In many countries, austerity is a hard sell.
Loans from the International Monetary Fund (IMF) can provide economic stabilization and financial support for developing countries - with conditions. Recipients typically need to restructure their economies, moving away from public sector services in the effort to foster market competition and private-sector business.
"The consensus was that they have to swallow a bitter pill, get away from socialism in their economies and become more capitalist, more private sector-oriented," explained Binghamton University Distinguished Professor of Political Science David Cingranelli, co-director of the University's Human Rights Institute.
In practice, that may mean ending public employment programs, bread subsidies or other measures intended to help the poor, even privatizing water systems - unpopular options for the public. The idea that IMF economic programs are sometimes welcomed by people living in less economically developed countries may be surprising.
Recent research offers a nuanced picture, showing that such reforms may be embraced in autocratic countries. "The role of IMF programs in aligning national economic policy with domestic preferences" was recently published in Socio-Economic Review. Lead author Rod Abouharb is a faculty member at University College London; co-authors include Bernhard Reinsberg of the University of Glasgow and Cingranelli.
Wealthier democracies, mostly in Europe and the United States, provide funding to the IMF, an organization of 191 member countries that provides policy advice, capacity development and financial assistance with the aim of achieving sustainable growth and prosperity. Countries can apply for loans through the IMF, with the goal of aligning their economies with the free market.
Program lending through the IMF has been a longstanding interest for Cingranelli. In 2007, he and former student M. Rodwan Abouharb, PhD '05, co-authored the book Human Rights and Structural Adjustment, which argued that IMF and World Bank programs were hurting people in the developing world. By forcing countries to accept economic policies that their citizens didn't want, the programs may spark political instability and undermine democracy. The book, in essence, focuses on the IMF as a "Bad Samaritan," encouraging societies to enact measures that make life more difficult for the common people.
However, countries that received IMF structural adjustment loans were more likely to be procedurally democratic, which countered their argument. Procedural democracy covers the right to vote, free speech and freedom of the press, not necessarily achieving the economic policies favored by the populace.
"That's why I got involved in this project almost 20 years later. I wanted to do a more careful empirical examination," Cingranelli said.
The end of an era?
In democracies, data show that citizens prefer greater protection from market forces than what is promoted by the IMF. In countries such as Greece and Kenya, IMF reforms have resulted in protests and public backlash.
However, citizens in autocracies such as Venezuela and Zimbabwe desire greater economic freedom and market liberalization than the government typically allows, according to surveys. In these cases, IMF lending tends to narrow the gap between what the public wants and what the government delivers, operating as a Good Samaritan.
Examples include Eastern European countries formerly under Soviet control; populations there hungered for more capitalism and free enterprise, in line with IMF goals.
"The IMF plays a Good Samaritan role in some countries that has been widely ignored in more ideological scholarship - including my own," Cingranelli acknowledged.
The researchers are currently working on a second article that focuses on the experience of particular countries.
Overall, the further an autocratic country departs from a private sector role in the economy, the more likely its populace will support IMF-driven policies. However, there is little evidence that economic reforms ultimately lead to more democracy, although democratic countries are more likely to receive IMF loans.
It's a complex situation. Take the case of Argentina, which has received IMF funding when it was ruled by the military and also as a democratic state. The country's current president, Javier Milei, is strongly in favor of diminishing the role of the public sector in the economy.
"Authoritarian leaders are more willing to do the unpopular things the IMF wants, whereas democratic leaders are not," Cingranelli said. "But sometimes it does happen that you get a democratically elected person who believes in what the IMF is pushing. Sometimes it's because the government swung too far in the other direction in previous decades."
Cingranelli acknowledged that this research ultimately may be historical; international institutions such as the IMF and World Bank are currently under attack, and their future role in the developing world is uncertain.
Both were created with the formation of the United Nations after the end of World War II, with the intention of making aid of this type driven by merit and principle rather than politics. The Trump administration's direct gift of $40 billion in aid to Argentina counters this goal, making funding a matter of personal alliance and approval. The United States is currently the largest financial contributor to the IMF, and its withdrawal from the program would have significant consequences.
"If the United States significantly reduces its contributions to the International Monetary Fund, the IMF will become less relevant," Cingranelli said.
