Poverty, Inequality, and The International Monetary Fund: How Austerity Hurts The Poor and Widens Inequality, 2021-2024

Among the drivers of socio-economic development, this study focuses on an important yet insufficiently understood international-level determinant: the spread of austerity policies to the developing world by the International Monetary Fund (IMF). In offering loans to developing countries in exchange for policy reforms, the IMF typically sets the fiscal parameters within which development occurs. Using an original dataset of IMF-mandated austerity targets, we examine how policy reforms prescribed in IMF programs affect inequality and poverty. Our empirical analyses span a panel of up to 79 countries for the period 2002–2018. Using instrumentation techniques, we control for the possibility that these relationships are driven by the IMF imposing harsher austerity measures precisely in countries with more problematic economies. Our findings show that stricter austerity is associated with greater income inequality for up to two years, and that this effect is driven by concentrating income to the top 10% of earners while all other deciles lose out. We also find that stricter austerity is associated with higher poverty headcounts and poverty gaps. Taken together, our findings suggest that the IMF neglects the multiple ways its own policy advice contributed to social inequity in the developing world.

Intergovernmental organisations (IGOs) are key actors in the spread of ideas, relying on their widely held legitimacy to influence policymakers around the world through a combination of coercion and persuasion. They devise rules and norms on issues as diverse as economic policy, health security, and environmental protection. Given the profound influence IGOs have on domestic policy decisions, the ideas these bodies represent are at the centre of current policy debates. Nonetheless, despite persistent academic attention, the avenues through which ideas travel from IGOs to domestic policymakers remain insufficiently understood. How do these ideas diffuse, where and when are these ideas implemented, and why do ideas become embedded in some countries but not others? This project will be among the first to systematically examine the activities of IGO technical assistance missions. The three core research questions are: 1. Why do IGOs provide technical assistance? 2. How does IGO technical assistance spread ideas to domestic officials? 3. What effect does IGO technical assistance have on domestic policy? To answer these questions, this project draws on recent theoretical advances in international relations and policy studies. The focus of the empirical research will be the IGO underpinning the world economic order: the International Monetary Fund (IMF), a central hub of knowledge on issues of key concern to developing countries, like fiscal and financial sector policies. The IMF presents a 'strategic research site', offering a unique analytical lens into the spread of policy norms to countries across the globe. The centrality of the organisation in global economic governance makes it a prime candidate for developing theoretical contributions that will be relevant to scholars across the social sciences. The analysis will scrutinise the inner workings of IMF technical assistance activities, which account for one-quarter of the organisation's operating budget and is provided free-of-charge to requesting member countries. To study this phenomenon, the project will create a dataset of IMF technical assistance that systematizes information on all activities between 1990 and 2019, to be analysed using advanced quantitative methods. The project will also generate in-depth case studies of two frequent recipients of technical assistance-Kenya and Rwanda-by employing qualitative analyses of interviews with domestic officials and IMF staff. The research findings will contribute to academic debates on the diffusion of policy ideas by IGOs, and to policy debates on how to reform global governance. What is at stake? IGOs typically court controversy because of the more conspicuous formal compliance mechanisms at their disposal-like the policy reforms governments must implement to obtain access to loans from international financial institutions. But profound influence is also exerted quietly in the background in providing domestic policymakers with routine technical assistance. These commonplace acts of persuasion are hidden from public scrutiny, and global governance institutions have been unaccountable for them. Consequently, this project aspires to lay the foundations for evidence-based policy debates on how IGOs provide technical assistance in order to increase public oversight and accountability for their actions. The project is designed with a view to maximise impact for three groups of beneficiaries: academics, policymakers, and civil society. To effectively reach academic beneficiaries, the project will rely on academic articles, a book, conference organisation and attendance, and a reading group. To achieve non-academic impact, the project will rely on policy briefs, an interactive website, and pieces in popular media. To meet these objectives, the project will also draw on its Expert Advisory Board, and the institutional support of Royal Holloway's Department of Politics and International Relations.