IMF Part 3: Research Design
This is the final component of my 3 part assignment on the IMF.
You can read part 1 here
You can read part 2 here
The purpose of this research design is threefold. First, it will review the extensive body of academic literature on the International Monetary Fund (IMF), including a brief provision of context based on my previous research. The IMF's role in facilitating debt relief and economic reforms will be outlined, paying attention specifically to the role of the IMF in achieving its stated goals of assisting nations experiencing balance of payment problems. The literature review will also examine the IMF's role in facilitating or interrupting domestic democratic processes, and related concepts of its democratic deficit and lack of transparency, and its role in culture and identity, sovereignty, and human security. This will be situated within a context of globalization and the changing nature of the state. Further, this research design will develop a research question and hypothesis based on and situated within the current academic context. Finally, it will prepare a fieldwork component to a future research project in order to answer the questions raised by other scholars'
work. By doing so, this paper will contribute to a growing body of literature on one of the most influential institutions of the globalized world, the IMF.
[continued after the jump, or click on title to view full article]
This paper will begin by examining some of the available research on the IMF, drawing upon previous work on the topic as a guiding framework. A summary of past research explains the role of the IMF as
threefold; to provide surveillance of economic and financial policies, to offer technical training, and to provide financing to nations experiencing balance of payment problems, often at low interest (IMF,
2006). The IMF is a truly global institution operating on six continents simultaneously and in real time, attempting to foresee and forestall the economic crises that result from reduced capital
controls in a global market (ibid.). While it is a powerful global actor that maintains relations with other non-state institutions and offers macroregional policy advice, it is still primarily a state-focused mechanism. This discussion sets the stage for a more rigorous investigation into the responses to, outcomes of, and motivations behind the IMF.
Despite its emphasis on poverty reduction, the IMF is a contentious institution. It has been the subject of massive street protests (Bruner, 2003; Scholte, 2005) from the so-called anti-globalization movement, a disparate group united by the feeling that the IMF represents a threat. It has been contested for its emphasis on neo-liberal policies, especially its emphasis on 'privatization of state held assets' (Bruner, 2003:694), as well as its use of structural adjustment programs which require an often radical transformation of a state's 'financial, legal, and corporate infrastructures' (ibid.). Most unpopular, austerity programs and
shock therapies have often had chaotic outcomes for citizens living through wildly fluctuating prices, a sharp reduction in government services, and reduced wages (Bruner, 2003; Klein, 2008). However, the opposition to the IMF has changed significantly in the wake of the twin tower attacks of 2001. A growing focus on security has, in the words of Bruner (2003), 'turned the prevailing world order into a dichotomy between 'economic liberalization' and 'terrorism'' (698), wherein domestic resistance to IMF policies, and neo-liberal
globalization more generally, have been increasingly branded as homegrown terrorism. This has helped to divorce the decision making process for the IMF, a supposedly global governance regime, from input
from civil society.
A major criticism of the IMF found both in the research and from protest groups is its lack of transparency. According to Manfred Steger, as quoted in Bruner (2003), the IMF is engaged in a 'rhetoric
of reform' (702) while continuing to conduct business as usual. Others have concluded that there is an 'inherent tension between conditions imposed by an outside lender and the cardinal democratic
principle of consent' (Kapur and Naim, 2005:90). This tension places the wishes of the polity in opposition to the conditionalities of the IMF, with the state serving as a moderator. Yet the state is often experiencing duress at this point, and weaker or poorer states may 'have nowhere else to turn' (Kapur and Naim, 2005:94), and so the wishes of its citizens may be swept aside in the interest of simply keeping the state and its finances afloat. This type of democratic deficit would be condemned at the national level, yet it is embraced by commentators as 'tough love' (Reguly, 2010).
In addition to the IMF's democratic deficit, it also has an impact on the democratic process of recipient nations. Once the terms of refinance are hammered out, conditionalities see the IMF 'mixing sticks ... and carrots' (Wei and Zhang, 2010) in order to convince nations to adopt unpopular or unwanted policies in exchange for badly needed financing. This places the recipient nation's government in a delicate situation, where popular promises to its citizens may have to be broken, leading 'voters [to become] more cynical about political leaders and the connection between elections and public policies' (Kapur and Naim, 2005:94). Even if no changes of direction are occasioned, austerity measures and other conditionalities may have 'enormous short-term political costs' (Kapur and Naim, 2005:95).
While the IMF has often been attributed with so called democracy building, research has found that the terms of its programs are too short for such an ambitious project, and the in fact that efforts to 'speed up democratic development achieve little and may even slow the rise of prodemocratic dynamics' (Kapur and Naim, 2005:90). In a world where international governance is newly coming to supplant the centrality of states, such short sighted and potentially harmful approaches should be judged critically.
The majority of the research done on the IMF has focused on the ways in which its policies have harmed or helped nations that have received assistance. Certain researchers (Wei and Zhang, 2010) have operated
within a framework that assumes that the goals of the IMF are inherently good, and have sought out to prove their relative effectiveness. They have worked to identify variables, such as a recipient nation's perceived 'willingness to reform' (ibid.) as being central to the efficacy of structural adjustment programs. However,
this research tends to be narrower in scope, making it a less valuable indicator of the IMF's true performance, and thus a more nuanced approach is needed.
Other researchers have taken a more mixed view of the IMF's policies, noting that while certain nations have benefited from assistance, others have experienced 'a period of failed, half-hearted, or non-existent reforms' (Kramer, 199:16). This group of scholars posits that while the IMF is generally well intentioned, it can have unintended negative consequences, either due to mission creep, an unclear mandate, or a lack of expertise or public consultation (Bradlow and Grossman, 1995; Bird, 2009). Some studies have shown
that the IMF's structural adjustment programs coincide with a higher incidence of infant mortality rates (Mukherjee, 2008), but this is perhaps dependent on factors such as whether the recipient nation has
a robust democracy or is more autocratic in nature. Still other authors in this group claim that policy rigidity at the IMF can lead to prescriptive approaches which work well for certain nations, but perform less well in others (Abbott, Anderson, and Tarp, 2010). Authors in this group generally perceive the IMF as a vital
institution on the global stage, but one that is in need of reform.
Still others have taken a more critical stance in examining the IMF, pointing out the ways in which it can interfere with the domestic democratic process of a nation (Kapur and Naim, 2005; Chossudovsky,
1998). Critics have also focused on the all too real human cost of a nation's involvement with the IMF, for example by highlighting the direct connection between the organization's insistence that India phase out fertilizer subsidies, and a subsequent increase in poverty and death (Chossudovsky, 1998). Others, while not as graphic in their examples, have shown the IMF to be a tool of oppression utilized by the international capitalist class to force open markets and trap whole regions in a spiral of dependency (Klein, 2008). Other analysis has tended to be critical specifically of the IMF's prescriptions, finding that they have recommended the very policies which in turn make a nation more likely to need IMF assistance (Bird, 2009). While
this might be for a variety of reasons, there is evidence that receiving IMF assistance makes it increasingly likely that a nation will take part in an IMF program in the future (Dreher, 2010). These criticisms of the IMF begin to ask the question of why a nation would even engage with such an institution to begin with.
The research perhaps responds to this question by noting that US and certain other Western nations have an undue influence over the actions of the IMF and the policies it endorses (Kramer, 1999; Thacker, 1999).
This particular view is supported by the fact that the voting mechanisms are based on the financial contributions of member states, rather than either a one country, one vote system or even one based on
relative populations (Kapur and Naim, 2005). Other theorists have noted that the IMF is unduly influenced, not by the economic situation of a particular nation, or the needs of its populace, but by largely western-influenced notions of geopolitical importance (Reynaud and Vauday, 2009; Thacker, 1999). Furthermore, there is evidence that the IMF is more willing to provide loans, with fewer contingent requirements, to temporary members of the United Nations Security Council (UNSC). This suggests that temporary members are coerced into voting in ways favourable to the US (and its allies) in exchange for more loans, or those with fewer strings attached (Dreher Sturm, and Vreeland, 2009).
To provide a deeper context, it is important to link the subject matter with an overarching theme of globalization. As mentioned above, the IMF is a global institution with an often macro-regional focus. This is necessary, since the process of globalization and its concomitant interconnection of markets and economies has meant that the crises which the IMF attempts to prevent are more unstable and much less contained by state borders (Scholte, 2005). The present recession has caused individuals, communities, theorists and nations to re-examine the present system of neo-liberal policies, helping to break through the wall of docility that has prevailed since 9/11. This has been exasperated by the fact that globalization has increasingly linked a far-flung international capitalist class, distinct from the majority of the world’s workers and with opposing
goals (Klein, 2008). There is also renewed talk of how a weakened US currency may be supplanted by the IMF's own currency (Yanjiu, 2009). Indeed, this currency, the Special Drawing Right (SDR), is a microcosm of the globalization process, one that is supraterritorial and based on a global basket (IMF, 2006), including the Euro which is itself a macro-regional currency (Scholte, 2005).
The process of globalization is also to be seen in identity and culture, and IMF assistance is deeply tied to this as well, coming as it often does at the expense of hard-won social welfare programs (Klein, 2008), often a vital component of national identity (an example being Canadians' identification with their public health
care). Further, as more people increasingly see themselves as citizen of the world, as part of a “global village” (Scholte, 2005), this identity makes them question the fairness of resource distribution, and the lack of human security which the IMF so poorly addresses.
In addition to both economic and identity issues, the IMF is related to democracy, or the lack thereof, in many parts of the developing world. As an international economic governance body, it is surprisingly unaccountable, nontransparent, and inaccessible, in ways already discussed. Besides its internal democratic deficit, or perhaps because of it, the IMF's involvement with a nation interferes with the development of a healthy democratic process (Kapur and Naim, 2005). Based on the Immanuel Kant’s democratic peace thesis, later furthered by Michael Doyle, interfering with a nation’s democracy could threaten human security by increasing the likelihood of both inter- and intrastate conflict (Baylis, Smith, and Owens, 2008). In a
more globalized world, where civil and military strife can quickly become regional conflict (ibid.), this effect of the IMF is highly objectionable. These processes, on the axes of global macroeconomics, culture and identity, and democracy and security, have all shown the interactional nature of the IMF and the globalization process.
The chilling effect on democracy and security also relates the IMF to the notion of the state. As globalization has intensified, the state has seen many of its traditional roles challenged or superseded, as
seen within the IMF's surveillance, training, and lending roles (IMF, 2006). Far from disappearing, however, the state has altered its roles (Scholte, 2005). It pays increasing attention to issues of security, border control, and immigration, particularly in the wake of 9/11. This securitization has highlighted the dichotomous nature of
the globalization process, wherein the transfer of goods, services, information and ideas through and between borders has increased exponentially, while the movement of people as both citizens and labour has not (Scholte, 2005). By chilling the democratic process within states, this increases the likelihood of conflict and war, in turn promoting a further tightening of borders as a fearful expression of sovereignty.
Furthermore, as already show, the state has questionable agency in its interactions with the IMF. The adoption of policies without choice violates traditional notions of state sovereignty. Further, the IMF’s
actions have been shown to benefit multinational corporations and major lending institutions, often more than nations themselves (Babbie, 2007), proving the increasing power and influence of non-state actors. This also suggests that the IMF, a non-state actor itself, is less concerned with states than serving the interests of other non-state actors, leaving states a distant consideration in the process. The combination of the changing nature of the state and its relative decline in importance shows how the IMF represents a potentially worrisome threat to the state as an institution.
To summarize the literature review section of this research design paper, the IMF is a contentious organization with an ever-changing and expanding mandate. It has a complex relationship to wider
geopolitical events, such that in the current climate of anti-terrorist security rhetoric it has become largely unassailable and inaccessible by civil society groups. Further, the IMF is an institution which espouses the virtues of transparency for its member nations, while remaining largely inscrutable in its decision making
process. What evidence has become known suggests that its policy recommendations are as often harmful as they are helpful, and that its involvement with a nation may decrease quality of life for citizens and increase the likelihood of future dependence on IMF programs. The conditionalities the IMF imposes have been termed inflexible and arbitrary at best, and at worst a form of coercion to help the US and its allies achieve geopolitical policy objectives. Further, these structural adjustment policies are often politically unpopular,
leading to unstable governments and unhappy citizens with a reduced confidence in the democratic accountability process.
Based on the complex but overall gloomy picture of the IMF that has emerged from the academic literature, this paper will now formulate a research question and hypothesis, before conceptualizing and
operationalizing a research design. While hinted at in the above research, there appears to be a gap related to assessing the motivational factors which cause a particular nation to seek out or accept IMF assistance and the attached conditionalities. This is an important area of research in understanding how an institution with
such a questionable record of accomplishment can continue to be not only regarded as legitimate, but also sought out in times of duress. Successfully answering it may help to address concerns about the IMF's
impact on democracy, its status as a vehicle for purchasing UNSC votes, and its ability to help nations retain the full extent of their sovereign decision making process even in light of a crisis. This may
be done by suggesting reforms for the IMF to pursue, or by outlining the structure and mandate of an entirely new organization in its wake.
Along this vein, the research question which needs to be answered is what factors contribute to a nation's government seeking out IMF assistance and accepting the conditionalities involved. This is a complex issue, and results in numerous hypotheses to be tested. It will examine a number of involved factors, including pressure from bilateral trading partners as well as the international political and investment communities, faith in the effectiveness of the IMF as a source of stabilizing policies and as a signifier to the wider financial community of the soundness of a nation's economic policy, and domestic reformist pressure brought by investors and the corporate sector. The main hypothesis is that, in addition to these factors, the most inescapable and insurmountable reason for accepting the IMF's terms is the immediate inability to meet balance of payment responsibilities brought on by the highly mobile nature of capital in the globalized market and delivered via currency attacks. This has been summed up by Naim and Kapur (2005:13) when they reported an agent of Argentina admitted that the IMF's program was 'not really what Argentina wanted, but [it] had been forced on the country as there was no further access to credit'. This is a statement which begs further elucidation, and sets the tone for the type of research to be done.
Primarily the research will be comprised of one-on-one interviews with central bank ministers and heads of state of all nations having received IMF support since 1990. These interviews will be semi-structured, in order to both provide direction for questions probing the motivations behind seeking and accepting IMF support, and to allow for the richness of qualitative response (Babbie, 2007). The questions will seek to elicit respondents' opinions of their interactions with the IMF, and the benefits or drawbacks for their nation's democratic process, economic situation, identity and culture, and sovereignty. They will also seek to differentiate domestic motivations for IMF involvement (such as economic instability) from external ones (such as international pressure). Finally, an emphasis will be placed on respondents' assessment of alternative courses of action – did they feel there were other avenues to address their issues, or did they feel there was no other choice but to accept IMF assistance and conditionalities. There will also be an examination of
whether the IMF's recent emphasis on national ownership of terms has influenced respondents' perceptions of conditionalities. By conducting such intimate interviews, this program will be able to deduce the structure and motivation of the IMF assistance process from within the government of nations receiving support, in a way that information from the IMF itself could not. The main hypothesis is that respondents will feel that there was in fact no other option than to involve with the IMF and accept their conditionalities, and that the recent emphasis on ownership has had a negligible impact on perceptions of alternatives or the palatability of terms. Future research will build off this design by cross-referencing findings with a review of IMF policy documents, and though both unlikely and unethical, participant observation at the highest echelons of IMF
administration would provide invaluable information on decision-making and policy formation.
In conclusion, based on the wide body of literature surveyed, the IMF’s claims to be assisting nations is dubious. This has been shown in light of its effects on economics, identity and culture, and democracy and security. Based on the IMF’s importance to the changing character and ongoing development of the institution of the state, and in light of the increasing interconnectedness and velocity of globalization, there is a great need to further the research as regards the level of agency states retain in interactions with the IMF. This research program has set out the form of a study to be undertaken, in the hopes that the IMF may be reformed or supplanted.
References
Abbott, P., Anderson, T. B., & Tarp, F. (2010). IMF and economic reform in developing countries. Quarterly Review of Economics and Finance, 50(1), 17-26.
Babbie, Earl. (2007). The practice of social research (11th ed.). California: Thomson Wadsworth.
Baylis, J., Smith, S., & Owens, P. (2008). The globalization of world
politics: An introduction to international relations (4th ed.). New York: Oxford University Press.
Bird, G. (2009). Exchange rate regimes in developing and emerging economies and the incidence of IMF programs. World Development, 37(12), 1839-1848.
Bradlow, D. D., & Grossman, C. (1995). Limited mandates and intertwined problems: A new challenge for the World Bank and the IMF. Human Rights Quarterly, 17(3), 411-442.
Bruner, M. L. (2003). Global governance and the critical public. Rhetoric and public affairs, 6(4), 687- 708.
Chossudovsky, M. (1998). Global poverty in the late 20th century. Journal of International Affairs (52).
Dreher, A. (2010). Does the IMF help or hurt? The effect of IMF programs on the likelihood and outcome of currency crises. World Development, 38(1), 1-18.
Dreher, A., Sturm, J., & Vreeland, J. R. (2009). Global horse trading: IMF loans for votes in the United Nations Security Council. European Economic Review, 53(7), 742-757.
International Monetary Fund (IMF). (2006). What is the IMF? Retrieved March 6, 2010, from http://www.imf.org/external/
Kapur, D., & Naim, M. (2005). The IMF and democratic governance. Journal of Democracy, 16(1), 89-102
Klein, N. (2008). The shock doctrine: The rise of disaster capitalism. Toronto: Random House.
Kramer, M. (1999). The changing economic complexion of Eastern Europe and Russia: Results and lessons of the 1990s. SAIS Review, 19(2), 16-45.
Mukherjee, B. (2008). International economic organizations and economic development: An assessment. SAIS Review, 28(2), 123-137.
Reguly, E. (2010, March 12). IMF's fiscal tough love the best option for Greece: Perhaps it's time to stop the rot in euro zone by severing the Greek limb. The Globe and Mail. Retrieved from http://www.theglobeandmail.
Reynaud, J., & Vauday J. (2009). Geopolitics and international organizations: An empirical study on IMF facilities. Journal of Development Economics, 89(1), 139-162.
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