International Financial Institutions and Labour Rights: Rhetoric versus Reality

Abstract

6 | International Union Rights | 24/1 FOCUS | WORLD BANK AND IMF International Financial Institutions and Labour Rights: Rhetoric versus Reality Labour organisations have long been critical of the International Monetary Fund (IMF) and World Bank. In particular, groups argue that policy prescriptions attached to international financial institution (IFI) loans, which emphasise labour flexibility, wage cuts, and reduced public sector jobs, amount to ‘cookiecutter policies that harm the interests of working people’ (Lloyd and Weissman 2007: 7). Politically, these policies are seen as undercutting the power of labour groups, decreasing both their ability to protect members as well as their relative political power. A large body of academic scholarship has studied the ways in which IFI programmes affect recipient countries. While earlier studies primarily focused on macroeconomic implications, more recent systematic research has also begun to examine the socio-political impacts. Thus far, results have been decidedly negative. For instance, Abouharb and Cingranelli (2007) found that structural adjustment programmes (SAPs) are significantly related to political repression– the programmes created a pernicious dynamic in which loan conditions encouraged anti-government protests that were often violently repressed. Subsequent work has found these programmes to be negatively associated with women’s economic rights, particularly freedoms from work and pay discrimination as well as workplace harassment (Detraz and Peksen, 2015). There is some evidence, however, that these programmes may ultimately serve to support some democratic reforms (Abouharb and Cingranelli 2007; Birchler et al. 2016). Somewhat surprisingly, less attention has been devoted to the labour rights implications of IFI policies. For its part, until recently the IMF has overlooked the possible effects of their programmes on labour conditions. In a welcome break, a recent IMF report (Jaumotte and Buitron 2015) noted the importance of a strong collective bargaining regime to reduce income inequality and secure better wages for low and middle-income earners. The report specifically finds that ‘the decline in unionisation appears to be a key contributor to the rise of top income shares’ (p. 31) to the detriment of those in other groups. Given the dearth of IMF research in the area of labour rights, the significance of this release was noted by labour scholars. For example, Manborde (2015: 7) observed in an earlier edition of this journal that the report finally attested to the importance of trade unions as necessary ‘economic and political correctives’ in the ‘kind of free market economy created by the mainstream political parties’. Somewhat sardonically, Cross (2015: 10) welcomed the IMF’s ‘foray into the realm of union rights’, though noting that it ultimately did little beyond refuting ‘some of the lazier assumptions on the effects of stronger trade unions’. Paucity of labour research aside, the IMF and World Bank have long noted the potential social and economic harm that their policies can cause, and have at the least expressed rhetorical support for labour rights. For example, over twenty years ago then IMF Director Michel Camdessus (1996) noted that IMF programmes should ‘contribute to improving human living standards’, States should take measures to assist with the ‘human costs of adjustment’ and labour organisations can play a key role in helping countries deal with the possible adverse impact of globalisation. Subsequent efforts on the part of these institutions have gone somewhat beyond rhetoric. By the late 1990s, the IMF began to incorporate promises to improve labour rights, specifically compliance with ILO core labour standards, into its loan conditions (Anner and Carraway 2010). One scholar argued that both IFIs have helped to increase the influence of the ILO and that ‘contrary to widespread opinion, the IMF and World Bank have become quasi-partners (with the ILO) in promoting labour rights’ (Stallings 2010: 13). For example, representatives from each organisation make it a practice to attend the others’ meetings and the World Bank’s procurement standards for contractors include core labour standards (Stallings 2010). At the least, this marks an encouraging break from their traditional view that, famously noted by former World Bank President James Wolfensohn (Lloyd and Weissman 2001, 11), that such organisations do ‘not get involved in national politics’. Thus while it has long been argued that IFI policies bode poorly for labour rights, there is some evidence that these...