IMF = I’M Fired! IMF Program Participation, Political Systems, and Workers’ Rights

Date01 August 2021
AuthorByungwon Woo,Su-Hyun Lee
DOI10.1177/0032321720905318
Published date01 August 2021
Subject MatterArticles
https://doi.org/10.1177/0032321720905318
Political Studies
2021, Vol. 69(3) 514 –537
© The Author(s) 2020
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DOI: 10.1177/0032321720905318
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IMF = I’M Fired! IMF Program
Participation, Political Systems,
and Workers’ Rights
Su-Hyun Lee1 and Byungwon Woo2
Abstract
How do International Monetary Fund programs and conditions affect labor rights? Recognizing
the diversity of International Monetary Fund conditionality, we argue that the more stringent
International Monetary Fund labor market conditionality is, the worse labor rights become.
However, this negative effect can be mitigated if there exist domestic political institutions that
have incentives and abilities to provide protections over workers: one such case is a closed-list
proportional representation system; another case is a leftist government that relies on political
supports of workers. Our empirical analysis demonstrates that the more labor conditionality a
program includes, the worse labor rights the country sustains. In addition, we report that the
negative effect is partially mitigated when domestic political circumstances are favorable to the
political representation of workers under a proportional representation system or under a leftist
government.
Keywords
International Monetary Fund, labor rights, conditionality, electoral system, partisanship
Accepted: 19 January 2020
Introduction
In May 2010, the Greek government signed onto an International Monetary Fund (IMF)
program after a long and heated negotiation with the European Union (EU) and the IMF.
The deal, which secured a 3-year, 30 billion Euro financial assistance package from the
IMF as part of a 110 billion Euro financing package with the IMF/EU, was touted by then
IMF Managing Director Dominique Strauss-Kahn as “a historic course of action that will
give this proud nation a chance of rising above its current troubles and securing a better
future for the Greek people” (IMF, 2010). In order to meet such a goal, the program
1S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore
2Department of Political Science and International Studies, Yonsei University, Seoul, South Korea
Corresponding author:
Byungwon Woo, Department of Political Science and International Studies, Yonsei University, 50 Yonsei-ro,
Seodaemun-gu, Seoul 03722, South Korea.
Email: bwwoo@yonsei.ac.kr
905318PSX0010.1177/0032321720905318Political StudiesLee and Woo
research-article2020
Article
Lee and Woo 515
contained a wide range of policy reform measures, commonly known as conditionality,
aimed at tackling massive fiscal imbalance and restoring long-run economic viability. At
the time of the press release, Mr. Strauss-Kahn emphasized the importance of the Greek
government following up with the policy conditions by empathetically stating “imple-
mentation is now the key” (IMF, 2010).
It turned out that the implementation of the policy conditions of the IMF program was
anything but smooth-sailing for the Greek government. Within hours of signing the agree-
ment, the program was met with anger from the Greek public. Union members, teachers,
pensioners, and students took to the streets and squares to protest the belt-tightening
austerity measures included in the IMF program. In the following months, large-scale
general strikes and intense riots continued, and the politics in the Greek parliament
became increasingly turbulent. The contentious politics of the IMF program implementa-
tion culminated with two rounds of a vote of confidence in 2011. The incumbent govern-
ment narrowly edged to win in both, but the second one in November 2011 eventually led
to the resignation of Prime Minister Papandreou. After some of the conditions included in
the program were not met, the 2010 stand-by agreement was scrapped altogether and was
replaced by a new 4-year program under the Extended Fund Facility. The drama had con-
tinued to unfold with frequent political crises and repeated renegotiations of the program.
Over 8 years since 2010, five different prime ministers had resided over the crisis and
Greece had only narrowly escaped national defaults.1
While Greece significantly departs from a usual IMF program–participating develop-
ing country in many regards, domestic political turmoil that followed the 2010 IMF
agreement exemplifies typical political dynamics of IMF program implementation: the
IMF and a government negotiate an IMF program that includes domestic-politically
unpopular policy reform measures, only to observe those conditions seriously challenged
when the government tries to implement them. Since an IMF program is an international
agreement that does not require formal ratification at the time of signing, the participating
government and the IMF are able to sign a program with ambitious reform measures with
a hope to “tip the balance” against anticipated domestic opposition (Vreeland, 2003).
However, implementation of such reforms also requires ex ante explicit approval or at
least implicit acquittal of relevant domestic stakeholders, such as legislatures and various
interest groups. Few governments are immune to such domestic approval process, and
without such consents from domestic stakeholders, some IMF programs abort prema-
turely and others remain incomplete, caught in the middle of domestic political contesta-
tion (Beazer and Woo, 2016; Ivanova et al., 2001; Vreeland, 2003).
As was the case in Greece, at the frontline of opposition in the battle against IMF pro-
gram implementation are most often workers and labor unions. IMF programs often
include labor market reform measures, such as wage restrictions, hiring freezes, privatiza-
tion of state-owned enterprises, lay-offs, pension reforms, or labor market flexibility legis-
lation that directly hurt workers’ rights (Kentikelenis et al., 2016; Reinsberg et al., 2019;
Stubbs and Kentikelenis, 2018). There are also other measures that indirectly compromise
workers’ interests. For instance, IMF programs often put ceilings on public spending and
contain other public sector reform conditions, and these measures often result in reductions
in public wages and social benefits that most workers rely heavily on (Nooruddin and
Simmons, 2006; Rickard and Caraway, 2019). Thus, fierce opposition by workers and
labor unions to IMF programs exemplified in the recent Greek case seems quite justified.
Building on the recent development in the IMF literature examining the effect of IMF
conditionality (Gunaydin, 2018; Kentikelenis et al., 2016; Reinsberg et al., 2019; Rickard

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