Books

The IMF and Economic Development

Why do governments turn to the International Monetary Fund (IMF) and with what effects? Vreeland examines this question by analyzing cross-national time-series data from throughout the world. He argues that governments enter into IMF programs for economic and political reasons, and finds that programs hurt economic growth and redistribute income upward. By bringing in the IMF, governments gain political leverage - via conditionality - to push through unpopular policies. For certain constituencies, these policies dampen the effects of bad economic performance by redistributing income. But IMF programs doubly hurt others who are less well off: They lower growth and exacerbate income inequality.

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The International Monetary Fund: Politics of Conditional Lending

The International Monetary Fund is a powerful international institution. Founded in the aftermath of World War II, its basic purposes were to facilitate world trade and promote national prosperity. The founders hoped that never again would the world experience the trade policies that led up to the Great Depression. Soon after its inception, the IMF became involved with developing countries. Over the course of the past 50 years, this involvement has grown so that most developing countries have participated in its programs of economic reform. These “IMF programs” grant governments access to loans, but this access can be swiftly cut off if the governments fail to comply with specific policy conditions. IMF conditional lending impacts the lives of individuals in intimate ways. The policy conditions address government expenditures, so IMF programs help determine whether roads, schools, or debt repayment take priority. By addressing interest rates and currency valuation, IMF programs may even impact the very purchasing power of the money in people’s pockets. Unfortunately, in terms of economic development, there is scant evidence of the success of IMF conditional lending.

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