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IMF Programs Increase Poverty,
Unemployment and
Inequality
in Latin America,
Reflecting Worldwide
Impact
Below we present preliminary findings from analysis that
relates the intervention of the International Monetary Fund in
Third World countries to the declining well-being of citizens in
those nations. The focus here is on the situation in Latin
America.
According the United Nations Development Programme (UNDP) in its
annual, highly respected Human Development Report, the
Human Development Index (which measures human
well-being) fell during the first half of the 1990s in 20 of the
24 Latin American and Caribbean countries in which the IMF had a strong
presence. Other sources confirm these findings. Operating under a
number of IMF programs, Mexico, for example, saw the number of its
citizens living in extreme poverty jump from 11 million to 15.8 during the
decade ending in 1995. In Chile, the leading disciple of IMF economic
orthodoxy, the poorest 10 percent of households suffered an absolute
decrease in income of 6.6 percent between 1992 and 1994; in fact, all but
the top two deciles of the population saw their monetary income decline
during the period (Leiva).
Employment figures tell a similar story. The Inter-American Development
Bank (IDB) reports that over one half of the 20 Latin American
countries for which it has official data have experienced
an increase in their unemployment rates in the 1980s and 1990s.
Even these figures underestimate the problem, as official figures can be
misleading. In Mexico, for example, anyone working one day per month is
classified as employed. Today, one third of the economically active
population of nearly 30 million workers are either unemployed or in
precarious jobs in that country. The worldwide record is
clear, however. Of the 43 Third World countries for which the
International Labour Office has official statistics covering the period
1978-1995, 31, or 72 percent, saw unemployment increase while they
were receiving IMF support.
Furthermore, those who have had jobs in countries under IMF
stabilization/adjustment programs have seen their wages fall.
According to the UNDP, between 1980 and 1992 real earnings per employee
fell in nine of the Latin American and Caribbean nations for which it has
data. In the cases of Venezuela, Brazil, Uruguay and Argentina, the
decline averaged more than two percent ov er that period. Even in Chile,
45.5 percent of those employed in 1994 still received wages inadequate to
cover the basic needs of an average-sized household; it would have taken a
drop of only US$3 in monthly per capita income for the 742,000 people in
the seventh "twentile" of the Chilean population to be cast below the
poverty line (Leiva). According to the IDB, the real minimum wage is lower
today than in 1980 in 17 of the 19 nations for which it has figures.
At the same time, statistics from the Economic Commission on Latin
America and the Caribbean (ECLAC) bear proof of the
growing disparity in the distribution of wealth in the
region. Of the 11 cases in which data is available, the percentage of
wealth controlled by the poorest 20 percent of the population has fallen
in seven.
One of the chief causes of growing wealth disparities is the
worsening income distribution of countries operating in
accordance with IMF economic conditionalities. In Mexico, income and
wealth distribution had deteriorated significantly even before the
economic crash of 1994-95. Between 1984 and 1994, the share of national
income received by the top ten percent of the Mexican population increased
from 34.27 percent to 41.24 percent, while the share held by the poorest
40 percent fell from 12.72 percent to 10.81 percent. In El Salvador, the
share of national income received by the bottom population decile fell by
almost a half and that received by the bottom 40 percent of the population
dropped by a third; in fact, all the population deciles experienced a
decline except for the top two, with the top decile's income increasing
dramatically from 27.48 to 38.36 percent (FUNDE). In the Southern Cone of
the region, the richest 20 percent of Chilean households further expanded
its share of national income during the first half of this decade in
contrast to the poorest 20 percent, which suffered a further loss (Leiva),
while Argentina has seen almost a doubling of the percentage of poor
people in its population, a decline in its middle class and a sharp
increase in the share of national income taken by the richest ten percent
of its households over the past two decades. World Bank data indicate that
inequality, measured by GINI coefficients, has also become more acute in a
number of other countries in the region.
One of the chief factors (beyond IMF and World Bank stabilization and
adjustment programs) preventing countries from reducing their increasing
poverty and inequality rates is the high level of their external
debt. Yet, preliminary analysis also demonstrates a
positive relationship between participation in
stabilization and adjustment programs and the accumulation of
debt. In 14 of the 16 Latin American countries involved in such
programs, foreign debt has increased by an average of 74 percent since the
policies were first implemented. The percentage of Third World countries
overall in which debt has increased during the application of these
policies is even higher.
February 1998
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