IMF, World Bank owe reparations to countries of the global south
By Jason Hickel, Salmaan Keshavjee, Maxine Burkett, and Eugene T Richardson
Introduction
Beginning in the 1980s and 1990s, the International Monetary Fund (IMF) and the World Bank implemented structural adjustment programmes (SAPs) across most countries in Asia, Africa and Latin America.
SAPs imposed austerity, privatisation and economic deregulation and have been associated with severe negative impacts on health outcomes and human welfare. In this brief analysis, we describe evidence of these damages and develop an argument for reparations and distributive justice.
The move to implement SAPs is best understood in the context of historical dynamics of international political economy. For most of the past 500 years, the world economy has been broadly structured such that growth and capital accumulation in the core (Western Europe and the European settler colonies of the US, Canada, Australia and New Zealand, often collectively referred to as the global North) depends on inputs of cheap labour and resources from the peripheries (Asia, Africa and Latin America, often collectively referred to as the global South).
This arrangement was challenged in the middle of the 20th century, as political movements across Asia, Africa and Latin America succeeded in overthrowing colonial and neo-colonial forces. Progressive governments rose to power across these regions, began dismantling the colonial economic arrangement and reorganised production more around local human needs and national development.
They introduced land reforms, labour rights and capital controls; they invested in public healthcare and education; they nationalised key resources; and they used industrial policy and planning to build economic sovereignty.
These developmentalist strategies were remarkably successful. During the 1960s and 1970s, real per capita income grew at an average of 3.2 percent per year across the South, and countries achieved substantial improvements in social outcomes.
The success of the anti-colonial movement posed a problem for Northern powers, however, as developmentalist policies restricted their access to the cheap labour, resources and captive markets they had enjoyed under colonialism, constraining their growth and profits. They responded in two ways.
First, by intervening militarily to topple progressive leaders and reverse developmentalist reforms, such as with the coups against Mossadegh in Iran, Lumumba in the Republic of the Congo, Arbenz in Guatemala, Allende in Chile, Nkrumah in Ghana and others, often installing right-wing dictatorships in their place. Second, they leveraged their power as lenders of the world’s reserve currencies to attach economic conditions to finance.
Global South countries are obliged to borrow or otherwise obtain core currencies—such as the US dollar and the Euro—to pay for necessary imports such as energy and producer goods.
This was particularly necessary during the process of early industrial development. This makes them vulnerable to interest rate changes in currencies that they do not control. In the late 1970s, the US Federal Reserve dramatically increased interest rates, triggering a debt crisis across the global South.
To protect US banks from the risk of Southern default, the US sought to ensure repayment by rolling over Southern debts on the condition that Southern governments implement SAPs under the IMF and the World Bank. SAPs were implemented beginning in the 1980s and tended to include three main measures:
Austerity: cuts to public healthcare, education, food subsidies, social security, etc.
Privatisation: transfer of public services, public industries and assets to private capital.
Deregulation: removal of industrial policy, tariffs, capital controls and labour protections.
In other words, structural adjustment was a primary mechanism by which neoliberal economic policy was implemented in the South to reverse the progressive reforms that had been so successful during the 1960s and 1970s.
It re-cheapened labour and resources, forced open Southern markets and also organised Southern production around supplying Northern firms through global commodity chains. Countries targeted by these measures had little choice in this matter; many governments considered default to be risky, on the grounds that they might be punished by financial markets.
In some cases, capitalists within the global South embraced SAPs because they saw opportunities to increase their own profits, for example by taking advantage of weakened labour standards and environmental protections.
Through structural adjustment, Western institutions assumed de facto control over economic policy in global South countries, shifting power over key macroeconomic decisions from national parliaments and elected representatives in Southern capitals to technocrats and bankers in Washington and New York.
Structural adjustment succeeded in restoring Northern access to cheap labour, resources and markets in the global South. It restored the North’s flagging rate of growth and led to a doubling in the rate of profit that US companies earned on foreign investment. But for the victims of structural adjustment, the consequences were devastating.
Several empirical studies have demonstrated that structural adjustment increases poverty. A 2022 statistical analysis covering 81 developing countries from 1986 to 2016 found that ‘all IMF arrangements have a positive effect on poverty’. The study demonstrated that a country under average IMF conditions on trade and exchange will have a poverty rate 3.5 percent higher than countries without such arrangements, all else being equal.
The IMF’s structural conditions have a particularly damaging effect, because they ‘tend to raise unemployment, lower government revenue, increase the costs of basic services’, etc.
Another statistical analysis covering 79 countries from 2002 to 2018 demonstrated that IMF austerity conditions are ‘associated with higher poverty headcounts and poverty gaps’ at various poverty thresholds and at significant levels. Both studies account for possible endogeneity biases. It is important to note here that poverty is a major social determinant of health outcomes.
Other studies have further demonstrated that IMF adjustment conditions increase poverty rates, increase unemployment, increase child labour, and reduce education spending. A 2024 analysis found that China experienced a dramatic increase in extreme poverty (as measured according to the basic-needs poverty line, BNPL) following its first World Bank SAP in 1990, which was part of further liberalisation that dismantled public provisioning systems and pushed the prices of food, housing and other basics out of reach for millions of working-class people.
A similar pattern is clear in the case of Jamaica, where trade and exchange-rate liberalisation under structural adjustment in 1990-1992 brought currency depreciation and an increase in food prices. Figure 2 shows that this was associated with an increase in BNPL poverty, reversing the progress of the previous years. Jamaica did not resume progress against extreme poverty until 2005.
Similar crises occurred in many other countries, particularly in the Eastern European countries that were subjected to structural adjustment after 1990. Increased BNPL poverty means people have reduced access to basics such as food and shelter.
Health impacts
SAPs impact health outcomes in several ways. They cut government investment in health, education, nutrition and family planning. They close healthcare facilities, reduce access to supplies and limit hires of key staff like doctors and nurses.
They require governments to devalue their currency, which increases the cost of imported drugs, medical supplies, food and fuel. Market deregulation guts health and safety laws, tariff cuts deprive governments of revenues and privatisation and user fees reduce public access to essential services like health, education, water and sanitation.
On top of this, losses to formal employment and cuts to wages reduce people’s ability to purchase food and healthcare, rendering them more vulnerable to disease.
Several counterfactual cases illustrate what global South countries could hypothetically have achieved in terms of human development had they not been subjected to structural adjustment.
For unique geopolitical reasons (and because of special military agreements with the USA), both Costa Rica and South Korea were permitted to continue using many of the social and industrial policy programmes of the progressive era, even despite formally participating in IMF and World Bank facilities.
Today, life expectancy in both countries exceeds 80 years, nearly 10 years higher than the average for low- and middle-income countries, and equal to the average in the global North.
Cuba offers another example. Cuba successfully resisted SAPs and instead built a robust system of public provisioning to ensure universal access to essential goods, including housing, healthcare and food. This system has been successful at fighting extreme poverty, hunger and premature mortality.
Cuba’s death rate from malnutrition is the lowest in the global South, and lower even than that of many rich economies, even while it faces crushing sanctions. This offers an example of what other countries could have achieved, had they been allowed to continue investing in public provisioning systems.
A recent non-peer-reviewed assessment based on the Global Burden of Disease Study calculated that, if other countries adopted policies like Cuba’s to ensure universal access to nutritious food, 16 million deaths could have been prevented during the period 1990–2019.51
Financial outflows and unequal exchange
SAPs had the effect of depressing wages and resource prices in the global South, which in turn enabled Northern states and corporations to appropriate wealth from the South through what scholars describe as ‘unequal exchange’ in international trade.
Systematic price disparities between North and South mean that for every unit of resources and labour embodied in goods that the South imports from the North, they must export many more units to pay for it. This results in large net flows from South to the North—a ‘hidden transfer of value’ from periphery to core.
This dynamic means that while the North enjoys the benefits of resource extraction, the ecological costs are disproportionately suffered in the South. It also means the South is drained of resources that could otherwise be used for human development and improving social outcomes.
The quantity of energy and materials appropriated each year would be enough to build infrastructure necessary to ensure universal access to decent living standards (DLS) across the global South, including healthcare, education, modern housing, electricity, sanitation, refrigeration, heating/cooling, internet, transit, etc.
The quantity of land appropriated each year would be enough to ensure a nutritious diet for up to 6 billion people, ending hunger and undernutrition.
Possibilities for reparations and distributive justice
Because these damages have been inflicted by programmes implemented primarily by the IMF and the World Bank, we suggest these institutions should bear primary responsibility for repair.
Another possibility is to apportion responsibility to the governments of the countries that control these institutions. The USA wields veto power over all major decisions in both the IMF and World Bank, with a voting share of 16 percent. The countries of the global North (which represent 15 percent of the world population) control nearly 60 percent of the voting power, and generally vote as a bloc, enabling them to implement decisions against the will of the global South (which, despite having 85 percent of the world’s population, has a minority of the votes).
There are several ways to calculate the scope of reparations owed. One approach is to quantify the cuts to public services, aggregate wage reductions and losses due to capital outflows suffered by each nation, to the extent that these are attributable to structural adjustment, adjusted for inflation and increased at a historically average rate of interest.
Another approach is to quantify total losses to potential national income due to structural adjustment against a counterfactual non-adjustment scenario. Claimants could also consider reparations for ecological damages and losses due to unequal exchange, to the extent this is exacerbated by structural adjustment.
Another approach is to focus specifically on repairing the negative welfare impacts where existing empirical studies have demonstrated SAPs played a direct causal role (eg, poverty, mortality, healthcare access).
Direct compensation can be provided in such a way that reverses these deprivations—eg, by ensuring access to necessary goods and public services—and restores people to the social indicators they would currently enjoy if the insult had not occurred and they had continued on a normal trajectory of improvement.
Two major challenges arise. The first is that the IMF and World Bank enjoy sovereign immunity status which may prevent them from being sued via normal channels for damages caused.
The second is that the undemocratic nature of the IMF and World Bank would pose an obstacle to reparations cases being brought from within the institutions; for example, the US could simply veto such an initiative. A formal reparations programme would therefore likely require cases to be brought against liable parties under international law.
In addition to reparations for past and current damages, we argue that the IMF and World Bank must issue a guarantee of non-recurrence, abolishing structural adjustment conditions on all further lending.
Furthermore, following suggestions made to the UN Human Rights Commission (A/HRC/43/45), they must be made to perform prior assessments of damages that could be caused by their lending policies. Any future programmes should also be calibrated to considerations of distributive justice, to ensure that programmes bring about a socially just allocation of resources.
On top of this, it is imperative to take steps to protect against future injury. We argue this should entail democratising the IMF and World Bank, so that all countries get a say when it comes to determining policy; ending the sovereign immunity status of these institutions, so they can be held liable for future damages; cancelling odious or overpaid debts; and introducing a fair, transparent mechanism for defaulting on external debts.
If the IMF and World Bank cannot be reformed from within, they should be replaced by alternative institutions that can carry out the necessary financial functions in a more democratic way.
Indeed, there is evidence that such alternatives are already emerging, in the form of the BRICS New Development Bank and the Asian Infrastructure Investment Bank, which were established by and for global South countries, and which do not attach structural adjustment conditions to finance.
We have provided an overview of evidence demonstrating that SAPs had negative impacts on human welfare across several key registers, and we have articulated a first argument for reparations. It would fall next to scholars of international law to assess questions of legal procedure and practical implementation.
However, even in the absence of a practical way forward, we contend that the argument for reparations nevertheless establishes an important principle and can contribute to current efforts to change IMF and World Bank policy and abolish structural adjustment conditions, while underlining the need for new institutions.
Source: gh.bmj.com, March 23, 2026. A longer version of this article is available online.