The International Monetary Fund (IMF) was formed in 1945 to ensure the stability of the international monetary system. The Fund’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that may bear on global stability. Since the global crisis, particularly since 2010, the IMF has tackled more and more areas.
A recent 2017 proposal proposes further IMF work on social protection, continuing IMF recent reforms to social security, welfare and labour systems. Austerity or fiscal consolidation reforms are very unpopular as they have detrimental impacts on populations. In several European countries, national Constitutional Courts found IMF-supported austerity cuts against the law and anti-constitutional (see for instance, Latvia 2009, Romania 2010, Portugal 2013-14). As IMF staff does not have the expertise on this area, they look at social protection expenditures from a fiscal viewpoint, a cost that can be cut in order to reduce fiscal deficits, ignoring the negative social impacts that austerity cuts may cause.
The letter below to IMF Directors has been signed by more than 50 prestigious economists and development specialists, concerned on IMF’s social protection and labour reforms.
To Christine Lagarde, IMF Managing Director
To Executive Directors of the IMF
As a group of economists, academics and development experts, we are writing to express concern over the IMF “independent” evaluation of The IMF and social protection, and its recommendations approved by IMF Board on July 2017.
We are particularly concerned by IMF advice on social security reforms, led by a fiscal objective, combined with labor reforms that weaken wages and collective bargaining, these reforms have a high human cost and will result in more poverty and inequality.
These reforms and austerity adjustments also depress household income, contract domestic demand and are slowing down global recovery.
Austerity cuts to multiple social protection programs are reducing social protection coverage and benefits. Old-age poverty is increasing in many countries as a result of inadequate pension reforms.
Further, we are very concerned about recent proposals to cut employers contributions to social security (see IMF Policy Paper on Fiscal Policy 2015 and WEO April 2016 chapter 3 on labor taxes/tax wedge) as this would destroy public social security systems and increase inequality.
These reforms have negative social impacts and represent high political costs to governments.
Precisely, world governments agreed in the SDGs to extend social protection systems for all, including social protection floors (SDG 1.3), instead of narrow-targeting safety nets for cost-savings. The IMF endorsement of the SDGs requires supporting global commitments.
Universal social protection, normally achieved by a combination of public social insurance and social assistance, is supported by all main development organizations due to its positive developmental impacts. Child and maternity benefits increase productivity and help to incorporate women into the labor market; disability and old-age pensions support household income; unemployment support assists those without jobs and has a counter-cyclical function during economic downturns. Adequate social protection benefit levels reduce poverty and inequality, promote human development, social cohesion and political stability.
The IMF does not have expertise on social protection. Advice to countries on social security reforms should be left to the ILO, the UN agency with the mandate for social protection and labor. Other UN organizations can support to extend of coverage, in the context of SDG 1.3. Additionally, representative trade unions must be consulted and strengthened, not weakened, to ensure collective bargaining processes that ultimately will bring prosperity to countries and reduce inequality.
- Sir Richard Jolly, Institute of Development Studies, former Deputy Executive Director UNICEF (1982-1996)
- Professor Stephany Griffith-Jones, Financial Markets Director, Initiative for Policy Dialogue, Columbia University
- Jayati Ghosh, Professor of Economics, Jawaharlal Nehru University, New Delhi, India.
- Richard D. Wolff, Professor of Economics Emeritus, University of Massachusetts, Amherst and Visiting Professor, New School University, New York City, USA.
- John Weeks, Emeritus Professor of Economics at School of Oriental and African Studies, University of London, UK.
- Rolph van der Hoeven, Professor Emeritus Employment and Development Economics,
International Institute of Social Studies (ISS), Erasmus University (EUR), The Hague, Netherlands.
- Al Campbell, Emeritus Professor of Economics, University of Utah, USA.
- Sakiko Fukuda-Parr, Professor of International Affairs, The New School, USA.
- Professor Diane Elson,University of Essex and Institute of Development Studies, University of Sussex. Member of UN Committee for Development Policy.
- Professor Radhika Balakrishnan, Rutgers University, USA.
- Anis Chowdhury, Adjunct Professor, Western Sydney University and the University of New South Wales, Australia.
- Sandra Polaski, former Deputy Director General for Policy, International Labour Organization (ILO).
- Gabriele Koehler,UN Association Germany and Member of UNICEF National Committee, Germany.
- Alexander Kentikelenis,Trinity College, University of Oxford, UK.
- Teresa Ghilarducci, Professor of Economics,New School for Social Research, USA.
- P. Chandrasekhar, Professor of Economics, Jawaharlal Nehru University, New Delhi, India.
- Erinc Yeldan, Professor of Economics and Dean, Faculty of Economics, Bilkent University, Turkey.
- Irene van Staveren, Professor of Development Economics, International Institute of Social Studies of Erasmus University Rotterdam, The Hague, Netherlands
- Professor Maxwell Constantine Chando Musingafi, Development and Peace Studies, Zimbabwe Open University.
- Kunibert Raffer, Professor (retired) Dept of Economcs, University of Vienna, Austria
- Mritiunjoy Mohanty, Professor, Indian Institute of Management Calcutta, Kolkata, India
- Sergio Cesaratto, Full professor of International Economics; Monetary and Fiscal Policies in the European Monetary Union, University of Siena, Italy
- Carolina Alves, Research Fellow in Heterodox Economics, University of Cambridge, UK.
- Professor Mustafa Özer, Anadolu University, FEAS, Department of Economics, Eskisehir, Turkey.
- Karsten Weitzenegger, Policy Advisor, Germany.
- Venkatesh Athreya, Professor of Economics (Retired), Bharathidasan University, Tiruchirapalli, India.
- Bonn Juego, Postdoctoral Researcher, Development & International Cooperation, University of Jyväskylä, and Board Member, Finnish Society for Development Research, Finland.
- Saratchand, Assistant Professor Department of Economics, Satyawati College, University of Delhi, India.
- Professor Dr. Cristina Fróes de Borja Reis, Professor of Economics and International Relations, Federal University of ABC, Brazil.
- David Barkin, Distinguished Professor, Universidad Autonoma Metropolitana-Xochimilco, 04960 Coyoacan, DF Mexico.
- Fadhel Kaboub, Associate Professor of Economics at Denison University, USA, and President of the Binzagr Institute for Sustainable Prosperity.
- Andrés Pizarro, Professor at Universidad Nacional de General Sarmiento, and member of the Centro de Economía Política Argentina (CEPA).
- Andrew M. Fischer, Associate Professor of Social Policy and Development Studies, International Institute of Social Studies (ISS), Erasmus University (EUR), The Hague, Netherlands.
- Jan Priewe, Professor (em.) of Economics, HTW Berlin – University of Applied Sciences, Berlin, Germany.
- Alan Cibils, PhD, Universidad Nacional de General Sarmiento, Argentina.
- Professor Ilene Grabel, Josef Korbel School of Int’l Studies, University of Denver, USA.
- Gustavo Indart, Associate Professor, Department of Economics, University of Toronto, Canada.
- Arana Mariano, Investigador Docente, Área de Economía Política, Instituto de Industria, Universidad Nacional de General Sarmiento, Argentina.
- Dr Andrew Cornford, Counsellor, Geneva Finance Observatory, Switzerland.
- Alicia Puyana Mutis, Profesora Investigadora, FLACSO México.
- Rodrigo Lopez-Pablos, former Researcher on Poverty and Inequality Economics, National Technological University and ITMO University, Argentina/Russia.
- Professor emerita Zsuzsa Ferge, Eotvos Lorand University, Budapest, Hungary, member of the Hungarian Academy of Sciences, and the Academia Europeae.
- Yavuz Yașar, Associate Professor, Department of Economics, University of Denver, USA.
- Nicolas Pons-Vignon, University of the Witwatersrand, South Africa.
- Guillermo Rozenwurcel, Full Professor of Economics, University of Buenos Aires, Argentina.
- Eduardo Strachman, Professor of Economics, São Paulo State University (UNESP), Araraquara Campus, Brazil
- Bilge Erten, Assistant Professor, Northeastern University, Boston, USA.
- Pietro Masina, Associate professor, University of Naples L’Orientale, Italy.
- Smitha Francis, Economist, New Delhi, India.
- Shaianne T. Osterreich, Associate Professor, Chair Department of Economics Ithaca College, New York, USA.
- Professor P.N. Junankar, Honorary Professor, Industrial Relations Research CentreUNSW Australia and Emeritus Professor Western Sydney University, and Research Fellow IZA, Bonn, Germany, Executive Editor, Economic and Labour Relations Review.
- John Miller, Professor of Economics, Wheaton College, Massachusetts, USA.
- Kari Polanyi Levitt, Emerita Professor Economics, McGill University, Montreal, Canada.