A Fate Worse Than Debt? International Financial Institutions and Human Rights, 1981—2003
| Date | 01 July 2009 |
| Published date | 01 July 2009 |
| DOI | 10.1177/0022343309334578 |
| Subject Matter | Articles |
485
© The Author(s), 2009. Reprints and permissions:
http://www.sagepub.co.uk/journalsPermissions.nav,
vol. 46, no. 4, 2009, pp. 485 –503
Sage Publications (Los Angeles, London, New Delhi,
Singapore and Washington DC) http://jpr.sagepub.com
DOI 10.1177/0022343309334578
A Fate Worse Than Debt? International Financial
Institutions and Human Rights, 1981–2003*
SILJA ERIKSEN
Department of Sociology and Political Science, Norwegian University
of Science and Technology (NTNU)
INDRA DE SOYSA
Department of Sociology and Political Science, Norwegian University
of Science and Technology (NTNU); and Centre for the Study of Civil War,
International Peace Research Institute, Oslo (PRIO)
Some report that human rights are likely to be violated when poor countries sign up to structural
adjustment programmes (SAPs). These violations apparently occur because ordinary people revolt against
the neo-liberal policies that SAPs push. This study examines the effect of the actual flow of finances from
the World Bank and the IMF, holding constant all other bank-based financial flows, on government
respect for human rights. The authors find that pay-in periods are beneficial for human rights, whereas
loan dry-ups correlate with violations. Loan dry-ups are likely to occur because of noncompliance with
SAPs rather than implementation, since the international financial institutions (IFIs) release loans in
tranches to solve the time inconsistency problem. The overall level of indebtedness is robustly related to
human rights abuses, but the higher the stock of debt owed to IFIs relative to total debt, the lower the
human rights violations. Accumulating debt to IFIs, thus, seems to improve the level of human rights.
Additionally, a higher government consumption to GDP ratio reduces human rights, a result that does
not suggest that governments that are capable of commanding a higher share of the country’s wealth
are less likely to face threatening social dissent. Moreover, a proxy for neo-liberal policies, the index of
economic freedom, correlates strongly with better human rights. These results do not square well with
the view that neo-liberal policy reforms and the attendant austerity measures drive dangerous dissent.
Introduction
The International Monetary Fund (IMF)
and the World Bank are severely castigated
within public, academic and policy circles
for contributing to human rights violations
by pushing onerous conditionality on poor
countries (Blustein, 2005; George, 1988;
Milner, 2005; Stiglitz, 2002; Wade, 2006;
Woods, 2006).1 Some scholars suggest that
* We thank Thomas Oatley, Ola Listhaug, Paul Midford
and several anonymous referees for comments and sugges-
tions on an earlier version of this article. Only we are to
blame for errors. We are particularly grateful to Rodwan
Abouharb for generously sharing data. The replication data
are available at http://www.prio.no/jpr/datasets. The statis-
tical software package STATA v10 was used in all analyses.
Corresponding author: indra.de.soysa@svt.ntnu.no.
1 This study will refer collectively to the International
Monetary Fund (IMF), the International Bank for
Reconstruction and Development (IBRD), the Inter-
national Development Association (IDA), the Regional
Development Banks (RDBs) and ‘other’ loan-giving finan-
cial institutions as the international financial institutions
(IFIs). The World Bank and the IMF impose condition-
ality on borrowing countries to ensure reform and repay-
ment. The IDA offers loans on highly concessional terms
to the poorest countries.
journal of PEACE RESEARCH volume 46 / number 4 / july 2009
486
structural adjustment programmes (SAPs)
generate human rights violations because
ordinary people oppose ‘unsuitable’ neo-liberal
policies (Abouharb & Cingranelli, 2006,
2007). The poor record of the international
financial institutions (IFIs) for regenerating
economic growth has led some to suggest
that these institutions have perhaps outlived
their usefulness and that they be abolished
on the grounds that their policies may also
end up killing people (Milner, 2005; Wade,
2006). What is still unclear is whether it is
the effects of IFI policies, or moral hazard,
that generates human rights violations. After
all, the high non-compliance with SAP poli-
cies is well documented ( Vreeland, 2006).2
This study addresses the pessimistic findings
by examining the impact of actual flows of
money from IFIs to asses whether or not the
frequency and size of the disbursements of
loans or the crises generated by indebted-
ness matter for human rights. This study also
addresses the issue of whether neo-liberal
policy features associated with the IFIs mat-
ter for human rights, an issue that is crucial
to evaluating whether IFI loans or govern-
ment non-implementation of recommended
policies are to blame.
Previous studies use a dummy variable
indicating whether or not a country signs a
SAP. We believe that this discrete variable
does not capture the nature of conditionality
and the differential application of condition-
ality on borrowers, since many argue that the
IFIs do not lend according to a blueprint but
that they lend based on many considerations,
including internal and external political pres-
sure (Uvin, 2004; Woods, 2006). In other
words, some governments possess greater
bargaining power and thereby enjoy loans of
greater than normal economic importance
and looser conditions (Dreher & Jensen,
2007; Stone, 2004; Thacker, 2006; Woods,
2006). This would mean that a dummy vari-
able flagging who signs SAPs misses the dif-
ferential nature of conditionality applied to
borrowers, the true nature of the crises faced
by the governments, and the stringency with
which the IFIs actually enforce condition-
ality and approve new loans (bailouts).3 By
using flows of loans from all IFIs for whom
the World Bank reports data, we are able to
isolate the effects of the World Bank’s and
the IMF’s influence simultaneously from
those of other flows of finance, particularly
from the International Development Asso-
ciation (IDA), a special agency of the World
Bank that lends to some of the poorest coun-
tries on highly concessional terms. This issue
is important, because the problem with aid
(and loans) is that money is fungible, and sep-
arating out the effects of the different lend-
ers allows us to assess which way the nature
of conditionality (harshness and looseness)
matters for bad human rights outcomes. This
study also gauges the effect of the total stock
of debt owed to multilateral banks relative to
total publicly guaranteed debt, which allows
the estimation of the accumulated influence of
multilaterals relative to other creditors on the
domestic political environment. Finally, this
study will directly examine the mechanism
identified by the critics as to why IFIs cause
human rights violations: does the size of gov-
ernment budgets and a proxy for neo-liberal
policies matter for predicting human rights?
Our results indicate that receiving loans
from the IFIs has positive effects on govern-
ment respect for physical integrity rights.
However, when loan payback exceeds fresh
2 A worldwide survey of 305 IMF programmes finds that
53% of cases failed to implement even 20% of the con-
ditions (Killick, 1995). The same author finds more than
70% non-compliance with World Bank programmes
( Killick, 1998). He blames inadequate funding and lack of
follow-through for the failure of IFIs.
3 In fact, our loan flow data show remarkable variance in
the economic importance of the disbursements (see sum-
mary statistics for details). For example, in 1995, the IMF
disbursed a loan amounting to 2% of GDP to Mexico, and
Zambia received a loan for more than 6% of its GDP, but
loans to Haiti and Sri Lanka have never reached one-half
of one percent of GDP during the entire period under
scrutiny.
To continue reading
Request your trial