The IMF & inequality

IMF official: the new direction ‘breaks one of the ten truths that all economists know’.
Alex Nunn & Paul White

Has the International Monetary Fund’s (IMF) recent high level commitment to reducing inequality translated into concrete action in its dealings with member states? Addressing this research question is significant in several respects.

First, the high level rhetorical commitment to reduce inequality might be seen as paradoxical because the IMF, alongside other institutions of global economic management, has long been criticised for its role in promoting economic reform in member countries, partly on the basis that this increases inequality. It is therefore important to assess the extent to which recent pronouncements on inequality by the Fund suggest a change in emphasis or a genuine institutional commitment.

Second, addressing the question contributes to a contemporary literature on more technical aspects of how we should understand and interpret IMF policy advice and conditionality. This literature currently focusses on a range of aspects of IMF policy advice, but does not address the recent interest of the Fund in inequality. The paper addresses this lacuna.

Our focus on inequality complements several strands of investigation in the existing literature on the IMF, particularly a variety of recent studies which assess the extent to which the Fund’s practice and ideas have shifted since the financial crisis that started in 2007. Much of this existing research focuses on fiscal and financial policy. Our focus is in some ways broader; seeking to locate IMF practice not just in the post-crisis context but in the deeper historical process of world market expansion. It is also in some ways more specific: studying IMF policy and practice specifically in relation to income and wealth inequality within countries.

We argue that there is evidence of change in the orientation of the IMF but that this has not fully percolated down into IMF practice in relation to the policy advice it dispenses to its member states. Similar to Kentikelenis et al. in relation to labour and social protection issues, we find that there is evidence that the IMF’s commitment to inequality 'reflects more "talk" than "walk’”.

The paper proceeds in the following way. The first section reviews and contextualises the IMF’s recent statements on inequality as one of several notable institutions to take up this concern. It is suggested that one possible explanation for this is that these international organisations are engaged increasingly in risk management; focussed on their shared agenda of promoting and sustaining world market integration. In that context, increasing inequality is now being seen, not merely as an unfortunate consequence of that shared agenda, but as a risk to it.

The second section reviews the recent literature focussing more specifically on IMF policy advice, drawing from that a series of more detailed ways in which the central research question for the paper might be addressed. The empirical strategies found in some of this literature are used to shape the way in which data is collected and interpreted.

The third section briefly summarises the empirical data collection and analysis process undertaken.

The fourth section presents the results of this multi-stage process to chart the IMF’s commitment to reduce inequality. It includes a review of high level policy documents and speeches, recent changes to the operational guidance that shapes the work of IMF staff and an analysis of the changing policy advice that the IMF officially offers to its member states. The consistency (or lack of it) of the IMF’s commitment to reducing inequality – in its own terms – through these different institutional scales is then used to answer the central empirical research question.

The final section of the paper discusses how these empirical findings may be interpreted as a contribution to the broader ‘Critical’ International Political Economy (IPE) literature and suggests avenues for further research.

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Journal of Australian Political Economy

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