reduce the pressures to cut pro-poor (and other) spending. IMF resources are usually
accompanied by conditionality which frequently includes targets for aggregate demand
management, budget deficits, inflation, exchange rate policy and trade and financial liberalization.
Many countries sign IMF agreements as a last resort, when facing a serious external imbalance and a large budget deficit, both of which imply a need for
government spending cuts.2
April 2021
International Monetary Fund
Blocks to Negative Arguments
42
April 2021
International Monetary Fund
43
AT Austerity
Austerity minimizes impact to the poor during times of economic recession
Dooley 3 [Dooley, Michael P.; Frankel, Jeffrey A. January 2003, “Managing Currency Crises in
Emerging Markets,” University of Chicago Press,
https://www.nber.org/system/files/chapters/c9656/c9656.pdf]
One possible explanation for the poverty-smoothing
effect of adjustment lending may be that conditionality
on macro adjustment is tougher during expansions than contractions, because the IMF and World
Bank may feardeepening a contraction with excessive austerity. If the poor disproportionately
suffer from austerity, then in contractions they will suffer less for a given rate of mean
income decline, while, conversely, they will do less well for a given rate of growth in expansions.
Second, the principal means of fiscal adjustment under adjustment programs during expansions
may be through regressive taxation measures like sales taxes, which lower the benefits to the poor
of mean income growth. Third, World Bank and IMF lending programs may explicitly include
“social safety nets” that cushion the effect of a contraction on the poor, whereas these transfers
may be reduced during expansions. I will first test for countercyclicality of these variables and then test their effect on the poverty
rate.
Austerity is a necessary evil. The alternative is a deep financial recession that
disproportionately harms the poor
NEF 13 [No Author, 2013, “Framing the economy: The austerity story,” NEF (nef is an
independent think-and-do tank that inspires and demonstrates real economic well-being),
https://b.3cdn.net/nefoundation/a12416779f2dd4153c_2hm6ixryj.pdf]
Spending cuts are never presented as desirable; their part in the austerity story hinges on the idea
that there is no alternative to them. This is a very powerful way to frame an argument, suggesting there is no choice to
be made. It is the lynchpin of the austerity story, the part that you must accept to make the plot
believable. People who argue against austerity by stressing the pain it causes are not attacking this
frame – depending on their language they may even be reinforcing it. A common way to activate this frame is to use the metaphor of
medicine. When you are sick medicine is the only way to make you better. You have to take it even
if it tastes bad or makes you feel worse and have faith you will be better off in the long run.
Acknowledging that austerity is ‘tough’ or ‘painful’ also activates the necessary evil frame
April 2021
International Monetary Fund
44
AT Inequality
Their studies are subject to selection bias. IMF programs are typically
implemented during periods of economic distress that would result in shortterm increases in poverty. Controlling for the selection bias, in a study of 48
countries over 25 years, IMF programs do not increase poverty or inequality.
Instead, IMF programs lead to increased investment in educational programs
Bird et. al 20 [Bird, Graham; Qayum, Faryal; Rowlands, Dane. 05-01-2020. “The effects of IMF
programs on poverty, income inequality and social expenditure in low income countries: an
empirical analysis,” Journal of Economic Policy Policy Reform,
https://www.tandfonline.com/doi/pdf/10.1080/17487870.2019.1689360?casa_token=xMI8M1XX
GpwAAAAA:axwJUO7p6TvjWNu_G9PbJUSuIZcT647yOTSBQodAI8srj8LwdkyvDNyBhIcKxJ-_sNUX09yDfv8iQ]
METHODOLOGY The key
methodological issue to deal with is selection bias; IMF programs are
typically adopted during periods of economic distress that would independently have required
policy adjustments that could affect poverty, inequality, and social spending. Identifying persuasive
counterfactual comparisons is particularly problematic when the IMF is brought in as a last resort. While there are a variety of statistical methodologies
available to deal with selection bias,8 all of them require a well-performing model that distinguishes between program and non-program countries.9 For
our analysis we adopt the propensity score matching (PSM) approach. This procedure estimates the effect of a treatment or policy by accounting for the
covariates that predict receiving the treatment. The first step in our analysis is therefore to estimate a participation equation that allows us to identify
countries with broadly similar propensities to participate in IMF programs. The second step tests whether the outcome variables being evaluated differ
significantly between countries with programs and those without, conditioned on their having similar participation propensities. We estimate the
participation equation upon which the propensity scores are based using a logit regression model that relates the probability of participating in an IMF
program to a range of factors that both economic theory and existing empirical studies suggest are significant and important. We also allow the
participation equations to differ between concessional and non-concessional IMF programs. A similar approach is used in Bird, Mylonas, and Rowlands
(2015), whose equations we modify for the analysis here. Having estimated the participation equations, we divide our sample into treatment and control
groups to calculate the impact of IMF programs on our selected measures of poverty, income inequality and social expenditure; not only in the year of
signing but also in the following two years. This we do by taking the difference in the means of the observations between the treatment and control
groups. ATE Yð Þ¼ E Yit1jDit¼ 1; p xð Þit ½ E Yit0jDit¼ 0; p xð Þit ½ where Y refers to the indicators of poverty, income inequality and social
expenditure, D indicates the existence of an IMF program, and p(xit) stands for the propensity score. We use a binary indicator of participation in IMF
programs and explore their effects on the Gini index, the income share of the lowest quintile, poverty headcount ratios, poverty gaps, infant mortality
rates, the human development index, as well as the level of government spending on education and health. Using a range of outcome variables enables us
to compare our findings with those reported in other studies (Garuda 2000; Martin and Ubiergo 2004; Hajro and Joyce 2009; Oberdabernig 2013;
Clements, Gupta, and Nozaki 2013). There
are 48 countries in the full sample and 35 in the concessional-only
sample. The estimations cover the years 1990–2015. Details of the countries included in our sample, as well as the
sources of our data are provided in a data appendix that is available in the online version of this paper. In general, the results reported in Table 3 suggest
that IMF
programs (concessional and non-concessional) do not have large and significant adverse effects in
terms of increasing poverty and income inequality. [ … ] In this respect our results stand in contrast to most previous
studies, especially the earlier ones. For example, Garuda (2000) and Vreeland (2002) find that the IMF programs are generally associated with increased
income inequality, though Garuda notes that this effect is contingent on the severity of the external imbalance. We also discover that there
are
some cases in which income inequality and poverty have risen, but the impact is statistically
insignificant. Overall, our results suggest that where IMF programs have a significant effect, they are
povertyreducing.13 Our finding that education expenditures rise in the aftermath of a program’s
initiation is broadly consistent with the findings of Martin and Ubiergo (2004) and Clements, Gupta, and Nozaki (2013).14 In a related exercise we
explored the results for “all programs” taken together, combining concessional and non-concessional ones. For this we used the “all country”
participation equation reported in Table 2. We do not present our detailed findings here. We found a statistically
significant increase in
April 2021
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45
the HDI and fall in the infant mortality rate in the year of signing an IMF agreement, as well as a
significant narrowing in income inequality according to both measures we use in the year
following a signing. Some of our measures also suggested a significant fall in poverty in in the second year after signing an agreement. The
fact that the results for all programs differed from those for the subgroups of non-concessional and concessional programs reinforces the importance of
making a distinction between the two types of program. However, in
the all program group, as well as the nonconcessional and concessional groups, we do not find the adverse effects on poverty and the
widening of income inequality that have reported in many other studies.
April 2021
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46
AT IMF = Neoliberalism
Turn. The IMF is moving away from neoliberalism in favor of Green
Investment to fight Climate Change
Hawkins 20 [Hawkins, Johns. 10-15-2020, “Some say neoliberals have destroyed the world, but
now they want to save it. Is Scott Morrison listening?” The Conversation,
https://theconversation.com/some-say-neoliberals-have-destroyed-the-world-but-now-they-wantto-save-it-is-scott-morrison-listening-148167]
The IMF’s
proposed package involves the following tools: an 80% subsidy rate for renewable
energy production a 10-year green public investment program in renewable energy, lowcarbon transport and energy efficient buildings carbon pricing, calibrated to achieve an 80%
reduction in emissions by 2050, after accounting for emission reductions from the green fiscal stimulus
compensation for poor households whose purchasing power is dampened by a carbon price. The
IMF says the plan is “growth friendly”, especially in the short term. The policies are designed to increase the price of fossil fuel
energy relative to low-carbon energy, and reflect the harm fossil fuels cause through air pollution and global warming. The IMF
is
not alone in its thinking. Some 27 Nobel laureates in economics have endorsed a price on carbon.
And recent research has conclusively found carbon pricing lowers growth in greenhouse gas
emissions. The IMF has long been a cheerleader for neoliberalism – a belief in free markets, free trade and
small government. But in this case it’s calling for market interventions: a new tax and
government subsidies for certain industries. It’s not the first time the IMF has looked to be questioning its own
neoliberal agenda, but it’s a twist nonetheless. The IMF’s calls contrast starkly with the approach of the
Coalition government. It dismantled the Gillard government’s carbon price in 2014, and has remained opposed to the measure
ever since.
April 2021
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47
AT IMF Bad General
IMF is not that bad—bad actions are more publicized than good actions,
usually respond in times of crisis, and scapegoated by countries to hide for
weak governance.
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
Crisis always creates difficulties. Because the IMF fights against the economic crisis,
regardless of policy that offers, it is likely to experience difficulties. Trying to balance the
balance of payments is not possible without some painful readjustments. 2. The IMF had some
successes. The IMF failures tend to be highly publicized. But its successes, less. Also, critics
tend to focus on short-term problems and ignore longer-term prospects (Hivos and the Mott
Foundation, 2003). 3. Safety The fact that there is a lender of last resort provides a boost to
investor confidence. This is important during the current financial crisis. 4. Countries are not
obliged to resort to the IMF loans. Countries are those that seek help from the IMF. The fact
that many countries turn to the IMF suggests that there are benefits in this respect. 5. The
IMF is an easy target. Sometimes, countries decide to make painful adjustments in the short
term, but it lacks political will. An IMF intervention causes governance to borrow from the
Fund, and later on, if difficulties arise, to blame the IMF (Bryant, Guh, 2008).
April 2021
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48
AT IMF cuts funding for health programs
IMF has reversed previous programs to help poor countries fund medical
supplies during COVID-19 pandemic
IMF 21 [No Author, 03-03-2021, “The IMF's Response to COVID-19, International Monetary
Fund, https://www.imf.org/en/About/FAQ/imf-response-to-covid-19]
Adjusting existing lending arrangements– The
IMF is augmenting existing lending programs to
accommodate urgent new needs arising from the coronavirus, thereby enabling existing
resources to be channeled to the necessary spending on medical supplies and equipment and
for containment of the outbreak. Policy advice. As the IMF monitors economic developments and the impact of the pandemic at the
global, regional, and country levels, it recommends policies needed to overcome the crisis, protect the most vulnerable and set the stage for economic
recovery. Capacity Development– In response to the pandemic, the
IMF is providing real-time policy advice and
capacity development to over 160 countries to address urgent issues such as cash management,
financial supervision, cybersecurity and economic governance. In particular, the Fund has been
working with tax administrations and budget offices in many countries to help them restore
operations and strengthen support to businesses and individuals, without compromising safeguards and
accountability. IMF technical experts are also working with countries to revise and update their debt
management strategies. The IMF has made its online courses available to government officials and members of the general public with
extended registration and completion timelines. In addition, the IMF has launched its Learning Channel on YouTube,
offering short and targeted on-demand microlearning videos.
April 2021
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49
AT Resource Extraction
1. Turn. Natural resource extraction leads to economici growth and
diversification. The OECD finds in 2011 that natural resources
extraction has been key for economic growth across Africa through
exports of agricultural and minerals such as hydrocarbon.
OECD 11 [No Author, 2011, “Economic Diversification in Africa”. OECD,
https://www.oecd.org/countries/tunisia/46148761.pdf]
“Natural resources have been the key sector for economic growth in Africa: the continent
has been traditionally driven by exports of agricultural goods and primary products such as
minerals and hydrocarbons. However, countries dependent on just a few commodities for their revenue are vulnerable to
boom and bust cycles as the prices of commodities are subject to wide fluctuations. Therefore, the need for expanding the
beneficiation of such products, and seeking sustainable utilisation where possible, are priorities
for African economic growth and diversification6 Subsequent trade and investment flows would therefore feed
the momentum for further economic diversification. If accompanied by policies that encourage trade and
exports, the exploitation of natural resources could provide improved opportunities for African
countries to produce and trade a variety of goods within Africa, and in the global market.”
Economic growth from resource extraction frees up capital that allows states
to diversify across a series of commodities. In the long-run, natural resource
extraction becomes a cash cow that allows countries to finance other domestic
initiatives and create a robust economy.
Gelb 10 [Gelb, Alan. 2010, “Economic Diversification in Resource-rich countries”. Center for
Global Development. https://www.imf.org/external/np/seminars/eng/2010/afrfin/pdf/Gelb2.pdf
“Studies using resource abundance measures tend to find positive associations between
natural resources and growth. “Wealth of nations” estimates find that higher income countries have higher levels per
head of all types of capital, including “natural capital” (cropland, forests and sub-soil mineral assets). Natural capital averages only
$3,588 per head in low-income countries but $20,227 in those with high incomes.10 These
data hardly suggest that lowincome countries are locked into their status by an excess of known natural capital. However, other
categories of capital, including human capital and produced capital, increase far more rapidly across the income progression. This
suggests that the different types of capital complement each other, and that countries do diversify
away from reliance on natural capital as they grow richer.”
Malaysia used capital generated from their natural resource exploitation to
diversify their economy and invest in energy, communications, and
transportation.
Gelb 10 [Gelb, Alan. 2010, “Economic Diversification in Resource-rich countries”. Center for
Global Development. https://www.imf.org/external/np/seminars/eng/2010/afrfin/pdf/Gelb2.pdf
April 2021
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“Malaysia was fortunate in its rather diversified resource endowment, which included good
geographic location and deep-water ports, rubber and tin, as well as forest products, which
preceded oil as export staples. Even in 2010 resource-based products represented 42% of
manufacturing value added.19 It sustained a high and relatively stable savings rate, and made massive investments in land
development and replanting schemes to expand and modernize the production of rubber and palm oil. It also made heavy
investments in technology and infrastructure, especially in the areas of energy,
communications and transport. Although Malaysia did start out on a protectionist path in the 1960s, in 1973-74 it
shifted to an extensive export promotion drive based on cheap manufactures. Measures to hold down costs included policies to reduce
the costs of labor and manage industrial relations.20 In the mid 1980s, strategy shifted towards higher-technology products and skills
upgrading.
Policies included liberalizing skilled immigration, a dramatic expansion in enrolment in
polytechnics, exchange relations with universities in Australia and Canada and skills development
programs jointly sponsored by the Federation of Manufacturing and the University of Science and Technology.”
2. Resource extraction depends on a countries governmental structure.
Good governance leads to economic benefits autocratic governments
lead to poor situations
Paltseva & Roine 11 [Paltseva, Elena; Roine, Jesper. 11-21-2011, “Are Natural
Resources Good or Bad for Development?” Forum for Research on Eastern Europe and
Emerging Economies, http://freepolicybriefs.org/
As a result, greater attention has been devoted to the political-economic explanations of the resource curse. The main
idea in recent work is that the impact of resources on development is heavily dependent on the institutional
environment. If the institutions provide good protection of property rights and are favorable to productive and
entrepreneurial activities, natural resources are likely to benefit the economy by being a source of income, new
investment opportunities, and of potential positive spillovers to the rest of the economy. However, if property rights are
insecure and institutions are “grabber-friendly”, the resource windfall instead gives rise to rent-seeking, corruption and
conflict, which have a negative effect on country’s development and growth. In short, resources
have
different effects depending on the institutional environment. If
institutions are good enough resources have a positive effect on
economic outcomes, if institutions are bad, so are resources for
development. Mehlum, Moene and Torvik (2006) develop a theoretical model to this effect and also find
empirical support for the idea. In resource-rich countries with bad institutions
incentives become geared towards “grabbing resource rents” while in
countries where institutions render such activities difficult resources
contribute positively to growth. Boschini, Pettersson and Roine (2007) provide a similar
explanation but also stress the importance of the type of the resources that dominate. They show that if a
country’s institutions are bad, “appropriable” resources (i.e., resources that are more valuable, more
concentrated geographically, easier to transport etc. – such as gold or diamonds) are more “dangerous” for
economic growth. The effect is reversed for good institutions – gold and diamonds do more good than less
appropriable resources. In turn,
better institutions are more important in
avoiding resource curse with precious metals and diamonds than with
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51
mineral production. The following graph illustrates their result by showing the marginal effects of
different resources on growth for varying institutional quality. Distinguishing the growth contribution of mineral
production in countries with good institutions with the effect in countries with bad institutions, the left panel shows a
positive effect in the former and a negative in the latter case. The right hand panel illustrates the corresponding, steeper
effects when isolating only precious metals and diamond production.
3. Turn. IMF improves governmental outcome preventing autocratic
control of resources
Lundgren et. al 13 [Lundgren, Charlotte J.; Thomas, Alun H.; York, Robert C. 2013 “Boom,
Bust, or Prosperity? Managing Sub-Saharan Africa’s Natural Resource Wealth,”
https://www.imf.org/external/pubs/ft/dp/2013/dp1302.pdf]
The international community is supplying an increasing amount of support for capacity
building in transparency and governance. • One element is the codifi cation of good practices in this area, summarized in the
IMF Guide on Resource Revenue Transparency (IMF, 2007b), which has become the major source
for guidance and examples in resource-rich countries. The Natural Resource Charter (Natural Resource Charter,
2010) also seeks to encapsulate best practice. • A second strand is the provision of technical assistance,
particularly in tax policies, contracts, regulation, public fi nancial management, and asset
management. 1 • A third approach is the encouragement of peer support, such as the
Extractive Industries Transparency Initiative (EITI), in which 37 resource-rich countries
were participating as of March 2013, including 20 from SSA. • A fourth dimension recognizes
explicitly that international companies and governments suffer from the same defi ciencies in
governance and are equally responsible for facilitating corrupt practices and restricting access to
information about their activities and payments. Legislation to prevent abuse and publish payment records is now becoming
more extensive among resource-importing countries. The U.S. Dodd-Frank Act is a case in point. Some governments have put transparency at the
forefront of their arrangements for managing new resource revenue. Liberia, the fi rst country in SSA to become compliant with the EITI, enshrined its
commitment to the EITI in law as it recovered from civil war. In
Asia, Timor-Leste decided to complement its early
compliance with the EITI by adopting fi ve transparency pillars (see Box 7.2 ).
4. Internal link defense. Meta-analysis of 14 econometric studies found no
correlation between resource extraction and civil conflict. Two
warrants First, relationship is reverse causal—civil wars cause
resource depletion as a country’s manufacturing sector flees while
leaving its resource sector in the economy. Second, alternative causal.
Correlation between civil war and resource dependence not caused by
the two but by a third variable, weak rule of law. Prefer our evidence
over theirs. Meta-analyses are naturally better as they holistically
examine the literature basis surrounding a particular topic, their
evidence is a one-off and has no basis in reality.
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Ross 4 [Ross, Michael L. 2004. “What Do We Know about Natural Resources and Civil
War?” Journal of Peace Research, vol. 41, no. 3, pp. 337–356. JSTOR,
www.jstor.org/stable/4149748.]
What can these studies tell us about the relationship between natural resources - including oil, gas, non-fuel minerals, gem- stones,
narcotics, timber, and agricultural products - and violent conflict? At first glance, the answer appears to be: not much. Table
I
summarizes the findings of 14 cross- national econometric studies of resources and conflict.
There appears to be little agree- ment on the validity of the resource-civ correlation. These and other, more quali- tative
studies reach varying conclusions on at least five aspects of the resource-conflict relationship: *
whether or not natural resources influence the onset of conflict; * whether or not resources
influence the duration of conflict; * whether resources influence all types of civil wars or only a subtype, e.g. ethnic or
separatist conflicts; * whether all types of resources, or only a subset (e.g. oil, diamonds) are linked to conflict; and * what causal
mechanisms link resources to conflict. Quantitative studies of natural resources and civil war have also been shadowed by concerns
about misspecification and spuri- ousness. Most
scholars measure a country's 'resource wealth' by using the
ratio of its resource exports to its GDP. This opens the door to two problems. First, there is a danger that
the causal arrow between natural resource exports as a fraction of GDP and the onset of
civil war might run the other way: civil wars might cause resource depen- dence by forcing
a country's manufacturing sector to flee while leaving its resource sector - which is locationspecific and cannot easily move - the major force in the economy by default.2 Using lagged
independent variables does not eliminate the danger of reverse causality: civil wars can be preceded by years of low-level violence
that drives off manu- facturing firms, producing a higher level of resource dependence before the conflict officially commences.
Second, the natural resource--civil war correlation could be spurious: both civil war and
resource dependence might be indepen- dently caused by some unmeasured third variable,
such as the weak rule of law. A state where the rule of law is weak might be unable to attract
investment in its manu- facturing sector, and hence would depend more heavily on resource
exports; it might also face a heightened risk of civil war through a different process. The result could be a statistically significant
correlation between resource dependence and civil war, even though neither factor would cause the other. Because the rule of
law - and other poten- tially significant missing variables, like the security of property
rights - are so difficult to measure across countries and over time, it is hard to test this
possibility statistically. Despite these problems, a close look at both the quantitative and qualitative studies suggests four
regularities - which could be characterized as two patterns and two con- spicuous 'non-patterns'. The first pattern is that oil
exports are linked to the onset of conflict; the second is that 'lootable' com- modities like
gemstones and drugs are corre- lated with the duration of conflict. The first non-pattern is that agricultural
commodities seem to be uncorrelated with civil wars, and the second is that primary commodities - a category that includes oil, nonfuel minerals, and agricultural goods - is not robustly associated with the onset of civil war. Not every cross-national study fits these
four regularities; still, they are the strongest findings to emerge so far from this rapidly growing field.
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53
AT Water Privatization
Turn. Water privatization sparks private investment into sanitation
infrastructure which empirically decreases infant mortality. Galiiani et. al 3
find that’s privatization of water services decreases child mortality 8 percent
due to improvement in infrastructure which decreased deaths from infectious
and parasitic diseases characteristic of governmental supply of water.
Galiani et. al 3 [Galiani, Sebastian; Gertler, Paul; Schargrodsky, Ernesto. 01-06-2003. “Water for
Life: The Impact of the Privatization of Water Services on Child Mortality,” Universidad de
San Andres,
http://ibread.org/bread/sites/default/files/020703_Conference/Water_for_Life_January_6
_2003.pdf]
In the end, despite
the concerns about potential negative health effects, we find that the
privatization of water services is actually associated with a reduction in child mortality of 8
percent. Moreover, we find that most of the reduction in mortality occurred in low-income areas
(26 percent), where the network expansion was greatest. Finally, we check the robustness of these estimates using cause specific mortality.
While privatization is associated with significant reductions in deaths from infectious and
parasitic diseases, it is uncorrelated with deaths from causes unrelated to water conditions.
1. THE ECONOMICS OF WATER SERVICE DELIVERY Water systems include both the supply of clean water and
the treatment and removal of sewage. These services are a natural monopoly involving large fixed costs and significant economies of
scale (Noll et al, 2000).1 There is typically little competition to a well functioning water system from alternative sources (Foster, 1999; Estache et al,
2001). The main alternative is household self-provision through pumped wells, rainwater catchments, cesspools, and septic tanks. Selfprovision suffers
from low quality and high cost (Abdala and Spiller, 1999). Similarly,
the sale of drinkable water from private vendors
is substantially more costly and therefore does not present serious competition either. Finally, the
average asset life of water systems’ physical plant is very long and therefore impedes any
potential dynamic competition. The water sector is also characterized by the presence of significant externalities. Most waterrelated diseases are contagious. This generates positive externalities in the provision of clean water across society. Similarly, the
proper elimination of sanitation residuals and treated industrial waste prevents negative
externalities through the pollution of natural bodies of water and other natural resources.
Chaisse 15 [Chaisse, Julien. 04-01-2015. “Globalization of Water Privatization: Ramifications of
Investor-State Disputes in the “Blue Gold” Economy,” Boston College International and
Comparative Law Review,
https://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=1735&context=iclr]
Water, Earth’s “blue gold,” is its most precious and essential commodity. It is fundamental to all aspects of drinking, eating, maintaining hygiene, and
promoting population health. Water is basic to the preservation of most ecosystems and crucial to a safe and long lasting environment. Moreover, it is
critical to several types of businesses and industries.4 It not only maintains social stability and environmental sustainability, but also fosters economic
development across civilizations.5 Consequently, access to clean water has been recognized by the United Nations (UN) as a basic human right that every
government is obligated to provide.6 The
world of water services changed significantly in the late 1990s due to
an extraordinary boom in global population growth. 7 The sustained population increase sparked a need for water services
expansion.8 Opportunities for investment in water services and sanitation infrastructure
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54
attracted tremendous support from a myriad of international financial institutions. 9 These
institutions unlocked a host of new business opportunities for the water services and sanitation
industry to address traditional problems ranging from fresh water scarcity to inadequate
investment in sanitation infrastructure to the inability of many public authorities to meet coverage needs.10 Coverage and
accessibility, even at the most elementary level, necessitate functional water services and
sanitation facilities.11 The inability of public authorities to provide coverage to their citizens
prompted a rise in water-services privatization contracts between foreign investors and
states, such that 10 percent of global consumers now receive their water from private
companies.12 Today, a growing number of businesses are engaging with the water services industry. 13 It is estimated that by 2025,
annual spending on water infrastructure in OECD countries will exceed $1 trillion. 14 New
technologies and the need for additional infrastructure investment will certainly increase demand in the market, potentially spawning billion dollar
valuations. Such economic promise and opportunity largely explains why water has earned the moniker of Earth’s “blue gold.”
Water privatization increases access to water
Salama 08 [Salama, Celine Ruben. February 2008, “Thirsty for Change: Considering
Water Privatization in Developing Nations, Columbia University,
http://water.columbia.edu/files/2011/11/Siegfried2008ThirstyForChange.pdf]
Access, maintenance, and distribution of clean water are daunting tasks for developing nations. Efforts
to provide clean drinking
water have often fallen short, which has prompted the World Bank to advocate for
privatization. From a theoretical perspective, privatization blends the advantages of corporate efficiency with responsible management on behalf
of the national government. Analysis of attempts to privatize water in the Philippines, with the establishment of the Metropolitan Waterworks Sewerage
System (MWSS), shows mixed results. Between
1997 and 2003, citizens with access to water increased from
58 percent to 84 percent, yet water became five times costlier due to privatization. Advocates may
applaud the efficiency of the model, but developing nations must emphasize accessibility and affordability of the resource. Privatization, as a model for
water distribution, remains contentious.
Water privatization frees up governmental budgets to fund other programs
Chaisse 15 [Chaisse, Julien. 04-01-2015. “Globalization of Water Privatization: Ramifications of
Investor-State Disputes in the “Blue Gold” Economy,” Boston College International and
Comparative Law Review,
https://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=1735&context=iclr]
The past twenty years have been plagued by an escalating global water crisis.290 Although it is a worldwide phenomenon, certain countries have
traditionally experienced disproportional negative effects. 291 Since 1990, many governments and international communities have tried to find novel
approaches toward managing water and optimizing resources. 292 Indeed,
countries with the weakest public sectors
have the greatest need for water services.293 The new movement in water management toward
privatization is now seen as an attractive option and solution for public authorities to save face
and provide their populations with basic water needs.294 Until privatization, water as a public resource was systematically
provided and managed by provincial or municipal government entities around the world.295 Governments had a moral obligation to ensure access to safe
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55
water and access to effective water services.296 Beginning in the early 1990s, developing countries were faced with a global push towards formal private
sector participation in water services. 297 Between 1991 and 2000, the number of countries with private participators grew from four to thirty-eight,
increasing the population served by private companies from 6 million to 96 million in 2000. 298 In 2012, some
researches showed
that in all, more than 205 million people in developing countries have been served by a
private participation project at some point since 1990. 299 This trend can be explained by two main reasons. First, as
previously cited, it was mostly driven by two major international agencies: the World Bank and the IMF. They are indeed the source of powerful
recommendations to developing countries to participate in a privatization movement. From their point of view,
privatization is a
promising means of improving the weak performance of the water services and utilities,
expanding coverage, raising the quality and efficiency of services, providing alternative
ways of infrastructure investment, and reducing the burden on public budgets.
April 2021
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Negative Arguments
56
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57
Austerity
IMF forces austerity measures (cuts in social spending in order to pay off
debt) in times of recession. COVID proves empirically. Measures will leave
millions without healthcare or income
Oxfam 20 [No Author, 10-12-2020, “IMF paves way for new era of austerity post-COVID-19,”
Oxfam International, https://www.oxfam.org/en/press-releases/imf-paves-way-new-era-austeritypost-covid-19]
New analysis by Oxfam finds that 76
out of the 91 IMF loans negotiated with 81 countries since March
2020 ―when the pandemic was declared― push for belt-tightening that could result in deep cuts
to public healthcare systems and pension schemes, wage freezes and cuts for public sector
workers such as doctors, nurses and teachers, and unemployment benefits, like sick pay. “The IMF
has sounded the alarm about a massive spike in inequality in the wake of the pandemic. Yet it is
steering countries to pay for pandemic spending by making austerity cuts that will fuel
poverty and inequality. These measures could leave millions of people without access to
healthcare or income support while they search for work, and could thwart any hope of
sustainable recovery. In taking this approach, the IMF is doing an injustice to its own research. Its head needs to start speaking
to its hands,” said Chema Vera, Oxfam International’s Interim Executive Director.
Austerity disproportionately harms the poor. Empirics prove in Ecuador,
Angola, and Nigeria
Oxfam 20 [No Author, 10-12-2020, “IMF paves way for new era of austerity post-COVID-19,”
Oxfam International, https://www.oxfam.org/en/press-releases/imf-paves-way-new-era-austeritypost-covid-19]
The IMF’s
own research shows austerity worsens poverty and inequality, yet it is encouraging
countries which receive loans to roll back inequality-busting measures put into place since the
beginning of the pandemic: Ecuador: healthcare and burial services collapsed in April, yet the government has been
advised by the IMF to backtrack on increases in healthcare spending and stop cash
transfers to people unable to work. The IMF and Ecuador recently agreed a $6.5 billion loan, which includes cuts to fuel subsidies
which poor people rely on. A year ago, Ecuador’s president, Lenín Moreno, was forced to cancel a disputed IMFbacked austerity package after protests left several dead. Nine countries including Angola and
Nigeria are likely to introduce or increase the collection of value-added taxes (VAT), which apply to
everyday products like food, clothing and households supplies, and fall disproportionately on poor
people. Unemployment in Nigeria has surged to 27 percent, the highest in at least a decade. 14 countries including
Barbados, El Salvador, Lesotho and Tunisia are likely to freeze or cut public sector wages and jobs, which could mean lower quality of healthcare and
fewer nurses, doctors and community workers in countries already short of healthcare staff. Tunisia
had just 13 doctors per 10,000
April 2021
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58
people when COVID-19 struck. In Costa Rica, protests have erupted against the government for
seeking a $1.75 billion loan from the IMF in exchange for austerity measures, including public
sector wage freezes. Oxfam and Development Finance International (DFI) analysis released last week revealed that governments’ failure to
tackle inequality ―through support for public services, workers rights and a fair tax system― left them woefully ill-equipped to tackle the COVID-19
IMF has contributed to these failures by consistently pushing a policy agenda that
seeks to balance national budgets through cuts to public services, increases in taxes paid by
the poorest, and moves to undermine labor rights and protections. As a result, when COVID-19
hit, only one in three countries, representing 22 percent of the global workforce, had safety nets for workers to fall
back on if they lost their job or became sick.
pandemic. The
IMF hurts the common man the most. Forced austerity measures—the
Eurozone crisis proves empirically
Brunnermeier et. al 16 [Brunnermeier, Markus K., Harold James, and Jean-Pierre Landau. "The
International Monetary Fund (IMF)." In The Euro and the Battle of Ideas, 289-314. Princeton;
Oxford: Princeton University Press, 2016. Accessed March 7, 2021. doi:10.2307/j.ctvc774qh.17.]
The involvement
of the International Monetary Fund (IMF) altered the course of the European
sovereign debt crisis. Although some might argue, from a purely formal perspective, that the Fund is simply an agent of the national
governments of the world that own it, in practice, the IMF took a position that was distinctly its own and that
reflected a particular weltanschauung (“worldview”). The management of the Fund, above all the managing
director, and the staff of professional economists define policies that are often intended to nudge governments in a particular
direction. Its economists have developed a reputation for technical competence and for standing
above day-to-day politics. In 2010, it was the demand for technical outside competence that drove the European governments to change
their minds about the desirability of involving the Fund. In that sense, the involvement of the Fund was a response to a
clear recognition that Europe did not have the competence or the authority to solve its own
problems: it needed an outside doctor to make the prescriptions. The kind of expertise that the Fund had
developed was however problematic for the Europeans. First, the most technical attention in the IMF had been
given to the issue of debt management and debt sustainability because of its extensive and painful
involvement with overindebted countries: low-income countries, Latin American emerging markets in the 1980s, and East
Asia in the later 1990s. Second, the Fund had evolved an approach to the politics of economic reform that
made it uncomfortable with the enforcer or whipping boy role that it had traditionally been given
by the international community (i.e., the big and powerful states). Since the 1990s, it had begun to emphasize more and more the idea
of “ownership”: reforms do not work unless they are carried by a deep political consensus. But the Europeans’ idea in calling in the Fund was precisely to
find a substitute for the lacking consensus about economic reform.
IMF loans harms poor countries through forced austerity and privatization—
Ecuador proves empirically
Weisbrot 19 [Weisbrot, Mark. 08-27-2019, “The IMF is hurting countries it claims to help,” The.
Guardian, https://www.theguardian.com/commentisfree/2019/aug/27/imf-economics-inequalitytrump-ecuador]
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When people think of the damage that wealthy countries – typically led by the US and its allies – cause to people in the rest of the
world, they probably think of warfare. Hundreds of thousands of Iraqis died from the 2003 invasion, and then many more as the region
became inflamed. But rich
countries also have considerable power over the lives of billions of people
through their control over institutions of global governance. One of these is the International
Monetary Fund. It has 189 member countries, but the US and its rich-country allies have a solid majority of the votes. The
head of the IMF is by custom a European, and the US has enough votes to veto many major decisions by itself – although the rich
countries almost never vote against each other. To see what the problem looks like, consider a recent IMF loan. In
March,
Ecuador signed an agreement to borrow $4.2bn from the IMF over three years, provided that the
government would adhere to a certain economic program spelled out in the arrangement. In the words
of Christine Lagarde – then the IMF chief – this was “a comprehensive reform program aimed at modernizing the economy and
paving the way for strong, sustained, and equitable growth”. But is it? The program
calls for an enormous
tightening of the country’s national budget – about 6% of GDP over the next three years. (For comparison,
imagine tightening the US federal budget by $1.4 trillion, through some combination of cutting spending and raising taxes). In
Ecuador, this
will include firing tens of thousands of public sector employees, raising taxes that fall
disproportionately on poor people, and making cuts to public investment. The overall impact of
this large fiscal tightening will be to push the economy into recession. The IMF’s projections
are for a relatively mild recession until next year, but it will likely be much deeper and longer – as often happens
with IMF programs. Unemployment will rise – even the IMF program projections acknowledge that –
and so will poverty. One reason that it will likely turn out much worse than the IMF projects is that the program relies on
assumptions that are not believable. For example, the IMF projects that there will be a net foreign private sector
inflow into the economy of $5.4bn (about 5% of GDP) for 2019–2022. But if we look at the last three years, there was an
outflow of $16.5bn (17% of GDP). What would make foreign investors suddenly so much more excited about bringing their money to
Ecuador? Certainly not the recession that even the IMF is projecting. There are other implausible assumptions and even some that
result from accounting errors, and sadly they all go in the same direction. It seems that the program’s
“expansionary
austerity” – something that almost never happens – is unlikely to make Ecuador into a worldfamous exception, where the economy grows as aggregate demand is slashed. The program also seeks to
reshape the economy in ways that, to many Ecuadorians, would appear to be political. The central bank will be made
more autonomous; public assets will be privatized; and labor law will be changed in ways
that give employers more unbridled power over workers. Some of these changes – for example, the
separation of the central bank from other government decision-making – will make economic
recovery even more difficult. All this is taking place under a government – elected in 2017 on a platform of continuity –
that seeks to reverse a prior decade of political reforms.
IMF programs result in forced austerity—causing race to the bottom that
hurt the poor
Shah 13 [Shah, Anup. 03-24-2013, “Structural Adjustment—a Major Cause of Poverty,” Global
Issues, https://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty]
Many developing nations are in debt and poverty partly due to the policies
of international institutions such as the
International Monetary Fund (IMF) and the World Bank. Their programs have been heavily
criticized for many years for resulting in poverty. In addition, for developing or third world countries, there has
April 2021
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60
been an increased dependency on the richer nations. This is despite the IMF and World Bank’s claim that they will reduce poverty.
Following an ideology known as neoliberalism, and spearheaded by these and other institutions
known as the Washington Consensus (for being based in Washington D.C.), Structural Adjustment Policies (SAPs)
have been imposed to ensure debt repayment and economic restructuring. But the way it has
happened has required poor countries to reduce spending on things like health, education and
development, while debt repayment and other economic policies have been made the
priority. In effect, the IMF and World Bank have demanded that poor nations lower the standard of living of
their people.
IMF imposes neoliberal ideology and framework to their projects
Shah 13 [Shah, Anup. 03-24-2013, “Structural Adjustment—a Major Cause of Poverty,” Global
Issues, https://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty]
As detailed further below, the
IMF and World Bank provide financial assistance to countries seeking it, but
apply a neoliberal economic ideology or agenda as a precondition to receiving the money. For
example: They prescribe cutbacks, liberalization of the economy and resource extraction/exportoriented open markets as part of their structural adjustment. The role of the state is minimized.
Privatization is encouraged as well as reduced protection of domestic industries. Other adjustment policies
also include currency devaluation, increased interest rates, flexibility of the labor market, and the elimination of subsidies such as food subsidies. To be
attractive to foreign investors various regulations and standards are reduced or removed. The impact of these preconditions on poorer countries can be
devastating. Factors
such as the following lead to further misery for the developing nations and keep
them dependent on developed nations: Poor countries must export more in order to raise
enough money to pay off their debts in a timely manner. Because there are so many nations being asked or forced
into the global market place—before they are economically and socially stable and ready—and told to concentrate on similar cash crops and commodities
as others, the situation resembles a large-scale price war. Then, the
resources from the poorer regions become even
cheaper, which favors consumers in the West. Governments then need to increase exports just to
keep their currencies stable (which may not be sustainable, either) and earn foreign exchange with which to help pay off debts.
Governments therefore must: spend less reduce consumption remove or decrease financial
regulations and so on. Over time then: the value of labor decreases capital flows become more volatile a
spiraling race to the bottom then begins, which generates social unrest, which in turn leads to IMF
riots and protests around the world These nations are then told to peg their currencies to the
dollar. But keeping the exchange rate stable is costly due to measures such as increased interest rates. Investors obviously concerned about their
assets and interests can then pull out very easily if things get tough In the worst cases, capital flight can lead to economic
collapse, such as we saw in the Asian/global financial crises of 1997/98/99, or in Mexico, Brazil,
and many other places. During and after a crisis, the mainstream media and free trade economists lay the
blame on emerging markets and their governments’ restrictive or inefficient policies, crony
capitalism, etc., which is a cruel irony. When IMF donors keep the exchange rates in their
favor, it often means that the poor nations remain poor, or get even poorer. Even the
1997/98/99 global financial crisis can be partly blamed on structural adjustment and early,
overly aggressive deregulation for emerging economies. Millions of children end up dying
each year.
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Democracy
IMF programs harm democracy and the rule of law
Hackler et. al 20 [Hackler, Lauren, Frank Hefner, and Mark D Witte. “The Effects of IMF Loan
Condition Compliance on GDP Growth.” The American Economist (New York, N.Y. 1960) 65,
no. 1 (2020): 88–96. https://doi.org/10.1177/0569434519836994.]
While IMF
loan programs may not produce economic growth and recovery as intended, Barro and Lee
in IMF programs can lead to detrimental effects in political
organization and control. They find that IMF conditional lending leads to reductions in economic
growth as well as “small negative effects on democracy and rule of law” (Barro & Lee, 2005, p. 1245). This
negative effect on democracy results in additional indirect reductions in economic growth. Barro and
(2005) find that participation
Lee assert that to form an accurate opinion on the effects of IMF conditional lending programs, it is essential to look beyond the typical indicators for
economic improvements, such as inflation rates and incomes. They chose to also examine how external social and political influences affect the
implementation of loan conditions. Their research suggests that an
influx of IMF funds may encourage inefficient
spending behavior in bureaucratic agencies. IMF loan programs may have adverse effects on
the general population while being beneficial to the national governments and individual
politicians. Loans beneficial to national government can raise a country’s income while lowering per capita GDP. This is a contributing factor as
to why countries continue to accept loans amid evidence of their failure. In addition, countries with stronger connections to
major IMF donor countries receive larger loans, longer time frames to meet condition compliance
benchmarks, and generally more lenient and favorable conditionality agreements (Barro & Lee, 2005).
This subjectivity based on relationships between donors and recipients can corrupt the environments surrounding IMF loans. IMF loans shift
the power structure within a country toward outside actors, and the public has reduced
involvement through democratic process.
Venezuela proves empirically. IMF policies historically led to the
consolidation of the Chavez regime in Venezuela
Adouharb Cingranelli 06’ [ABOUHARB, RODWAN M.; CINGRANELLI, DAVID L.
International Relations department of the University College London, Professor of
Political Science at Binghamton University, 2006, “The Human Rights Effects of World
Bank Structural Adjustment, 1981–2000,” International Studies Quarterly (2006) 50
p.233-262,
https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.375.5960&rep=rep1&type=pd
f]
The case of Venezuela provides an illustration of the role of structural adjustment in producing
increased domestic conflict, a weakened democratic system and repression. As Di John (2005:114)
writes: A few weeks after the announcement of [structural adjustment] reforms, Venezuela
April 2021
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62
experienced the bloodiest urban riots since the urban guerrilla warfare of the 1960s. The riots,
known as the ‘‘Caracazo,’’ occurred in late February 1989. A doubling of gasoline prices, which were
passed on by private bus companies, induced the outburst. . . . The riots that ensued were contained by a
relatively undisciplined military response that left more than 350 dead in two days. Although
Venezuela’s democratic system has been maintained, over the period of this study, dissatisfaction
with economic policies has played a part in three attempted coups, multiple general strikes, two
presidential assassination attempts, and has led to several states of emergency being imposed.
Even today, debate over structural adjustment policies in Venezuela remains heated. President Hugo
Chavez sustains his popularity largely based on his opposition to the kind of unregulated
economic liberalization advocated by the IMF and the Bank (Banks, Muller, and Overstreet 2003)
The findings presented here have important policy implications. There is mounting evidence that
national economies grow fastest when basic human rights are respected (Sen 1999; Kaufmann 2004;
Kaufmann, Kraay, and Mastruzzi 2005). SAAs place too much emphasis on instituting a freer market and
too little emphasis on allowing the other human freedoms necessary for rapid economic growth to take root
and grow. By undermining the human rights conditions necessary for economic development, the Bank is
damaging its own mission626262
April 2021
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63
Bail Out
IMF policy of bailing out poor countries exacerbate their crises—Mexico
proves empirically
Hessler 18 [Hessler, Uwe. 04-09-2018, “IMF bailouts — roads to stability or recipes for
disaster?” Deutsche Well, https://www.dw.com/en/imf-bailouts-roads-to-stability-or-recipes-fordisaster/a-45338114]
Joseph Stiglitz, chief economist at the World Bank between 1997 and 2000, had serious doubts about the viability of the new doctrine.
Although noting
at the time that this policy was appropriate for some Latin American countries, it
"didn't make sense to apply it blindly to other countries." Stiglitz also said that although the IMF was
funded by money from taxpayers, it was not held accountable to their interests, "which clearly
identifies the problem of governance as one of the prime problems with the IMF for taxation without representation." In 1995,
Mexico was hailed as a shining example of the IMF's new policy, as the country had repaid a
bailout package to the tune of $52 billion (€45 billion). But it would take only a few years that its
failures became obvious. Mexico's citizens suffered a sharp decline in real per capita
income, which in 1998 had fallen back to a level last seen in 1974. From the end of 1994 to the end of
1996, Mexico added $560 billion to its total external debt because the government bailed out mainly commercial banks to the tune of
$545 billion by buying all their bad loans. Some economists even regard the legacy
of the bailouts in Latin America as
the beginning of the financial crisis in Asia in the late 1990s. They claim that the IMF had sent a clear
signal to the world that if anything goes wrong, the lender would come to the rescue of
investors.
IMF bail outs made the Asia Crisis worse—South Korea proves empirically.
Countries that refuse the IMF do better in the long-run—Malaysia proves
Hessler 18 [Hessler, Uwe. 04-09-2018, “IMF bailouts — roads to stability or recipes for
disaster?” Deutsche Well, https://www.dw.com/en/imf-bailouts-roads-to-stability-or-recipes-fordisaster/a-45338114]
The late
1990s Asian financial crisis was caused in large part by South Korea, Thailand, the
Philippines, Malaysia and Indonesia's heavy reliance on short-term foreign loans and openness to
hot money. When it became apparent in 1997 that private enterprises would not be able to meet their payment obligations,
international currency markets panicked and Asian currencies plummeted. The IMF treated
the Asian meltdown like other emergency situations, giving assistance only in exchange for
structural adjustment policies. The Fund instructed governments to cut spending, with the result that this deepened the
economic slowdown. In South Korea, for example, a country whose income approaches European levels, unemployment
skyrocketed from approximately 3 percent to 10 percent. "IMF suicides" became common among
April 2021
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64
workers who had lost their jobs and dignity. In Indonesia, the worst-hit country, poverty rates
rose from an official level of 11 percent before the crisis to 40 to 60 percent, and GDP declined
by 15 percent in one year. Malaysia stood out as a country that refused IMF assistance and advice.
Instead of further opening its economy, Malaysia imposed capital controls, in an effort to eliminate
speculative trading in its currency. While the IMF mocked this approach when adopted, the
Fund later admitted that it succeeded.
IMF bailout exacerbated the Eurozone crisis—Greece proves empirically
Hessler 18 [Hessler, Uwe. 04-09-2018, “IMF bailouts — roads to stability or recipes for
disaster?” Deutsche Well, https://www.dw.com/en/imf-bailouts-roads-to-stability-or-recipes-fordisaster/a-45338114]
Regarding the 2010 sovereign debt crisis in the eurozone, even
the IMF's own independent watchdog was hugely
critical of the lenders' approach. In a 2016 report, the Independent Evaluation Office (IEO) said the IMF was guilty
of "over-optimistic forecasts failed to spot the scale of the problem and left the impression it
is treating Europe differently." The crisis, which began in Greece but spread to Ireland, Portugal, Spain and Cyprus,
brought the 19-member currency union to the brink of collapse and enormous hardship to the people. Despite three bailouts
totaling €298 billion, unemployment in Greece, for example, remains stubbornly high at
22.5 percent. There, the minimum wage has fallen from €863 to €684, while government spending
on health almost halved. But Greece's creditors from the IMF and the European Union continue to
demand that Athens spends less than it earns, in order to create the surpluses needed to repay its
debt.
IMF forces austerity measures that directly harm the poor—Turkey proves
empirically
Hessler 18 [Hessler, Uwe. 04-09-2018, “IMF bailouts — roads to stability or recipes for
disaster?” Deutsche Well, https://www.dw.com/en/imf-bailouts-roads-to-stability-or-recipes-fordisaster/a-45338114]
In recent months, the number
of finance ministry officials from across the world meeting IMF
representatives in Washington seems to have grown significantly. More and more money is pouring out of
developing nations and into the United States, causing the US dollar to rise in value and the currencies of emerging markets to hit new
lows. Their US dollar-denominated debts have become huge burdens. Read more: Turkish lira left to tank as
markets downplay contagion fears Turkey has been at the center of the rout, but many other countries, including Argentina, Hungary,
Egypt, Angola, Ukraine and Indonesia, have been hit as investors dump riskier emerging market stocks and bonds for the safety of
American assets. Argentina's Economy Minister, for example, is in
Washington this week to thrash out a hastily
revised loan deal with the IMF under efforts to shore up investor confidence and the peso, which
April 2021
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65
plunged 20 percent alone at the end of last week. But the IMF is confident that the austerity measures
imposed by the government on the lenders' advice — including cuts to energy subsidies and the
loss of 95,000 public sector jobs — will stem the tide. Turkey, meanwhile, is trying to weather the storm in emerging
market finance, despite a 40 percent drop in the value of its currency, the lira. Ankara says it won't go cap in hand to
the IMF begging for a bailout that will only cause its population to suffer more. Judgement
is still out on which country will overcome its crisis better.
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66
Economy
IMF programs hurt the economies of recipient nations—mandated austerity
and employment cuts
Blanton et. al 18 [Blanton, Robert, G. Early, and Bryan Peksen. “Out of the Shadows or into the
Dark? Economic Openness, IMF Programs, and the Growth of Shadow Economies.” The Review
of International Organizations 13, no. 2 (2018): 309–33. https://doi.org/10.1007/s11558-0189298-3]
IMF programs, specifically Structural Adjustment Programs (SAPs), are commonly cited as a prime example
of Bglobalization from above^ (i.e., Kosack et al. 2004; Stiglitz 2004), as they involve sweeping changes in recipient countries that are
essentially mandated by the institution. Somewhat unsurprisingly,
the economic and societal impacts of
IMF programs have long been a source of contention. SAPs often come with specific conditions
that call for structural changes in the economic institutions of a state, including a smaller public
sector, reduced social spending, and labor reforms (e.g., Kentikelenis et al. 2016). While there is often a fair degree
of diversity in how conditions are negotiated and implemented (Steinwand and Stone 2008), the general purpose of SAPs is
to reduce aggregate demand and to purportedly enable the recipient to better compete in the
global marketplace. However, we posit that adherence to these programs—particularly the conditions entailed by SAPs—
creates an economic and political climate which might increase informal economic activity in recipient countries. Economically, the
effects of IMF program participation are largely recessionary as the reduction in
government spending and austere fiscal and monetary policies are associated with reduced
economic growth and increased unemployment, particularly in the short-term (e.g., Bas and Stone
2014; Oberdabernig 2013; Dreher 2006; Easterly 2005; Przeworski and Vreeland 2000). Reduced employment
opportunities in the formal economy, as well as tightening in government spending due to
austerity measures, create a climate ripe for the expansion of the shadow economy, as employees
may resort to informal work due to Bno other job opportunity or source of income in the ‘formal’
economy^ (Campbell 2005: 16)
IMF loans harm developing countries economy—slashes in social spending as
a result of IMF restructuring deters foreign investment
Hackler et. al 20 [Hackler, Lauren, Frank Hefner, and Mark D Witte. “The Effects of IMF Loan
Condition Compliance on GDP Growth.” The American Economist (New York, N.Y. 1960) 65,
no. 1 (2020): 88–96. https://doi.org/10.1177/0569434519836994.]
(Atoyan & Conway, 2006, p. 121). Similarly, Butkiewicz and Yanikkaya (2005) focus on the long-run effects of IMF loans. However,
their results indicate that
IMF loans issued to developing nations are “either neutral or
detrimental to growth.” This unfavorable result is due to the IMF’s negative impact on “public
April 2021
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67
as well as private investment” (Butkiewicz & Yanikkaya, 2005, p. 371). They point out that mandatory reductions in public
expenditure as a loan condition contribute to program failure. Many recipient governments respond to spending
cuts by first making substantial reductions in public investments, which may reduce a
nation’s overall investment and growth. Following public investment reductions, private
investment often follows suit according to the authors. The IMF also provides “provision and analysis of
statistical data, training, and policy advice and technical assistance” (Butkiewicz & Yanikkaya, 2005, p.
386). They have found that despite the addition of these services, “stimulating economic growth is not a
benefit of IMF lending” (Butkiewicz & Yanikkaya, 2005, p. 386).
April 2021
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68
Inflation
IMF fails as an organization—sets too low inflation estimates which are
harmful for economic growth and poverty reduction
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
Criticism of the IMF’s role is centered on four core issues (Goldsbrough, 2006): 1. Macroeconomic
frameworks
underlying the IMF programs are said to be “too rigid”, restraining, therefore, the
expenditures that would be made, since they are very conservative in terms of
macroeconomic stability. This might be because their goal is to achieve low inflation rates or to target
fiscal deficits which are lower that what is necessary for stability. There are two aspects of criticism on
macroeconomic frameworks: first, that programs aim at achieving too low inflation targets,
exceeding the available evidence on inflation thresholds that are harmful for economic
growth and poverty reduction; secondly, in spite the declaration made at the time the
Facility for poverty reduction and growth was introduced, the programs still present
insufficient fiscal flexibility, especially in terms of expenditure financed by aid.
IMF fails—overemphasis on liberalization and privatization. Empirically
proven in Indonesia and Brazil
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
Globalization turned over the night into an important topic, decreasing the feeling of isolation,
connected the national economies and influenced the development of international trade. It also
hollowed the difference between the developed and underdeveloped countries. The process of globalization itself and the
implementation of a trade based economy did not have positive effects in the emerging countries.
The West promised great improvements if the countries adopted the new economic system. The new system caused a rising degree of hunger instead.
International financial institutions have not had the leading role in a global ruled system without global leadership. Stiglitz claims that the IMF
has
made two mistakes in its actions. The first one was accepting the theory of liberalization, drawing
the map according to the theory and by diagnosing the problems in the emerging countries in a
wrong way. Moreover, this scheme and this model have been applied to all the states, neglecting national features. The problems can be
described in four steps. First step is privatization. Some politicians have sold public water and electricity
companies without negotiating, interested by the remittances. These politicians have used the demands of the
World Bank in order to justify its actions. The second step was liberalization of the capital flows. Unfortunately, in the
case of Indonesia and Brazil, money usually moves because of the real estate sector and currency
April 2021
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69
speculations. The state reserve can lose currency in just a few days. When such things happen, the IMF demands these countries
to raise the interest rate by a considerable percentage. The effects are predictable. High interest rates can
destroy the value of the real estate sector and industrial production, and clear the national
reserves. The IMF then leads the weaken country towards the third step, represented by the liberal
stabilization, at the market level, of the prices of water, food and gas. This action leads to the fourth step, the socalled IMF protest, which is also predictable (Davis, 2007).
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Debt
IMF issues debt that is unstable for poor countries
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
In his role as “keeper”, it is said that the IMF
goes beyond the available evidence to make decisions on
issues such as absorptive capacity, risk of “Dutch disease” or debt sustainability. To a considerable
extent, the community of the lenders contracted from the IMF assessments of the countries’ macroeconomic
policies, based on its signals on the opportunity of the macroeconomic framework when
making decisions on aid. While creditors’ answers to these signals may be nuanced, the IMF assessments are
likely to influence the level of aid flows. So, the question is how the IMF makes its decisions on
macroeconomic framework for an environment where there is a considerable uncertainty about
how the economy will respond to the aid. Some critics of the IMF argue that it exceeds the available
evidence in making such judgments, relying unduly on the caution side by strong
emphasizing of macroeconomic risks. IMF response is that this is a more flexible approach to macroeconomic
challenges, but that many of the involved countries went through long periods of macroeconomic instability, with high costs, so
caution is justified in order not to undermine the recent gains.
Despite early success, IMF turned toward structural adjustment programs
which imposed neoliberal economic reform in poor countries
Hessler 18 [Hessler, Uwe. 04-09-2018, “IMF bailouts — roads to stability or recipes for
disaster?” Deutsche Well, https://www.dw.com/en/imf-bailouts-roads-to-stability-or-recipes-fordisaster/a-45338114]
In response to the Latin American financial crisis in the 1990s, however, the IMF
changed its policy, implementing what's become known as
"the Washington Consensus" — a policy demanding structural reforms that increased the
role of market forces in exchange for immediate financial help. Originally set out by British economist John
Williamson in 1989, the principles included lower government borrowing to discourage high fiscal deficits, cuts in government subsidies and lower
corporate taxes. Other "structural
adjustments" recommended were freely-floating currency exchange
rates, free trade policies, relaxing rules that hamper foreign direct investment and competition, as
well as the privatization of public assets. Read more: IMF: 'Arab states need to address debt issue' The neoliberal economic
policies proposed in the Washington Consensus have since become pillars of bailout conditions enforced not only by the IMF, but also by its
Washington-based offspring, the World Bank.
IMF is a neoclassical organization that causes more problem than it solves
April 2021
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71
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
The IMF is, undoubtedly, the most important financial organizations in the world. In its 67 years of
operation, the IMF has encountered ups and downs. The IMF critics say that, instead correcting
its failures, this institution tends to cause more problems (McQuillan, 2010). The IMF has been glorified,
but also criticized because of the importance granted to the market economy, the Fund being
defined as a supporter of financial globalization. Countries that rely on the financial aid from the
IMF have to implement standard programs of economic reforms which, often, have
significant consequences on the population. Basic criticism of the IMF, from a theoretical
point of view, is based on the commitment to neoclassical doctrine, often called market
fundamentalism (Davis, 2007). The toughest critics of neoclassical doctrine were made by George Soros, founder of the Open
Society Foundation, and expert in functioning of financial markets. The theoretical core of this issue is that the strategic
operation of the MF is contained in the economic relations explanation, which becomes
guideline for developing countries and for those with problems, countries that are
dependent on the aid from the international financial institutions. The IMF imposed this limited
development concept to all of the countries that asked for help.
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Corruption
The IMF is a corrupt organization that is made up of developed countries
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
Moreover, the
main problem of the IMF is the management, the lack of accountability and
evaluation, the excessive monopolistic status, the undemocratic management system and the lack
of public participation. This institution is dominated not only by the richest countries, but also by commercial and financial interests of these
countries (Schwartz, 2005). Experts that are involved in the process of decision making of the IMF adapt their analysis and suggestions to their superiors’
ideas. The IMF is often criticized for its politics and secret programs. Lately, an important step has been made towards publishing additional info about
its activity. Though, more actions are needed in order to increase the transparency of the IMF and its citizen approach. Increasing
public
pressure may lead to changes in the politics of the international institutions, bringing benefits to
citizens all around the world. Moreover, the leading structure and the way of making decisions have
been the main problem of IMF activity. The most developed countries make decisions within the IMF, not only due to the way of
vote rights allocation, but also due to the division of competences between certain domains within the organizational hierarchy and the vote of qualified
majority, exceeding 2/3 in the total number of votes. Nowadays, most of IMF and World Bank activity within the emerging countries are lead by
representatives of the industrialized countries. It is well known that the leading staff of the IMF is always from Europe and the one of the World Bank
(WB), from the United States. The elections are always made behind closed doors, and global development experience is not a prerequisite. The
principle of liability demands that decision makers are responsible for their own actions
and for the consequences of their elections. This activity includes the principles of transparency and evaluation.
Transparency ensures information access to individuals that are not members of the institution.
Evaluation allows citizens to express their opinion about the decisions quality. The IMF has failed in achieving the criteria of
responsibility. The main reason is the lack of a systemic and independent evaluation mechanism. As
long as there are no consistent, independent and continuous evaluation and criticism of the IMF, one can see that the IMF tries to hide the results of its
activity. Commercial
interests must be replaced with preoccupation with the living standards,
democracy, human rights and social justice. Institutions representing the global civil society
demand individuals to involve in developing economic growth programs, though, very often, the IMF
makes the plans by itself, behind closed doors and then sends them to the countries in order to be signed,
without letting them know that they have the possibility to develop their own plans. As global communication turns the world
into a very strong linked system, more and more individuals are capable of examining the costs
and benefits of economic policies.
The IMF is mistargeted at meeting the needs of developing countries
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
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73
3. The IMF
is criticized for not having a more detailed approach of members’ needs when
determining the macroeconomic framework and the requirements of the aid to help
countries to achieve the Millennium Development Goals – or any other targets related to
these goals. They say that the IMF does not act as a catalyst and it can tell creditors that a medium
term framework based on low expectations is acceptable when a more ambitious scenario would
be feasible. IMF response is that in the formulation of the spending programs, the government must take account of budgetary
constraints, including expectations of available aid and is not in favor of poorer countries to claim that they would receive more help
than they do – in a world where commitments still exceed payments.
IMF funds autocratic regimes in developing countries with no accountability
mechanism to ensure funds are used properly
Mukherjee 08 [Mukherjee, Bumba. 2008, “International economic organizations and economic
development: an assessment.” (International Monetary Fund)(World Bank)(On Multilateralism).
SAIS Review, 28(2), 123–137. https://doi.org/10.1353/sais.0.0013
For one, it ensures that financial assistance from the IMF and the World Bank will fail in promoting economic development in these corrupt dictatorships.
As suggested earlier, this is because corrupt
dictators typically use funds from the Bretton Woods institutions to buy-off
political opposition rather than invest it for promoting economic development. Additionally,
rewarding dictators in developing countries with IMF and World Bank funds will further erode
the prospects for serious economic development in these countries. This may put into motion a cycle
of vicious poverty and domestic violence which could create a breeding ground for
terrorism and terrorist groups who may seek to strike the United States and its allies. Third, as
noted by Easterly (2001), current organizational arrangements within the IMF and the World Bank
provide poor or no incentives for personnel in these organizations to actively monitor
whether the aid or loan flows are being utilized effectively by recipient nations.28 For instance,
Easterly (2001) emphasizes that it is standard practice in international economic organizations to
quantify success by inputs, such as the amount of money loaned, rather than outputs, such as the
degree of poverty relief that is attained. IEOs typically design careful and detailed plans for policy reforms in developing countries
that obtain funds from these organizations. However, few resources, if any at all, are applied to evaluate why similar
plans for policy reform in the past have not been implemented properly in loan recipient nations
IMF programs incentivize corruption
Shah 13 [Shah, Anup. 03-24-2013, “Structural Adjustment—a Major Cause of Poverty,” Global
Issues, https://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty]
True, in
some cases corrupt governments have borrowed money from these institutions and/or
directly from various donor nations and ended up using that money to pursue conflicts, for
arms deals, or to divert resources away from their people. However, in most cases that has been done knowingly,
April 2021
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74
with the support of various rich nations due to their own national interests, especially during the Cold War. As Oxfam says, it would be wrong to hold
civilians to ransom by placing stringent conditions on humanitarian relief because of the way their government spends its money. Furthermore, it
has
been argued that Structural Adjustments encourage corruption and undermine democracy. As Ann
Pettifor and Jospeh Hanlon note, top-down conditionality has undermined democracy by making elected
governments accountable to Washington-based institutions instead of to their own people.
The potential for unaccountability and corruption therefore increases as well. As the article from Africa Action above also mentions, African
countries require essential investments in health, education and infrastructure before they can
compete internationally. The World Bank and IMF instead required countries to reduce state support and protection for social and economic
sectors. They insisted on pushing weak African economies into markets where they were unable to
compete with the might of the international private sector. These policies further undermined the economic development
of African countries. Side Note» This inevitably means that the poor suffer, while the rich get richer. Also note
that the illegal drug trade has increased in countries that are in debt (because of the hard cash that is earned), as
Jubilee 2000 points out. Growing such illegal crops also diverts land away from meeting local and
immediate needs, which also leads to more hunger. Debt’s chain reactions and related effects
are enormous. (For more information on debt in general, see this web site’s section on debt related issues.) These policies may be described as
reforms, adjustments, restructuring or some other benign-sounding term, but the effects on the poor are the same
nonetheless. Some even describe this as leading to economic apartheid.
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Informal Labor Sector
IMF programs prompt the growth of the informal labor sector
Blanton et. al 18 [Blanton, Robert, G. Early, and Bryan Peksen. “Out of the Shadows or into the
Dark? Economic Openness, IMF Programs, and the Growth of Shadow Economies.” The Review
of International Organizations 13, no. 2 (2018): 309–33. https://doi.org/10.1007/s11558-0189298-3]
In order to understand the impact of increasing levels of international economic engagement that have occurred via various forms of globalization, it is
necessary to look both at the formal and informal sectors of countries’ economies. The
existence of the informal sector often connotes a dysfunctional relationship between states
and markets, and the expansion of this sector can undermine the legitimacy of countries’
economic policies and institutions. To a large extent, the decision to enter the shadow sector represents a rejection of a countries’
formal economy, as individuals and firms forgo the potential benefits of state governance and accept the costs of operating outside of extant regulations
and protections. By assessing the relationship between two forms of international economic engagement and changes in the size of countries’ shadow
global
economic integration is a multifaceted phenomenon that can have varied impacts upon countries,
we examined how economic openness (Bglobalization from below^) and participation in IMF (Bglobalization
from above^) affect the growth of the shadow sector. We argued that increased commercial integration
into the global marketplace would lead countries’ shadow sectors to contract—evaluating two specific
mechanisms. First, we argued that the removal of trade barriers would reduce incentives for illicit trade, diminishing firms’ incentives for exploiting the
economies, we provide insights into how integration into the broader global economy influences this failure of the formal marketplace. As
shadow sector. Secondly, increased exposure to foreign firms and capital would bring with it a Bclimb to the top^ effect that could improve countries’
regulatory environments and labor standards, increasing the incentives for both firms and workers to operate in the formal sector. Conversely, we argued
that participation in IMF programs would have the opposite effect, as the economic
downturns and weakened state capacity wrought by IMF programs could increase
participation in the shadow sector. Examining these relations across 145 countries for over 40 years, we
found substantially significant evidence that greater economic openness tends to cause shadow sectors to contract, while
participation in IMF programs appears to promote the growth of shadow sectors
Austerity and poor employment due to IMF structural adjustment programs
results in the expansion of the informal labor sector
Blanton et. al 18 [Blanton, Robert, G. Early, and Bryan Peksen. “Out of the Shadows or into the
Dark? Economic Openness, IMF Programs, and the Growth of Shadow Economies.” The Review
of International Organizations 13, no. 2 (2018): 309–33. https://doi.org/10.1007/s11558-0189298-3]
IMF programs, specifically Structural Adjustment Programs (SAPs), are commonly cited as a prime example
of Bglobalization from above^ (i.e., Kosack et al. 2004; Stiglitz 2004), as they involve sweeping changes in recipient countries that are
essentially mandated by the institution. Somewhat unsurprisingly,
the economic and societal impacts of
April 2021
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76
IMF programs have long been a source of contention. SAPs often come with specific conditions
that call for structural changes in the economic institutions of a state, including a smaller public
sector, reduced social spending, and labor reforms (e.g., Kentikelenis et al. 2016). While there is often a fair degree
of diversity in how conditions are negotiated and implemented (Steinwand and Stone 2008), the general purpose of SAPs is
to reduce aggregate demand and to purportedly enable the recipient to better compete in the
global marketplace. However, we posit that adherence to these programs—particularly the conditions entailed by SAPs—
creates an economic and political climate which might increase informal economic activity in recipient countries. Economically, the
effects of IMF program participation are largely recessionary as the reduction in government
spending and austere fiscal and monetary policies are associated with reduced economic growth
and increased unemployment, particularly in the short-term (e.g., Bas and Stone 2014; Oberdabernig 2013;
Dreher 2006; Easterly 2005; Przeworski and Vreeland 2000). Reduced employment opportunities in the formal
economy, as well as tightening in government spending due to austerity measures, create a
climate ripe for the expansion of the shadow economy, as employees may resort to informal work
due to Bno other job opportunity or source of income in the ‘formal’ economy^ (Campbell 2005: 16)
IMF Structural Adjustment programs increase the size of the informal labor
sector
Dooley 3 [Dooley, Michael P.; Frankel, Jeffrey A. January 2003, “Managing Currency
Crises in Emerging Markets,” University of Chicago Press,
https://www.nber.org/system/files/chapters/c9656/c9656.pdf]
I speculate that the poor
depend more on the informal sector, which is not directly affected as much as
the formal sector by economic reforms under adjustment loans. More generally, the poor may be ill
placed to take advantage of new opportunities created by structural adjustment reforms, just as they
may suffer less from the loss of old opportunities in sectors that were artificially protected prior to reforms. The poor may also benefit more
from sweeping home-grown reform programs than those in which the government reforms are
limited to a few highly visible indicators constrained by IMF and World Bank adjustment loans. A
recent World Bank report on aid and reform in Africa found no relationship between adjustment lending (or aid more generally) and the development of
such a broad consensus (Devarajan, Dollar, and Holmgren 2001). As this report puts it, “successful reformers have consultative processes that result in a
broad consensus for reform.” One
distinction that should be made is between “structural adjustment
lending” and “structural adjustment policies.” This paper has tested the effect of the former but not the latter.
Shadow economies/informal labor are a key issue in global development & a
question of public policy
Blanton et. al 18 [Blanton, Robert, G. Early, and Bryan Peksen. “Out of the Shadows or into the
Dark? Economic Openness, IMF Programs, and the Growth of Shadow Economies.” The Review
of International Organizations 13, no. 2 (2018): 309–33. https://doi.org/10.1007/s11558-0189298-3]
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Examining the growth of shadow sectors is essential to understanding both the trajectory and the social, political, and economic
impacts of international economic ties. First,
the shadow sector makes up a substantial portion of the global
economy. According to OECD estimates from 2009, approximately 1.8 billion workers engage in
unregulated, untaxed, off-the-books forms of labor around the world (Neuwirth 2011). As a whole, the size
of the global shadow sector is estimated at over $10 trillion and continues to grow (Neuwirth 2011).
The shadow economy is also a Bcrucial issue^ (Elbahnasawy et al. 2016: 31) for economic development, as it raises key questions for
a state’s governance as well as the economic welfare of its citizenry. Workers
face far greater vulnerabilities in the
shadow sector, as they lack job security, legal protections, and often face depressed wages (ILO
2002). Shadow economies also result in lost revenues to the state (Awasthi 2016), which results in
decreased funding for social welfare policies, military budgets, and other important
national priorities (Loayza 1997). Yet many aspects of the shadow economy remain under-examined and poorly understood.
In this paper, we examine how participation in the licit global economic order impacts the extent of shadow sector activity. While past
work has explored some of the ways in which globalization might influence illicit commerce (i.e., Naim 2005), there is a dearth of
systematic analysis on the effects of licit foreign economic ties on the illicit economy. Moreover, given
the varying
mechanisms that encompass globalization, we expect that these multiple facets are unlikely to
impact shadow sector activity in the same way. In this study, we explore two salient forms of foreign economic
integration: economic openness and participation in the IMF’s structural adjustment programs (SAPs). Our focus on the effects of
these two different processes allows us to examine both Bglobalization from below^ that emerges from commercial interactions and
integration at the firm- and consumer-levels and Bglobalization from above^ that is externally imposed on countries, in this case by
international institutions like the IMF (Falk 1999; see also Kosack et al. 200
IMF programs increase the expansion of the shadow economy—diminishing
state capacities & decreasing the potential benefits associated with formal
economy
Blanton et. al 18 [Blanton, Robert, G. Early, and Bryan Peksen. “Out of the Shadows or into the
Dark? Economic Openness, IMF Programs, and the Growth of Shadow Economies.” The Review
of International Organizations 13, no. 2 (2018): 309–33. https://doi.org/10.1007/s11558-0189298-3]
The sociopolitical impacts of IMF programs might also contribute to the expansion of the shadow economy. First,
the structural changes
often mandated by IMF programs might have a deleterious impact on state capacity, specifically
bureaucratic quality. Forced downsizing and reorganization might Binstill volatility in the
bureaucracy^ (Reinsberg et al. 2016: 4–5), while other reform measures such as wage and labor flexibility may
leave the organizations shorthanded and hamper the ability of these institutions to hire skilled
personnel. As a result, bureaucratic performance might decline and governments’ capacity to
effectively and efficiently regulate their economies might be weakened. Diminished resources and staff might
increase the amount of time it takes for bureaucratic agencies to fulfill their basic tasks, such as issuing licenses and approvals. It could also
engender disgruntlement among government employees, making them less effective at their jobs.
This reduced state capacity might increase the perceived attractiveness of doing business in the
shadow economy. On the one hand, citizens and businesses will find it more difficult to interact with
regulatory agencies that are staffed by aggrieved, shorthanded personnel—increasing the transaction costs of
complying with government policies. On the other hand, weakened, dispirited state regulators may also be less able or
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willing to enforce regulations that are labor-intensive to implement (i.e., tax collection). At the same time, IMF
conditions might also decrease the potential benefits associated with the formal economy. For
example, extant research has found IMF programs to negatively impact the level of worker rights
protections, including free association and collective bargaining rights as well as wage
discrimination (Blanton et al. 2015; Abouharb and Cingranelli 2007). The literature on the shadow economy notes that
overly restrictive or burdensome labor regulations encourage entry into the shadow economy, as
they increase the cost to employers to operate in the formal economy (i.e., Schneider 2005). However, for
workers the protection of basic labor rights can be an important consideration when seeking
work. Given the flexible and sometimes transient nature of informal work, a functioning labor rights regime is one of the primary benefits associated
with work in the formal sector. The reduction of these rights could thus minimize the advantages of formal
work and potentially steer employees into the shadow economy. In all, the economic and sociopolitical impacts
of IMF programs create a climate ripe for the expansion of the shadow economy. Foremost, conditions imposed by IMF
programs often lead to the contraction of countries’ formal sector economies at least in the
short term that pushes labor and capital to explore informal opportunities. Moreover, the reduced
state capacity and worker rights that these programs engender lessen the prospective benefits that
workers can obtain from conducting their economic activities in the formal sector. The combination
of economic hardship and decreased capacity thus serves to limit both the opportunities as well as
the incentives to participation in the formal workplace. This discussion leads to the following hypothesis about the effects
of Bglobalization from above
IMF programs empirically increased informal labor sector 19%--Togo and
Tunisia proves empirically
Blanton et. al 18 [Blanton, Robert, G. Early, and Bryan Peksen. “Out of the Shadows or into the
Dark? Economic Openness, IMF Programs, and the Growth of Shadow Economies.” The Review
of International Organizations 13, no. 2 (2018): 309–33. https://doi.org/10.1007/s11558-0189298-3]
In Table 2, we assess
the effects of IMF program participation on the shadow sector. In contrast to the
program participation in general as well as the number of
structural conditions attached to those programs are significantly related to greater growth in
illicit economic exchanges during the IMF program years. This finding is significant across all
models, indicating that it is robust to the choice of the sample. This suggests that the economic downturn,
results of the previous model, we find that IMF
reduction in credit markets, and reduced state capacity brought about by the IMF programs can push actors into the shadow economy,
due to economic hardships as well as decreased benefits for remaining in the formal economy. We use two cases, Togo
(1979–
1998) and Tunisia (1986–1992), from our sample in Fig. 2 to further illustrate the extent of the change a country might
observe in the size of its shadow sector during the IMF years. Both countries received IMF loans
in order to address budgetary and other financial problems, and both cases show a notable
increase in the shadow sector growth prior to as well as after the end of their IMF program
participation. In the case of Togo, for instance, there was about an 18% increase (from 28 to 33) in the
size of the shadow economy between the early years and last year of the IMF participation.
The case of Tunisia is particularly interesting in this regard, as the IMF once deemed it one of the Bmost successful of economic
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reformers in the Arab World^ (Pfeifer 1999: 23). Yet although Tunisia attained some positive economic outcomes due to its reforms,
particularly reducing inflation, the austerity
measures failed to resolve many of Tunisia’s underlying
political and economic problems, as unemployment stayed very high and its investment in human
capital remained low (Pheifer 1999). Problems with the informal economy continued, as the sector has continued to
grow, due to both the continued scarcity of formal work and much higher income opportunities in
the shadow economy. This forced Tunisian workers to choose Bbetween making a living and
taking high risks^ in the shadow sector (Trabelssi 2014: 4).
Informal economy decreases wages and workers lack social benefits and
educational programs
Banchetta 09 [Bacchetta, Marc, Ekkehard Ernst, and Juana P. Bustamante. Globalization and
Informal Jobs in Developing Countries. Geneva: International Labour Organization, 2009.
Economic Research and Statistics Division World Trade Organization, 2009.
https://www.wto.org/english/res_e/booksp_e/jobs_devel_countries_e.pdf]
Over the past decade, world trade has expanded signifi cantly. By 2007, global trade had reached more than 60 per cent of world GDP, compared with
less than 30 per cent in the mid-1980s. Few would contest that increased trade has contributed to global growth and job creation. However, strong
growth in the global economy has not, so far, led to a corresponding improvement in working
conditions and living standards for many. Absolute poverty has declined, thanks to the economic dynamism of recent years, the
efforts of private companies, migrant workers and their remittances and the international development community. Nevertheless, in many instances,
labour market
conditions and the quality of employment growth have not improved to the same
degree. In many developing economies job creation has mainly taken place in the informal economy, where
around 60 per cent of workers fi nd income opportunities. However, the informal economy is
characterized by less job security, lower incomes, an absence of access to a range of social
benefits and fewer possibilities to participate in formal education and training programmes
– in short, the absence of key ingredients of decent work opportunities
Informal economy is the root cause of inequality in the developing world
Banchetta 09 [Bacchetta, Marc, Ekkehard Ernst, and Juana P. Bustamante. Globalization and
Informal Jobs in Developing Countries. Geneva: International Labour Organization, 2009.
Economic Research and Statistics Division World Trade Organization, 2009.
https://www.wto.org/english/res_e/booksp_e/jobs_devel_countries_e.pdf]
Pervasive inequality is one of the most signifi cant barriers to growth in many developing
economies (International Institute for Labour Studies, 2008; Kucera, 2002). The lack of access to basic private (e.g. fi nancial services) and public
services (e.g. education and health care) as a result of unequal income and wealth distribution has prevented entrepreneurship from fl ourishing and
sidelined many potentially productive individuals. In addition, political economy problems lead to a distorted redistribution in favour of more prosperous
households. Informality
is at the centre of these inequality dynamics (United Nations DESA, 2005). Indeed, it is one
of the most critical channels through which informality affects both growth and stability. The link between informality and income inequality is by now
April 2021
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well-established. Empirical
studies have demonstrated persistently that standard measures of income
inequality, such as the Gini coeffi cient, are highly correlated with the incidence of informal
employment (Kucera and Xenogiani, 2008a; 2008b). This is the case even when controlling for various other
factors, such as the quality of governance and government spending as a share of GDP, or when
using different indicators to measure the size of the informal economy (Elbadawi and Loayza, 2008). More indirect
measures concern the relationship between the incidence of poverty and informal employment. As demonstrated by Kucera (2008), standard poverty
measures (such as the share of the population living below 2 US$ a day) are closely related to the share of informal employment in a cross-country
analysis. Nevertheless, such an aggregate picture masks differences among informal workers at the microeconomic level as the measured wage gap varies
substantially between different segments and tiers of the informal economy (Bargain and Kwenda, 2009). Indeed, depending on the type of informal work
– informal employer, self-employed, casual worker or home worker – informal employment is remunerated at vastly different levels, further contributing
to distributional concerns (Carr and Chen, 2002). The correlation that may be drawn from these studies is, however, no proof of causality. Indeed, recent
analyses demonstrate that the link between inequality and informality is running in both directions. A
higher incidence of informal
employment is raising the degree of income inequality through a composition effect. At the same time, a
higher degree of income inequality is increasing the size of the informal economy as individuals are prevented from joining the formal economy, due to a
lack of either human or fi nancial wealth (Chong and Gradstein, 2007). In
cross-country regressions an increase in the
size of the informal economy by 3 percentage points can be shown to raise income inequality
as measured by the Gini coefficient by as much as 8 percentage points. Chong and Gradstein (2007) also
show that the strength of this link depends on institutional quality, such as the degree of corruption, the integrity of the rule of law, government stability
and democratic accountability. This result is also confi rmed by earlier studies which looked only at transition economies in Eastern Europe and Central
Asia (Rosser et al., 2000). Looking beyond the static picture of unequal income distribution, one can also draw inferences from studies analysing earnings
mobility for workers transiting between different segments of the labor market.
Growth in the informal economy makes countries more vulnerable to
economic shocks
Banchetta 09 [Bacchetta, Marc, Ekkehard Ernst, and Juana P. Bustamante. Globalization and
Informal Jobs in Developing Countries. Geneva: International Labour Organization, 2009.
Economic Research and Statistics Division World Trade Organization, 2009.
https://www.wto.org/english/res_e/booksp_e/jobs_devel_countries_e.pdf]
Informality is associated with increased vulnerability of countries to economic shocks. Moreover,
informality raises the likelihood of being affected by such shocks. The combination of these two tendencies can
create a vicious circle, weakening the long-term performance of a country, lowering the potential benefi ts it can derive from trade and reducing
economic well-being. Volatility
in growth performance and the frequency of extreme economic events
with above
average sized informal economies are almost twice as likely to experience extreme economic
events, compared to countries with less informal employment. Empirical evidence in the literature tends to
confirm this adverse association between informality and business cycle volatility – informality both acts as a direct cause for
higher business cycle volatility and represents a symptom for other institutional defi ciencies that
render a country less resilient to shocks, such as the absence of automatic stabilizers or the
presence of regulatory distortions. The study shows that high rates of informality drive countries towards the lower, more vulnerable
(such as rapid growth spurts and sudden growth reversals) tend to rise with the size of the informal economy. Countries
end of global production chains. Economies with larger informal sectors may attract particular types of capital flows related to the existence of a large
low-wage labour pool. Specifically, some emerging
economies and developing countries seem to have tried in
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the past to use the size of their informal economy as an argument for international investors to
take advantage of low labour costs. For instance it is sometimes argued that EPZs may lower labour costs compared to the rest of the
economy through the selective or partial application of labour laws and regulations. On the other hand, governments may set up zones in areas and sectors
most affected by high informality rates, with the objective of improving working conditions there. Empirical evidence suggests that this objective has not
always been met. This is partly related to the fact that informal labour markets or EPZs often occupy the weakest place in the global production chain,
which prevents fi rms operating in this area from appropriating a large enough share of international value added to grow and innovate. While local
working conditions may improve to a certain extent in such circumstances – at least in
comparison to the situation prevailing before trade and investment opening – these arrangements
are unlikely to offer countries the opportunity to establish benefits from international integration.
In the end, countries may be left with labour market conditions that are little better than those existing before economic opening. At the same time, the
economy may have been rendered more vulnerable to international shocks.
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Moral Hazard
Existence of IMF loans changes risk-reward evaluations for policy makers the large increase in the number of countries experiencing big crises suggests
this is true
Meltzer 99 [Meltzer, Allan H. 1999, “What’s Wrong with the IMF? What would be
better?” Independent https://www.independent.org/pdf/tir/tir_04_2_meltzer.pdf]
Even if he is wrong, a crisis may not occur during his term of office. IMF loans, at subsidized rates, are available. A timely loan may
require some retrenchment, but not all countries that go to the IMF have a crisis. It is sufficient
for moral hazard that the
existence of subsidized loans from the IMF modifies the finance minister’s evaluation of the costs
he faces. The large increase in the number of countries experiencing large crises in recent years
suggests that a change of this kind has occurred. Perhaps the severity of the crises in Indonesia, Thailand,
Korea, and Russia will change future behavior. But even if so, institutional reform is still desirable. A more
problematic defense of IMF procedures compares the IMF’s rescue packages for international
banks to the rescue of some of the passengers on the Titanic. The comparison is inapt. There is no important
difference between individual and social losses when a ship such as the Titanic sinks.
IMF loans result in countries taking out loans they can’t afford
McQuillan 20 [McQuillan, Lawrence. 2020, “International Monetary Fund,” Britannica,
https://www.britannica.com/topic/International-Monetary-Fund]
The fund also operates the IMF Institute, a department that provides training in macroeconomic analysis and policy formulation for
officials of member countries. Criticism And Debate The impact of IMF loans has been widely debated. Opponents
of the
IMF argue that the loans enable member countries to pursue reckless domestic economic
policies knowing that, if needed, the IMF will bail them out. This safety net, critics charge, delays
needed reforms and creates long-term dependency. Opponents also argue that the IMF
rescues international bankers who have made bad loans, thereby encouraging them to
approve ever riskier international investments. IMF conditionalities have also been widely debated. Critics
contend that IMF policy prescriptions provide uniform remedies that are not adequately
tailored to each country’s unique circumstances. These standard, austere loan conditions
reduce economic growth and deepen and prolong financial crises, creating severe hardships
for the poorest people in borrowing countries and strengthening local opposition to the IMF.
IMF bailouts encourage a moral hazard in which they are rewarded for poor
financial decisions
Barro 99 [Barro, Robert J., 1999 “THE IMF DOESN’T PUT OUT FIRES, IT STARTS
THEM,” Harvard University,
https://scholar.harvard.edu/barro/files/98_1207_imf_bw.pdf]
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83
But no one is willing to blame Congress if the IMF actually works to encourage Brazilian-type financial crises time and again. Some economists
believe that bailouts
increase "moral hazard" by rewarding and encouraging bad policies by
governments and excessive risk-taking by banks. Aware that they can be bailed out in the crunch, banks will often
lend at interest rates that do not reflect fundamental risks. This, in turn, generates new financial crises
and reduces world economic growth. In Asia, a flood of low-cost capital from Europe, Japan, and the
U.S. wound up financing real estate speculation and overcapacity, thanks in part to an assumed IMF
“guarantee.” But nobody will ever be able to prove that the IMF effectively starts new fires in this way. Hence, the political forces favor IMF
funding and limitless bailouts. CRUTCHES. IMF economists like to argue that these moral-hazard problems are minimal. But consider the case of the
recent $42 billion package for Brazil. How did the Brazilians qualify for this support? They did so mostly by not exercising sound fiscal policies. If their
policies had been better, they would not be in their current difficulties and would not qualify for IMF money.
Investors pour tons of money in to a region expecting an IMF bailout if things
turn sour
Helfer 98 [Helfer, Ricki T. 08-01-1998. “Rethinking IMF Rescues,” Brookings
Institution, https://www.brookings.edu/research/rethinking-imf-rescues/]
That leaves the question of how much the prospect of the IMF’s
divided. Some argued that the IMF
rescue contributed to the Asian crisis. On this, participants were
essentially played no role because no one believed the Asian miracle
would end. Moreover, Asian countries were growing so rapidly prior to the crisis that they would naturally attract large inflows of foreign
capital—which could run out much faster than it came in—regardless of the prospect of an IMF rescue. Others sharply disagreed, asserting that
investors would not have poured so much money into Asia—certainly not at such relatively
low interest rates—if they had not expected some kind of IMF rescue if things turned sour.
Some blamed the IMF’s bailout of Mexico in 1994-95 for leading to the Asian crisis of 1997-98, although most disagreed with that conclusion. James
Tobin offered a third view: while
moral hazard is a serious and difficult problem, it was not the major cause
of the Asian currency crisis. In Tobin’s view, fixed exchange rates were the main culprits. Had the Asian countries adopted floating
exchange rates, the depreciation in their currencies—which was inevitable given their large current account deficits—would have occurred gradually,
without the sharp and ultimately contagious plunges that actually occurred. Moreover, had their exchange rates floated, Asian banks and corporations
would not have been so eager to borrow in steadily appreciating foreign currencies, which significantly aggravated the crisis.
The IMF insulates banking systems against loss, which encourages reckless
borrowing and lending at artificial interest rates
Helfer 98 [Helfer, Ricki T. 08-01-1998. “Rethinking IMF Rescues,” Brookings
Institution, https://www.brookings.edu/research/rethinking-imf-rescues/]
The criticisms of the Fund extend far beyond issues about exchange rate regimes, of course. As I am about to briefly summarize, some
of these attacks are partly valid. But to paraphrase the Clinton Administration’s approach to affirmative action, the far better course is
to “mend the Fund, not to end it”. Moral Hazard: Let’s begin with the better known “moral hazard” problem: that because
IMF
funds recently have been used to stabilize domestic banking systems, IMF rescues have the
effect of insulating creditors of banks in borrowing countries against loss. This distorts the
pricing of loans and encourages too much borrowing and lending at artificially suppressed
interest rates. IMF officials have acknowledged this problem, have urged attention be devoted to solving it, but at the same
time, either have implicitly or explicitly suggested that this is a price that may have to be paid in order to prevent contagion. This view
is far too pessimistic. In the United States, we heard similar objections to curtailing the ability of regulators to protect uninsured
depositors during the 1980s and yet a law was enacted in 1991 (FDICIA) that does precisely that.
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Too much lending in recent years has contributed to financial crises - there
have been 90 in the past 15 years
Meltzer 99 [Meltzer, Allan H. 1999, “What’s Wrong with the IMF? What would be
better?” Independent https://www.independent.org/pdf/tir/tir_04_2_meltzer.pdf]
Leading countries, including the United States, Japan, Britain, and the European Union, allow their currencies to float. Western
Europe now has a common currency and a single central bank in place of fixed but adjustable exchange rates. Many
of the
financial crises of recent years arose because there is too much
lending, especially short-term lending, to developing countries, not too little. Recent history gives strong
problems or international
support to the proposition that if a country adopts market-oriented policies of privatization and deregulation, opens its trade to
competition in foreign markets and by foreigners in domestic markets, and carefully controls its budget, foreign lenders and investors
are willing to finance its development. Yet the international financial system is crisis-prone. Latin America in the 1980s, Mexico in
the mid-1990s, and Asia and Russia most recently present well-known examples of deep, pervasive financial crises that have been
costly to the public in the countries with financial problems, to their trading partners, and, often, to much the rest of the world. The
past fifteen years have seen ninety serious banking crises, most of them followed by
deep recessions. More than twenty of these crises produced direct losses to a developing country exceeding 10 percent of its
GDP. In half of these cases, including several Asian countries now, losses exceed 25 percent of GDP
(Caprio and Klingabiel 1996, 1997; Calomiris 1998). These losses,
relative to GDP, are far larger than the cost of
the U.S. savings-and-loan problem to U.S. taxpayers. The frequency and severity of recent
international financial problems, and their occurrence in a period of growth, economic progress, and low inflation
should raise a number of questions
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Financial Crisis
IMF exacerbates the effect of recessions by false optimistic predcitions of
future economic conditions that result in countries taking out loans despite
gray skies around the corner
Gentimir & Ivan 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
In a recent paperwork of the Center for Economic and Policy Research (CEPR), economists
argue that countries currently
involved in the IMF loan agreements are subject to "pro-cyclical" macroeconomic policies, which
tend to aggravate the economic slowdown. Economists argue that the IMF failed to learn valuable lessons
from the past economic crises, and continues to be based on overly optimistic growth forecasts
for debtor countries. Managing these policies wrongly, the authors argue that the IMF may have increased or
prolonged financial crisis in many countries that it have borrowed (Center for Economic and Policy Research,
2009). CEPR and other analysts have criticized the IMF for failing to anticipate the crisis in the United
States. Since the IMF releases regularly the World Economic Outlook every six months - in order to assess current economic trends - some
economists argue that the Fund should have recognize the growing bubble and to anticipate the
consequences. Critics urge the IMF to reassess the criteria, assumptions and economic analysis used to prescribe macroeconomic policies in
developing countries (Inter Press Service, 2009). In many Eastern European countries, both leaders and citizens see
the IMF loan conditions as factors that have aggravated the crisis. In Romania (who negotiated a loan of 20
billion with IMF), opposition political party called for a vote of no confidence against the elected government
because of the controversial reforms imposed by the IMF. In Hungary, people know of the IMF loans and conditions
attached to them, and "The IMF is not very pleasant".
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Resource Extraction
IMF programs cause resource extraction from poor countries
Bandhauer 00 [Bandhauer, C. 03-22-2000, “Top Ten Reasons to Oppose the IMF,” UTC,
https://wsarch.ucr.edu/wsnmail/2000/msg00449.html]
IMF Policies hurt the environment IMF
loans and bailout packages are paving the way for
natural resource exploitation on a staggering scale. The IMF does not consider environmental
impacts of lending policies; and environmental ministries and groups are not included in policy
making. The focus on export growth to earn hard currency to pay back loans means unsustainable
liquidation of natural resources. Government cutbacks inevitably target the environmental ministry as one of the first
agencies to come under the budget axe. This happened with the bailouts of Brazil, Indonesia, and Russian
countries that are renowned for their great biodiversity.
Exports have increased over 16 year time period
Roe 16 [Roe, Alan. June 2016, "Like it or not, poor countries are increasingly dependent on
mining and oil & gas," United Nations, https://www.wider.unu.edu/publication/it-or-not-poorcountries-are-increasingly-dependent-mining-and-oil-gas]
Specifically, of
the 72 low- and middle-income countries that we identify as most dependent on
exports, 63 experienced an increase in their dependence on extractives resources in
that 16-year timeframe. That is, no fewer than 88% of these countries became even more dependent on extractives exports over this
period. The average increase
was around 18 percentage points (pp), although some countries
experienced increases as large as 94 pp (Chad), 76 pp (Sudan) and 64 pp (Mozambique). Fifteen of 18 low-income countries
experienced an increase in dependence on extractives, and 20 of the 25 lower-middle-income countries saw an increase over this 16-year period.
Resource exports harm poor countries.
[No Author, No Date, “The Price of Oil: Debt & Poverty.” Oil Change International, Oil Change
International, priceofoil.org/thepriceofoil/debt-poverty/]
One would assume countries that are well endowed with oil, gas and mineral wealth would be economically well off. In fact, just the
reverse seems to be true. In
the mid 1990’s economists Jeffrey Sachs and Andrew Warner found a strong negative
correlation between a country’s dependence on mineral exports – and oil in particular – and their
gross domestic product (GDP). Further research by others also has found that these countries also suffer from
high rates of poverty, malnutrition, child illiteracy, corruption, authoritarianism, civil war, and
April 2021
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87
even indebtedness. Collectively, these observations are known as the resource curse. Drilling into
Debt, one of Oil Change International’s first reports, found that countries that produce oil tend to be poorer, more
violent, more corrupt, and less productive economically than they should be. Paradoxically, aid programs designed to
‘help’ poor countries likely exacerbated this situation: the report also found that World Bank programs designed to
increase rich countries’ private investment in developing country oil production instead drastically increased debt.
April 2021
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Structural Adjustment Programs
IMF structural adjustment force privatization of basic social services and
hiking prices on basic necessities such as food, water, and gas
Shah 13 [Shah, Anup. 03-24-2013, “Structural Adjustment—a Major Cause of Poverty,” Global
Issues, https://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty]
The US Treasury view was this was great as we wanted Yeltsin re-elected. We don’t care if it’s a corrupt election. (Emphasis added) Capital
market liberalization. According to Palast, Stiglitz describes the disastrous capital flows
that can ruin economies as being predictable, and says that when [the outflow of capital] happens, to
seduce speculators into returning a nation’s own capital funds, the IMF demands these
nations raise interest rates to 30%, 50% and 80%. Market-based pricing. Palast writes that it is at this
point that the IMF drags the gasping nation to this third points, described as a fancy term for
raising prices on food, water and cooking gas which, Palast continues, leads, predictably, to Step-Three-and-aHalf: what Stiglitz calls, The IMF riot. These riots, which the article clarifies are peaceful demonstrations
dispersed by bullets, tanks and teargas[sic], cause further capital outflows, a situation which, as
Palast points out, is not without a bright side: foreign corporations … can then pick off remaining assets,
such as the odd mining concession or port, at fire sale prices. Free trade. But a version dominated by rules of the World
Trade Organization and the World Bank, which according to Palast, Stiglitz likens to the Opium Wars: That too was about opening markets, he said.
Palast writes that As in the nineteenth century, Europeans and Americans today are kicking down barriers to sales in Asia, Latin American and Africa
while barricading our own markets against the Third World’s agriculture. (Note that while even President Bush will claim that we want rules based global
mechanisms, the mainstream media often does not ask what the rules themselves are, and whether they are most appropriate.) Palast highlights Stiglitz’s
problems with the
IMF/World Bank plans, plans that the article describes as devised in secrecy and
driven by an absolutist ideology: first, they are not open to discourse and dissent, and second, that
they don’t work. Palast writes that Under the guiding hand of IMF structural assistance
Africa's income dropped by 23%.
Stuctural Adjustment Programs (SAPs) force governments to cut back on
programs to help its citizens and force it to conform to western standards of
economic prosperities- furthering the poverty inside the indebted countries
Jubilee N.d. [Jubilee U., No Date, “How it All Began: Causes of the debt crisis,” S.A.
Network]
But their loans add to the debt burden and come with conditions. Governments have to agree to impose very
strict economic programs on their countries in order to reschedule their debts or borrow more money. These programs are
known as Structural Adjustment Programs (SAPs). SAPs have particularly affected the countries of sub-Saharan
Africa, whose economies are already the poorest in the world.SAPping the Poor SAPs consist of measures designed to
help a country repay its debts by earning more hard currency - increasing exports and decreasing imports. In a
few countries SAPs appear to have had some good effect; in most they have worsened the
economic situation. In all countries applying SAPs, the poor have been hit the hardest. In order to
obtain more foreign currency, governments implementing SAPs usually have to: spend less on
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health, education and social services - people pay for them or go without Devalue the national currency,
lowering export earnings and increasing import costs Cut back on food subsidies - so prices of essentials can soar in a matter of days
Cut jobs and wages for workers in government industries and services Encourage privatization of
public industries, including sale to foreign investors Take over small subsistence farms for large-scale export crop
farming instead of staple foods. So farmers are left with no land to grow their own food and few are employed on the large farms.
SAPS disproportionately harm the poor, children and gender minorities—
eliminate labor protection annd decrease wages. Historical IMF
mismanagement pushed 200 million people into poverty
Dooley 3 [Dooley, Michael P.; Frankel, Jeffrey A. January 2003, “Managing Currency
Crises in Emerging Markets,” University of Chicago Press,
https://www.nber.org/system/files/chapters/c9656/c9656.pdf]
Many SAPs
require changes in labor laws, such as eliminating collective bargaining laws and
lowering wages in order to provide conditions favorable to attracting foreign investors. The IMF's
mantra of "labor flexibility" permits corporations to fire at whim and move where wages are cheapest. According to the 1995 UN Trade and Development
Report, employers are using this extra "flexibility" in labor laws to shed workers, rather than create jobs. In
Haiti, the government was
told to eliminate a statute in their labor code that mandated increases in the minimum wage when
inflation exceeded 10%. By the end of 1997, Haiti's minimum wage was only $2.40 a day, just one-fifth of
the minimum wage in 1971 in real terms. Workers in the U.S. are also hurt by IMF policies by
having to compete with cheap, exploited labor. Two years ago, the IMF’s mismanagement of the Asian
financial crisis plunged South Korea, Indonesia, Thailand and other countries into deep
depression that led to the creation of 200 million "newly poor." The IMF advised countries to "export their way out of
the crisis." Consequently, the dumping of Asian steel in U.S. markets resulted in the layoffs of over 12,000
steelworkers. 7) The IMF's policies hurt women the most SAPs make it much more difficult for
women to meet their familiesí basic needs. When education costs rise due to user fees, girls are the first to be withdrawn from
schools. User fees in public health facilities make it unaffordable to those who need it most. The shift to
export agriculture also makes feeding one's family increasingly difficult. Women have also become more exploited in the
private sector workforce as regulations are rolled back and sweatshops abound. The general lack of
economic opportunity has meant an increase in prostitution and other black market jobs and
indentured servitude.
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Water Privatization
IMF makes water privatization a condition to getting a loan
Halifax 9 [05-29-2009, "Issue Brief: The World Bank and Water Privatization,” Halifax
Initiative, https://halifaxinitiative.org/content/issue-brief-world-bank-and-waterprivatization-march-2004]
Through private sector leveraging and structural adjustment (SAP) conditionality lending, the Bank and its sister institution, the
International Monetary Fund (IMF) play a decisive role in domestic water policy development. The standard prescription of structural
adjustment policies include: fiscal austerity (cutbacks to reduce budget deficits and create space for multinationals), privatization, deregulation, and trade liberalization. Both the World Bank and IMF
frequently make[s] water privatization
a requirement of structural adjustment loans and insist[s] on substantial reforms to
legal, regulatory and institutional structures to pave the way for water privatization.
These requirements then become conditions for any other loans.
IMF’s water privatization is a human rights issues disproportionately
harming those in poverty
Brettonwoods Project 18 [No Author, 12-06-2018, “IMF and World Bank’s support for
privatisation condemned by UN expert,” Brettonwoods Project,
https://www.brettonwoodsproject.org/2018/12/imf-and-world-banks-support-forprivatisation-condemned-by-un-expert/]
An October report by Philip Alston, the
UN special rapporteur on extreme poverty and human rights, on the effect of
aggressive promotion of it, arguing that widespread
privatisation of public goods in many societies is “systematically eliminating human rights
protections and further marginalising those living in poverty.” Following in the footsteps of numerous UN
reports, this report warned against a “tsunami of unchecked privatisation” that has transformed arguments for
fiscal deficit reduction into an ideology of governance that devalues public goods and services (see
Observer Spring 2017, Autumn 2017). The IMF and World Bank, it claims, are at the heart of this process.
privatisation on human rights, has heavily criticised the World Bank and IMF’s
IMF pushes privatization of water
Citizen 4 [No Author, May 2004, "IMF and World Bank Water Policies Undermine
Public Health,” Citizen, Water for All (WFA), https://www.citizen.org/wpcontent/uploads/imfandworldbankwaterpoliciesunderminepubhealth.pdf]
Rather than increasing funds for public water and sanitation services, IMF and World
Bank policies push full cost recovery and water privatization. Many World Bank structural
adjustment loans and water sector restructuring loans now require governments to replace public subsidy with a policy promoting "full
This means that water consumers must pay the full price
for operation and maintenance (and sometimes even expansion) of the water utility.
cost recovery" or "economic pricing."
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Increasing the price of water in developing countries, where the majority of the
population makes less than US$2 per day, reduces access to clean water. This is not
responsible public health policy.
Water privatization harms low income communities and drains them of
access to affordable water.
Citizen 11 [No Author, 2001, "V. IMF and World Bank Push Water Privatization and
Full Cost Recovery on Poor Countries", Citizen, https://www.citizen.org/wpcontent/uploads/migration/imf-wb_promote_privatization.pdf]
The IMF’s and World Bank’s drive to privatize and extract full cost recovery from water systems is
generating concerns worldwide about the potential for such policies to compromise public health and rob
low-income communities (which make up the majority of developing country populations) of access to affordable
water. The most immediate impact of reducing the access to safe and affordable water will fall on
women and children. More than five million people, most of the children, die every year from
illnesses caused from drinking unsafe water. As water becomes more costly and less accessible, women and children who
bear most of the burden of daily household chores must travel farther and work harder to collect water -- often resorting to water from polluted streams
and rivers. Families
are forced to make trade-offs between water, food, schooling, and health
care
Water privatization empirically increased the price of water 95 percent
Citizen 4 [No Author, May 2004, "IMF and World Bank Water Policies Undermine
Public Health,” Citizen, Water For All (WFA), https://www.citizen.org/wpcontent/uploads/imfandworldbankwaterpoliciesunderminepubhealth.pdf]
In developing countries, many people are outside the piped water system or cannot afford treated
water. Those who are outside the piped water system must depend upon costly tanker trucks or streams, rivers and lakes that may be
polluted. Those outside the piped water system already pay exorbitant fees for access to clean water. In Ghana, after IMF and
World Bank policies required a 95 percent raise in water fees in May 2001, three buckets of water cost a family
almost half of the minimum wage. In India, some poor households pay as much as 25 percent of their income
on water.
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AT Climate Change
Warming is inevitable – every existential catastrophe will be triggered –
adaptation and mitigation technologies are insufficient.
Hedges 17 [Hedges, Chris. 06-19-2017. “We Can’t Fight Climate Change if We Keep
Lying to Ourselves”; https://www.commondreams.org/views/2017/06/19/we-cant-fightclimate-change-if-we-keep-lying-ourselves]
We must embrace a despair that unflinchingly acknowledges the bleak future that will be created by
climate change. We must see in any act of resistance, even if it appears futile, a moral victory. African-Americans understand, in
a way perhaps only the oppressed can grasp, that our character and dignity will be measured by our ability to name and resist the
malignant forces that seem to hold us in a death grip. Catastrophic
climate change is inevitable. Our technology
and science will not save us. The future of humanity is now in peril. At best, we can mitigate the crisis. We
cannot avert it. We are fighting for our lives. If we do not rapidly build militant movements of sustained revolt, movements
willing to break the law and attack the structures of the corporate state, we will join the 99.9 percent of species that
have vanished since life first appeared on earth. “In these circumstances refusing to accept that we face a very
unpleasant future becomes perverse,” Clive Hamilton writes in “Requiem for a Species.” “Denial requires a willful misreading of the
science, a romantic view of the ability of political institutions to respond, or faith in divine intervention.” Tens
of millions of
human beings, especially in the global south, are being herded into the climate furnaces for
immolation. And we in the north are soon to follow. The earth’s temperature has already risen by
more than 1 degree Celsius since the late 19th century. And it is almost certain to rise a few more
degrees—even if we stop all carbon emissions today. The last time the earth’s temperature rose 4
degrees, the polar ice caps disappeared and the seas were hundreds of feet above their current
levels. “[Climate change] is interacting with two previously existing crises,” Christian Parenti, author of “Tropic of Chaos: Climate
Change and the New Geography of Violence,” told me in an interview. “On the one hand, the legacy of neoliberal economic
restructuring has weakened states in the global south so they don’t have the capacity to pave the roads, educate the population, to help
farmers who are in distress. On the other hand, much of the global south is littered with cheap weapons and veterans of previous
conflicts who know how to use those cheap weapons. In this comes the extreme weather of climate change. [In]
states that
have been systematically reduced to the point where they can’t respond even if they wanted to, how do
people adapt to climate change? How do they adapt to the drought and floods? Very often, you pick up surplus
weaponry. You go after your neighbor’s cattle. Or you blame it on your neighbor’s ideology or ethnicity. Underneath a lot of these
ethnic and religious conflicts we see there is a climate element.” “The great danger in climate change is that at
a certain point
[you will see] the collapse of natural ecosystems, the dying of tropical forests, which are
currently carbon sinks—they pull CO2 out of the atmosphere,” Parenti said. “But if they die and all that wood
burns or rots, they can become net emitters of greenhouse gases. There are the huge deposits of methane, frozen methane in the Arctic.
These are already beginning to come out.” “The fear is that at
a certain point we cross the line and there’s a tipping
point,” he said. “The primary cause of greenhouse gas emissions will become the breakdown of these
natural systems, and then it really is out of our control.” We have the technology to build alternative energy and
food systems, but the fossil fuel industry, the most powerful industry in the world, has blocked all
meaningful attempts to curb fossil fuel extraction and reduce energy consumption. And meat, dairy
and egg producers, responding to consumer demand, are responsible for the emission of more greenhouse
gases than the entire global transportation sector. Livestock generates enormous amounts of methane,
which is 86 times more destructive than CO2. Livestock also produces 65 percent of nitrous
oxide resulting from human activity, a gas that has 296 times the “Global Warming Potential” of
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carbon dioxide. The massive animal agriculture industry, like the fossil fuel industry, receives billions of dollars in subsidies
from the U.S. government. And corrupt and pliant politicians who do the bidding of these industries
receive millions in return from lobbyists. It is legalized bribery. And it won’t stop until this political system is
destroyed. The nonprofit Project Drawdown, which compiles research from an international coalition of scientists, says that “a plantbased diet may be the most effective way an individual can stop climate change.” Adopting such a diet should be our first act of revolt.
The second should be carrying out civil disobedience to disrupt the extraction of fossil fuels, along with massively reducing our
consumption of those fuels. The third, through mass mobilization, should be to overthrow the corporate state and nationalize the
energy sector, the banking industry, utilities and public transportation in addition to dismantling a war machine that in waging futile
and unwinnable wars consumes nearly half of all government expenditures. It is a lot to demand. But if we do not succeed, the
human race will disappear. Governments, if they were instruments of the common good, would end subsidies to the fossil
fuel and animal agriculture industries, retrofit government vehicles and buildings to use clean energy, ban the fossil fuel and animal
agriculture industries from public lands, end the externalization of the true costs of these industries, and impose taxes so heavy that
extraction of fossil fuels would be unprofitable and the purchase of animal food products economically unsustainable—just as those
foods are environmentally unsustainable. But with
state power being held captive by corporations, short-term
profit takes precedence over human health and even human survival. “The technology exists to strip
CO2 out of the atmosphere,” Parenti said. “The problem is it’s extremely expensive. And how do you store it? As
a gas, it can leak out. But it can also be turned into basically baking soda. But the costs are so expensive. So this technology
currently exists. It’s proprietary. Private companies are using it to facilitate further oil extraction. If
civilization was serious about survival, governments will seize or buy that technology. Make it open
source. And invest in whatever was necessary to strip CO2 out of the atmosphere artificially, along with [extraction by] plants and
forests etcetera.” Parenti stressed that collapse
will be defined not only by rising temperatures but a series of
social and infrastructure failures. It will be nonlinear. He noted that food prices, including the prices for basic
grains, surged shortly before the 2010-2013 uprisings known as the Arab Spring. “You had the Black Sea drought, affecting grain
harvest in Russia, Ukraine and Kazakhstan,” he said. “This ripples through world markets. Bread prices spike in Tunisia and Egypt.
People are out in the street protesting this mukhabarat [secret police] state they’ve lived in for 30 years. But it’s also about the price of
bread. That’s one way that a climate crisis appears. It doesn’t appear like a climate crisis at first. You
have to think about
the interconnections of the world economy.” The civil war in Syria was preceded in 2006 by the
worst drought in 900 years, as well as an austerity program that weakened government support systems. Farmlands
were transformed into arid dust bowls. Livestock perished. Food prices skyrocketed. Over 1.5 million
desperate people from the countryside fled to urban areas, many packing themselves into the shantytowns and slums set up by
refugees during the war in Iraq. And into the chaos walked Islamic State. The war, which has taken half a million lives, created 4.8
million refugees and internally displaced 7 million people in Syria. The
refugee crisis that resulted in Europe is the
worst since the end of World War II. The influx to Europe has empowered nationalist and
protofascist movements and touched off a rise in hate crimes. Climate change is the unseen hand
in unrest, social disintegration, chaos and war. “At one level, this is a war about ethnicity and religion and
opposing the foreign occupation,” Parenti said of the war in Afghanistan. “But on another level, this is about farmers who are dealing
with the worst drought in living memory, which is occasionally punctuated by extreme flooding, growing the only crop they can grow
in those conditions—[heroin] poppies. The poppy happens to use about one-fifth or one-sixth the amount of water that wheat and
other traditional Afghan crops use. So farmers have to grow poppy if they’re going to survive. Which side of the conflict will help
them do that? The Taliban. There are subtle and important interconnections to all ongoing conflicts.”
The 400 ppm threshold is irreversible.
Kahn ’16 ([Kahn, Brian (Senior Science Writer at Climate Central, former researcher at
the International Research Institute for Climate and Society, M.A. in Climate and Society
from Columbia University; 09-28-2016, “The world passes 400ppm carbon dioxide
threshold. Permanently,” The Guardian,
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95
https://www.theguardian.com/environment/2016/sep/28/the-world-passes-400ppmcarbon-dioxide-threshold-permanently]
In the centuries to come, history
books will likely look back on September 2016 as a major milestone for
the world’s climate. At a time when atmospheric carbon dioxide is usually at its minimum, the monthly value failed
to drop below 400 parts per million (ppm). That all but ensures that 2016 will be the year that carbon
dioxide officially passed the symbolic 400 ppm mark, never to return below it in our lifetimes, according to
scientists. Because carbon pollution has been increasing since the start of the industrial revolution and has shown no signs of abating,
it was more a question of “when” rather than “if” we would cross this threshold. The
inevitability doesn’t make it any
less significant, though. September is usually the month when carbon dioxide is at its lowest after a
summer of plants growing and sucking it up in the northern hemisphere. As fall wears on, those plants lose their leaves,
which in turn decompose, releasing the stored carbon dioxide back into the atmosphere. At Mauna Loa Observatory, the
world’s marquee site for monitoring carbon dioxide, there are signs that the process has begun but levels have
remained above 400 ppm. Since the industrial revolution, humans have been altering this process by
adding more carbon dioxide to the atmosphere than plants can take up. That’s driven carbon dioxide
levels higher and with it, global temperatures, along with a host of other climate change impacts.
“Is it possible that October 2016 will yield a lower monthly value than September and dip below 400 ppm? Almost impossible,” Ralph
Keeling, the scientist who runs the Scripps Institute for Oceanography’s carbon dioxide monitoring program, wrote in a blog post.
“Brief excursions toward lower values are still possible, but it already seems safe to conclude that we
won’t be seeing a
monthly value below 400 ppm this year – or ever again for the indefinite future.” We may get a day or two
reprieve in the next month, similar to August when Tropical Storm Madeline blew by Hawaii and knocked carbon dioxide below 400
ppm for a day. But otherwise, we’re
living in a 400 ppm world. Even if the world stopped emitting carbon
dioxide tomorrow, what has already put in the atmosphere will linger for many decades to come.
“At best (in that scenario), one might expect a balance in the near term and so CO2 levels probably wouldn’t change much – but
would start to fall off in a decade or so,” Gavin Schmidt, Nasa’s chief climate scientist, said in an email. “In my opinion, we
won’t
ever see a month below 400 ppm.” The carbon dioxide we’ve already committed to the atmosphere has
warmed the world about 1.8F since the start of the industrial revolution. This year, in addition to
marking the start of our new 400 ppm world, is also set to be the hottest year on record. The planet has edged
right up against the 1.5C (2.7F) warming threshold, a key metric in last year’s Paris climate agreement.
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AT Cryptocurrency
Delink. IMF not ready to regulate cryptocurrency—strict adherence to
neoliberalism makes it unable to adapt to cryptocurrency
Amand 18 [Amand, Samantha. 04-25-2018, “The IMF Isn't Ready to Lead Cryptocurrency
Regulation,” Cigio Online, https://www.cigionline.org/articles/imf-isnt-ready-leadcryptocurrency-regulation]
Although overshadowed by the ongoing international trade debacle, cryptocurrencies and the impact of new technologies on the economy and financial
system were a prominent theme at the 2018 Spring Meetings of the International Monetary Fund (IMF). The
IMF is trying to position
itself as the key international institution for facilitating cooperation on cryptocurrency regulation
and assisting with the adoption of blockchain technology. But the institution has not yet shown that it can be
innovative enough to effectively fill the knowledge gap of policy makers regarding new
technologies. When discussing cryptocurrencies, financial policy makers make an important distinction between the financial assets and the
underlying technology. Cryptocurrencies are financial assets that are generated and transferred through a decentralized network that is secured using
cryptography. This underlying technology — called distributed ledger technology or blockchain — is essentially a digital ledger on which transactions
are recorded. Policy makers agree that the regulation of some activities related to the use of cryptocurrencies is necessary. For example, there is no
tolerance for the use of cryptocurrencies (or any financial asset) to facilitate money laundering or the financing of terrorism and other illicit activity.
Regulators also agree that they have a role in protecting consumers by trying to identify and prevent fraudulent activity related to cryptocurrencies. On
these fronts, the Group of Twenty (G20) finance ministers and central bank governors have committed to supporting the development and
implementation of appropriate regulations. [ … ] This is where the IMF runs into hurdles. Certainly, with the Fund’s large constituency, it can cast a wide
net in facilitating international cooperation on cryptocurrencies policies. But
the IMF isn’t exactly known for providing
innovative policy advice — quite the opposite. The IMF’s history of strict adherence to neoliberal principles has given the impression that it is dogmatic in its advice. This perception is, however,
changing. The institution has made significant efforts to be more inclusive in its policy goals, while also tailoring its advice to the individual context and
circumstances of each country. Still, the
IMF is loaded with economists who are trained to analyze and identify
problems within a specific economic framework. These well-trained economists might not be well
equipped to understand how new technologies could change the way the economy functions.
IMF does not have the legal authority to regulate IMF because the IMF is
limited to countries that are signatories to the IMF whereas cryptocurrencies
are cross-national
Goldsmith 20 [Goldsmith, Jacob. 2020, “The IMF Must Develop Best Practices Before
Government-Backed Cryptocurrencies destabilize the International Monetary system,” Emory
International Law Review, https://law.emory.edu/eilr/content/volume-34/issue-2/comments/imfbest-practices-cryptocurrencies-international-monetary-system.html]
While not officially a regulatory agency, the
IMF is the closest thing to a regulatory agency of monetary policy
on the international stage. 243 The IMF is a cooperative fund which works with all 189-member countries, assessing their economic and
currency policies, while providing suggestions and undertaking studies, so as to accomplish its mission. 244 The primary goal of the IMF is to provide
stability to the international monetary system. 245 More specifically, one of the primary responsibilities of the IMF is to coordinate and maintain order in
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the international foreign exchange market. 246 The primary goal and responsibility of the IMF seems to parallel well with some of the issues presented
by private cryptocurrency. There
is just one problem: the authority of the IMF is limited to countries
which have signed onto the IMF Articles of Agreement. Private cryptocurrencies are, by their
nature, separate from countries. 247 Thus, while some commentators have tried, it is a stretch to
argue that the IMF could extend their authority to include oversight of private
cryptocurrencies. Moreover, even if the argument could be made in theoretical terms, the feasibility
of exercising such oversight is extremely low.
Turn. Government-backed cryptocurrencies which will threaten the stability
of the international monetary system such as the U.S. dollar
Goldsmith 20 [Goldsmith, Jacob. 2020, “The IMF Must Develop Best Practices Before
Government-Backed Cryptocurrencies destabilize the International Monetary system,” Emory
International Law Review, https://law.emory.edu/eilr/content/volume-34/issue-2/comments/imfbest-practices-cryptocurrencies-international-monetary-system.html]
Some of the primary concerns surrounding the related issues of price instability and lack of inherent value would seem to be addressed
merely by the backing of a stable government. 267 The truth is that concerns about price stability and stability of the international
monetary system remain, even with the blessing of governments and their central banks. 268 At least one high profile banker, Swiss
National Bank governing board member Andréa Maechler, has posited that
government-backed cryptocurrencies
still present the potential to inject instability into the global monetary system. 269
Government-backed cryptocurrency has the potential to cause enormous issues for the
international community, the most pressing of which is the threat to the stability of the
international monetary system. As mentioned above, one of the major issues with private cryptocurrencies is a lack of
stability, given the absence of inherent value in the coins. 270 This lack of inherent value, mixed with speculation
from investors and the relative uniqueness of the asset, have all contributed to price fluctuations
which make private cryptocurrencies impractical for daily use by the average consumer. 271 Such
impracticality would be unacceptable for government-backed cryptocurrency. As the IMF has discussed, central banks will prefer that
government-backed cryptocurrencies support, or at least do not undermine, the public policy goals of financial integrity, financial
stability, and monetary policy effectiveness. 272
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AT IMF prevents recessions
IMF is ineffective. Leads to liquidity problems hindering developing countries
ability to respond to international crisis.
Gentimir & Maria 12 [Gentimir, Irina-Elena; Ivan, Maria-Alexandra. 05-01-2012. “The
International Monetary Fund, Criticized. The International Monetary Fund Response to Critics,”
Danubius University, http://journals.univ-danubius.ro/index.php/eirp]
Jeffrey Sachs, economist and professor at Harvard University, is one of the critics of international financial organizations. He claims
that Western countries must devote more financial resources to programs against poverty. He adds that past
project failed
because US pressure to give money to allied governments, no matter that they were incompetent
or corrupt. Sachs emphasizes the growing influence of Wall Street bankers on these institutions. Many economists believe the
criticism is justified, but this does not give poor countries the right to set conditions and amount of loans. Also, it is normal for
the IMF to protect the bankers interests because, unprotected, they will not invest, which is
contrary to the interest of developing countries (Rogoff, 2003). The WB and IMF have both good and bad ideas. As
mentioned above, it can be deduced that more and more economists believe that the IMF is not needed (Hood, Kamery and Pitts,
2004). These statements are based on three arguments. First,
the IMF is institutionally unable to be an
effective so-called “last lender in case of emergency”. The IMF does not succeed in creating
valuable money and in reacting quickly enough to prevent liquidity crises. Also, the Fund lacks
information on insolvency and illiquidity of the banks. The IMF has not demonstrated
effectiveness in promoting economic policies necessary to avoid future crises. The IMF,
established for helping in the short term, evolved into an international economic consultant for
development, using loans to persuade developing countries governments to implement policies
that are in interest. However, the IMF has not shown effectiveness in this role. Differences in living
standards between rich and poor countries continued to grow. The power and the frequency of crisis deepened. Negotiations for
receiving the IMF loans take too long and threaten transformation of liquidity crises into one of
solvency.