1. Why does the IMF assign labor conditions? The Burden of Adjustment, Exchange Rate Regimes, and Labor Conditions
- Author:
- Saliha Metinsoy
- Publication Date:
- 09-2019
- Content Type:
- Working Paper
- Institution:
- Centre for Global Political Economy, University of Sussex
- Abstract:
- Why does the International Monetary Fund (IMF) assign more stringent labor conditions in some cases and not others? This paper argues that the Fund’s bureaucratic organizational culture and neoliberal economic beliefs dictate its interpretation of international economics and predict the stringency of labor conditions in its programs. Particularly, the Fund staff envisage that lower unit labor costs would indirectly increase competitiveness, boost exports, and contribute to the balance of payments in fixed exchange rate regimes, where currency depreciation is not possible. To this end, the Fund assigns more stringent labor conditions in fixed regimes compared to floating ones. To test this theory, the paper uses a mixed method. It firstly demonstrates the association between exchange rate regimes and the stringency of labor conditions in Fund programs in a global sample. It then complements this analysis by showing particular organizational habits and beliefs at work in two cases, namely in Latvia and Hungary in 2008 under their respective IMF programs. Furthermore, the paper shows that distribution of income away from labor groups (i.e. lowered wages) is in fact by design in IMF programs in an attempt to increase competitiveness in fixed regimes.
- Topic:
- Economics, International Monetary Fund, International Development, and Neoliberalism
- Political Geography:
- Europe, Eastern Europe, Hungary, and Latvia