A Fate Worse Than Debt? International Financial Institutions and Human Rights, 1981—2003

Abstract

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.