The distributional effects of privatisation in IMF programs, with Merih Angin
Privatization of state-owned enterprises (SOEs) has been a defining feature of International Monetary Fund (IMF) programs since the 1980s. Since the borrowing countries have to implement the conditions attached to their IMF loans, privatization cases increase under IMF monitoring. Privatizations of SOEs are amongst the most important, and also politically contentious type of IMF conditionality as they not only require changes in the institutional framework of the recipient country, but also lead to major structural changes in its economy. However, few studies to date have systematically investigated the distributive impact of privatization conditionalities of IMF programs. This paper analyzes the effect of privatization conditionalities on returns to the activity of labor (primary source of income for the vast majority of the population) versus returns to ownership (a more important source of income for the wealthy), in order to see whether the IMF’s privatization conditionalities can be linked to increasing inequality in a borrowing country. We first look at the causal mechanisms at work through case studies of privatizations in two key developing countries, namely Pakistan and Turkey, both of which implemented numerous IMF programs that required privatizing SOEs in strategic sectors. To test our theory in a large-N setting, we then employ regression analysis on a novel dataset including all IMF programs from 1980 to 2014.
Currency hierarchies and development bank financing after economic globalisation
According to the conventional wisdom on economic globalisation, ‘deep’ integration, which involves external and domestic liberalisation, should be incompatible with state owned national development banks (NDBs) which are used to control domestic credit allocation. Although NDBs have declined since the 1980s, reports of this decline have been exaggerated, and mask significant variation in the responses of different countries to the onslaught of pressures to reign in statist institutions. This paper argues that the structure of the international economy makes it easier for developed countries to retain statist financial institutions due to strong and stable demand for their public securities as a result of their position in the currency hierarchy. This allows them to fund development banks on international markets and sidestep domestic redistributive conflicts, which arise when banks are funded on national budgets. This is not an option available to most developing countries with soft currencies, whose public securities are seen as risky. Developing countries can only retain these statist institutions if they resolve domestic distributional challenges. This is illustrated through comparative case studies of the post-80s evolution of NDBs in countries with varying levels of economic development: Germany, Brazil, South Africa, and Pakistan, using original archival material.