In principle, the function of the IMF is admirable and reflects the goal set out in the United Nations Charter: "to employ international machinery for the promotion of the economic and social advancement of all peoples." Of course, the IMF cannot simply lend a country huge sums of money without preconditions. It must intervene in the fiscal policies of the borrower nation to enable it to get out of debt and be able to repay the loan. This is a delicate matter, since this sort of intervention necessarily infringes on the borrower's sovereignty.
In practice, as revealed in the U.S. Army's official manual "Army Special Operations Forces Unconventional Warfare" (per WikiLeaks, December 2008), the IMF is a "Financial Instrument of U.S. National Power and Unconventional Warfare." From its beginning in 1946, it was structured to serve this purpose at the insistence of the U.S., which had emerged from WWII as the world's most powerful military and economic power.
The IMF has 189 member nations. The voting power of each member country is proportional to the size of its economy. The U.S. GDP is today a quarter of the $80 trillion global economy, and China is second at 15.4%. The U.S. GDP equals the sum of the 8 largest economies after China: Japan, Germany, the U.K., France, India, Italy, Brazil and Canada. This gives the U.S. effective veto power over all major IMF decisions.
The IMF requires an applicant nation to commit to a set of economic reforms called a structural adjustment program (SAP). These SAPs are shaped by neoliberalism, the prevailing ideology of capitalism since 1980. Neoliberals envision society itself as a market, and they see all interactions among citizens as transactions within this all-encompassing market. For neoliberals the highest value is freedom understood as absence of coercion (especially in markets). Government control or regulation is essentially coercive. It's at best a necessary evil, and a free society should minimize it.
Neoliberals believe that competition for profit in a free market liberates the creative abilities of the best and brightest and benefits society far more than government programs. To maximize entrepreneurial activity and reduce government expenses, they push for productive capacities, services and institutions such as education, health care and transportation to be privately owned. The resulting budget reductions for public institutions and social programs are commonly referred to as "austerity."
To the chagrin of neoliberals, most people regard public transportation, education and health care as rights, and resist privatization and austerity. As Naomi Klein argued in The Shock Doctrine, it takes a painful crisis like the American-supported coup in Chile in 1973, or out-of-control debt in the developing countries of Latin America, to force people to accept austerity. In such cases the IMF is always ready to gift them with neoliberal freedom in the form of a SAP. Other lending institutions and governments are usually unwilling to lend to a debtor country unless the IMF has certified that the country is carrying out its SAP.
The IMF tells the debtor nation to grow its economy by creating a favorable climate for investment, especially from abroad. International corporations must be welcomed and accommodated. This requires maximizing their profitability by reducing environmental and other regulations that cut into profits, and by curbing the power of unions to drive up labor costs. Taxes may need to be increased to shore up government revenue, but this tax increase should be on ordinary citizens rather than on holders of capital.
In recognition of American dominance in the IMF, the neoliberal prescriptions for debtor nations are known as the Washington Consensus. They have turned Latin American countries into capitalist theme parks with reduced public-sector employment, underfunded social programs and shrunken subsidies. State-owned assets such as trains, park lands, colleges and medical facilities are sold off (privatized). As George Monbiot puts it, privatization allows "corporations to set up tollbooths in front of essential assets and charge rent, either to citizens or to government, for their use."
For example, in 2019 the IMF offered a $4.2 billion loan to Ecuador. The austerity requirements for this loan included ending a fuel subsidy that had been in place for 40 years, regressive tax increases, and changes in labor law to favor employers. Massive riots forced President Moreno to reinstate the fuel subsidy and promise to renegotiate other austerity measures. The situation there remains unstable.
The IMF itself issued a report in June of 2016 which admitted that austerity measures in its SAPs have failed to generate the economic growth that would enable debtor nations to repay their loans, and have increased inequality which "in turn hurts the level and sustainability of growth." In other words, its SAPs are debt traps. Why, then, is the IMF still imposing austerity in Ecuador and most of Latin America?
Austerity causes unemployment, reduced income and a lower standard of living for the working classes. How could anyone think that drastic cuts in the purchasing power of ordinary citizens would promote economic growth? As Paul Krugman pointed out in 2015, "Since the global turn to austerity in 2010, every country that introduced significant austerity has seen its economy suffer, with the depth of the suffering closely related to the harshness of the austerity."
The battle in this country for universal health care, the protests of the gilets jaunes in France and the massive demonstrations in Ecuador, Chile and Lebanon are all part of a global resistance against neoliberalism, the ideology of a capitalist elite that even uses the IMF, a UN agency, to hoard the resources of society for themselves.