THE IMF AND THIRD-WORLD POLITICAL INSTABILITY The IMF and Third-World Political Instability Is There a Connection? Scott R. Sidell M MACMILLAN PRESS ©Scott R. Sidell, 1988 Softcover reprint of the hardcover 1st edition 1988 978-0-333-42715-6 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended). Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1988 Published by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Sidell, Scott R. The IMF and third-world political instability: is there a connection? 1. International Monetary Fund 2. Economic assistance I. Title 332.1'52 HC60 ISBN 978-1-349-09055-6 ISBN 978-1-349-09053-2 (eBook) DOI 10.1007/978-1-349-09053-2 Contents List of Tables vi Acknowledgements x 1 Introduction 1 1.1 Brief history of Fund conditionality 4 1.2 Plan of the study 7 2 Review of the Relevant Literature 9 2.1 Distributional effects of Fund-supported programs 9 2.2 Literature on the determinants of political instability 13 2.3 Summary of the relevant literature 25 3 Concepts, Indicators, and the Analysis Strategy 27 3.1 Operationalisation of the dependent variables 27 3.2 Operationalisation of the explanatory variables 30 3.3 Analysis strategy 40 4 Empirical Findings and Interpretations 47 5 Conclusion 71 Appendix: Countries Empirically Examined 75 n ~~~ Index 81 v List of Tables 2.1 A summary of the expected direction of relationships of political variables based on the literature review 26 3.1 Three dimensions of political instability and their respective indicators 28 3.2 The four transformations of the three dependent variables to be examined for distributional normality 30 3.3 Explanatory variables and their correspondent conceptualised dependent variables 31 3.4 Explanatory variables and their respective operational definitions 36 3.5 Variable transformations and their associated skewness scores 37 3.6 Descriptive measures of variable transformations selected for empirical testing 38 3.7 Correlation coefficients between all pairs of the explanatory variables 39 4.1 Descriptive statistics of cases examined by category 47 4.2 Cross-sectional estimates for the dependent variable 'In collective protest' and the explanatory variable 'IMF-supported economic intervention' 48 4.3 Cross-national estimates for the dependent variable 'In internal war' and the explanatory variable 'IMF-supported economic intervention' 49 4.4 Cross-national estimates for the dependent variable 'In illegitimate executive transfer' and the explanatory variable 'IMF-supported economic intervention' 49 4.5 Cross-national estimates for the dependent variable 'In collective protest' and the explanatory variable 'total number of IMF-stand-by arrangements' 50 4.6 Cross-national estimates for the dependent variable 'In internal war' and the explanatory variable 'total number of IMF-stand-by arrangements' 51 4.7 Cross-national estimates for the dependent variable 'In illegitimate executive transfer' and the explanatory variable 'total number of IMF-stand-by arrangements' 51 vi List of Tables VII 4.8 OLS estimates of the bivariate relationships between each of the lags of the IMF dummy variable 'presence or absence of IMF-supported economic intervention' and each of the three dimensions of political instability 52 4.9 Cross-national estimates for the dependent variable 'In collective protest' and the explanatory variable 'IMF-supported economic intervention at time (t-1)' 52 4.10 Cross-national estimates for the dependent variable 'In collective protest' and the explanatory variable 'IMF-supported economic intervention at time (t-2)' 53 4.11 Cross-national estimates for the dependent variable 'In collective protest' and the explanatory variable 'IMF-supported economic intervention at time (t-3)' 53 4.12 Cross-national estimates for the dependent variable 'In internal war' and the explanatory variable 'IMF-supported economic intervention at time (t-1)' 53 4.13 Cross-national estimates for the dependent variable 'In internal war' and the explanatory variable 'IMF-supported economic intervention at time (t-2)' 54 4.14 Cross-national estimates for the dependent variable 'In internal war' and the explanatory variable 'IMF-supported economic intervention at time (t-3)' 54 4.15 Cross-national estimates for the dependent variable 'In illegitimate executive transfer' and the explanatory variable 'IMF-supported economic intervention at time ( t-1 )' 55 4.16 Cross-national estimates for the dependent variable 'In illegitimate executive transfer' and the explanatory variable 'IMF-supported economic intervention at time (t-2)' 55 4.17 Cross-national estimates for the dependent variable 'In illegitimate executive transfer' and the explanatory variable 'IMF-supported economic intervention at time (t-3)' 56 4.18 Results for the dependent variable 'collective protest' and the explanatory variable 'IMF-supported economic intervention at time (t)' and its associated sociopolitical control variables 56 4.19 Results for the dependent variable 'internal war' and the explanatory variable 'IMF-supported economic viii List of Tables intervention at time (t)' and its associated sociopolitical control variables, in which state-sponsored repression is tested at time (t) 57 4.20 Results for the dependent variable 'illegitimate executive transfer' and the explanatory variable 'historical degree of IMF-supported economic intervention' and its associated sociopolitical control variables 57 4.21 Error components estimates of the bivariate relationships between each of the lags of the IMF dummy variable 'presence or absence of IMF-supported economic intervention' and each of the three dimensions of political instability 60 4.22 Error components estimates of the model containing the dependent variable 'In collective protest' and the dependent variable 'IMF-supported economic intervention at time ( t)' 61 4.23 Error components estimates of the model containing the dependent variable 'In collective protest' and the dependent variable 'IMF-supported economic intervention at time ( t-1 )' 61 4.24 Error components estimates of the model containing the dependent variable 'In collective protest' and the dependent variable 'IMF-supported economic intervention at time (t-2)' 61 4.25 Error components estimates of the model containing the dependent variable 'In collective protest' and the dependent variable 'IMF-supported economic intervention at time (t-3)' 62 4.26 Error components estimates of the model containing the dependent variable 'In internal war' and the dependent variable 'IMF-supported economic intervention at time ( t) 62 4.27 Error components estimates of the model containing the dependent variable 'In internal war' and the dependent variable 'IMF-supported economic intervention at time ( t-1) 62 4.28 Error components estimates of the model containing the dependent variable 'In internal war' and the dependent variable 'IMF-supported economic intervention at time (t-2) 63 List of Tables ix 4.29 Error components estimates of the model containing the dependent variable 'In internal war' and the dependent variable 'IMF-supported economic intervention at time (t-3) 63 4.30 Error components estimates of the model containing the dependent variable 'In illegitimate executive transfer' and the dependent variable 'IMF-supported economic intervention at time ( t)' 63 4.31 Error components estimates of the model containing the dependent variable 'In illegitimate executive transfer' and the dependent variable 'IMF-supported economic intervention at time (t-1)' 64 4.32 Error components estimates of the model containing the dependent variable 'In illegitimate executive transfer' and the dependent variable 'IMF-supported economic intervention at time (t-2)' 64 4.33 Error components estimates of the model containing the dependent variable 'In illegitimate executive transfer' and the dependent variable 'IMF-supported economic intervention at time (t-3)' 64 4.34 Error components, GLS results for the multivariate model of collective protest 66 4.35 Differences in the likelihood of experiencing collective protest between those countries that have experienced a minimum of one IMF stand-by arrangement, and those that have never experienced an IMF stand-by arrangement 69 Acknowledgements First, I would like to thank my wife Linda, for her untiring emotion al support, and my parents for their instrumental financial and emotional support, during those much talked about times when graduate students really need such support. Second, I would like to thank Kurt Westby, who played a fundamental logistical role in helping me bridge the 300-mile gap between Harvard and Cornell. I would also like to thank both the Economics and Government Departments at Harvard, and the Sociology Department at Cornell for their generous support of my computer analysis. In addition, I would like to thank Steve Caldwell and Tom Davis at Cornell, as well as Stef Haggard and Michael Roemer at Harvard, for their continuous positive criticism and intellectual substantive and statistical expertise. I would also like to extend a special thanks to Jill Appel, Director of Harvard's Government Data Center, for her constant logistical support in getting together the data that I needed for this study, and to the consulting staff at Harvard's Office of Information Technology, who got me out of one too many computer programing bottlenecks. Finally, I would like to thank the students and philanthropists whose financial contributions to Cornell University helped to finance my graduate studies there. X