Structural Adjustment Term Paper

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Structural Adjustment Policies

Structural Adjustment's Bitter Realities

Debt is an efficient tool. It ensures access to other people's raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters' income to a bare minimum while the North enjoys huge savings...."

Susan George - a Fate Worse Than Debt

New York: Grove Weidenfeld, pp. 143, 187, 235)

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To the uninformed, the phrase "Structural Adjustment" would appear to be some kind of a problem with the foundation on a house that needs fixing, or maybe the wall of a building is crumbling and needs adjustment. But in reality, Structural Adjustment Policies (SAPs) are those policies that the World Bank (WB) and the International Monetary Fund (IMF) have put forward over many years to developing nations (poor countries); SAPs are conditions that must be agreed upon prior to those struggling nations receiving funds. Ironically, in many instances these policies - that were supposed to have brought developing nations out of poverty - have made it very difficult for poor nations to escape poverty. The SAPs should be re-designed so that recipient nations are not locked into programs and policies they cannot maintain; and for many impoverished nations, their debts to the IMF, WB, and other institutions, should be forgiven so they can start with a clean economic slate.

EXPLANATION of STRUCTURAL ADJUSTMENT: Both the WB and IMF provide millions of dollars in loans to developing nations. But the red tape that goes along with those loans, according to many international watchdog groups, journalists, social advocates and other interested objective parties, tends to keep those recipient nations in poverty.

Term Paper on Structural Adjustment Assignment

How does this happen? According to Global Issues (www.globalissues.org),the SAPs keep poor nations dependent on the richer nations. These policies began in the 1980s; they were genuinely in response to the dire conditions in many developing countries. The SAPs were launched on the heels of policies known as "neoliberalism" and the "Washington Consensus." The red tape attached to a given loan may include a "liberalization" of that country's economy ("resource extraction" and "export-oriented open markets created"), Global Issues explains. Also, privatization, reduced protection of domestic industries, currency devaluation, higher interest rates are policies demanded by the IMF and WB prior to a nation receiving millions of dollars in loans. What these specific requirements end up doing, Global Issues continues, is requiring the poor nation to export more in order to raise the capital to pay off their debts on the payment schedule set up for it.

And because the SAPs red tape applies to so many developing countries, and so many are asked "or forced" to move their exports into the world market place ("before they are economically and socially stable and ready"), and ordered to "concentrate on similar cash crops and commodities, it is like a huge price war," Global Issues continues. Cheaper resources result from these policies, and this "favors the West," which leads to exploitation of those poor nations by the very rich nations that loaned the money in the first place, the Global Issues argument goes.

At first glance, it may seem that the growth in development of export goods such as coffee, cotton, sugar and lumber, would be beneficial to the exporting country, since it brings in revenue," according to author Richard Robbins (Global Problems and the Culture of Capitalism) on page 95 of his book. But in fact, when a country exports "raw or unprocessed materials" just to get some cash out of it, but that country has to then import lumber that is processed (because they don't have the processing facilities), that is a type of "exploitation" that is alluded to as "unequal exchange," Robbins writes. In the end, the cost of importing finished lumber products is greater than the money received for the exports that were necessarily exported so that poor country (that may have rich natural resources, i.e., forests but no way to process lumber) could pay back the IMF / WB vis-a-vis SAP.

Meanwhile an article in the Ecologist Report (Cavanagh, et al., 2000) asserts that the IMF, "...through its notorious structural adjustment programmes (SAPs)," has "imposed harsh economic reforms in over 100 countries" in the developing world, which has thrown "...hundreds of millions of people deeper into poverty." How did this policy come about in the first place? Cavanagh explains that the Third World "debt crisis" of the 1980s caused rich nations (through the IMF and WB) to make loans to poor countries. And when the oil prices shot upward in the 1970s, raising interest rates dramatically, "heavily indebted countries suddenly found themselves unable to make soaring interest payments." Hence they could either default to the WB, or agree to be "restructured" and to be "maintained soundly" which involved SAP. Those SAPs forced (as explained earlier in the paper) poor countries to integrate their national economies into the global market, "enabling multinational corporations to access cheaper labour markets and natural resources, and increase exports" (Cavanagh p. 23).

An example of the restructuring that is required by IMF policies is the "downsizing" that SAPs require of poor countries; the IMF requires (in some cases) that countries "privatize public companies and services and fire public sector workers" (Cavanagh p. 24). So, the unemployment of workers makes matters worse in that economy, not better. Another restructuring requirement is that the debtor nations cannot engage in "deficit spending," and as a result, social services are often cut by the poor countries in order to meet their payment obligations to WB and IMF. "In Zimbabwe," Cavanagh continues, spending "per head on healthcare has fallen by a third since 1990 when a structural adjustment programme was introduced."

WHAT IS the WORLD BANK'S IMPACT? On the subject of Africa, the WB, and structural adjustment programs, an article in the Journal of Asian and African Studies (Gibson 2004) asserts that it is "now generally accepted in African studies" that the 20-plus years that African has been under the dictates of structural adjustment "...has been a devastating failure." Not only have the WB policies "failed," Gibson writes, but indeed the continent of Africa has "moved from 'crisis' to 'tragedy.'" and what is the reason for this reported slide into tragedy? From the WB's perspective, Gibson explains, Africa's economic performance has been poor; African "elites" and "government patronage" have drained the nations in Africa of the resources that the WB has tried to provide, in the view of the WB. The promises of security, health, and education, made by the WB when the loans were approved, "can no longer be met," Gibson goes on.

When the WB insisted that Zambia privatize it's copper resources, and Zambia complied with that SAP, no advantage was realized in that process. "Zambia is now a country with increasing unemployment and poverty," Gibson asserts, "and a declining infrastructure." Also, the SAPs that placed strict guidelines on Zambia's agriculture called for the use of "high-yield hybrid maize dependent on fertilizer." But the bad news is that the fertilizer degraded the soil, and so Zambian farmers were forced to "plant in riskier areas close to the flood plain." When an El Nino brought heavy rains into Zambia, millions of dollars worth of crops were destroyed, which produced, "for the first time in living memory, a famine..."

The Gibson article explains that the World Bank's millions in loans notwithstanding, more than twenty African nations today "have a per capita income less than that in 1975." And life expectancy in many African nations is "less than 40 years"; HIV / AIDS, malaria, ad TB rates "are the highest in the world, as are infant morality and malnutrition," Gibson concludes.

Meanwhile, Ghana, a country which went through about twenty years of structural adjustment policies, "degenerated into" a "highly indebted poor" country, according to the review of a book (titled IMF and World Bank Structural Adjustment Programs in Africa: Ghana's Experience) published in the journal Economic Development and Cultural Change (Ankomah 2001). Just like the lumber industry failure in Zimbabwe, the cocoa industry in Ghana, the "economic backbone" of Ghana, "suffered from devaluation of the currency," Ankomah writes (p. 500). And as the economy of Ghana became squeezed due to forced privatization, health and education became "unattainable privileges of 'cost recovery' schemes."

An article in the Canadian Journal of Sociology (Brym, et al., 2005) reflects the fact that "mothers with young children are especially vulnerable to the negative effects of structural adjustment." Women in developing countries are "typically saddled with reproductive and domestic work, including buying and preparing food" and taking care of their children's health and education, Brym writes. And since privatization of some government services involves "the elimination of basic food subsidies" and introduces "user fees" for health services and education the "burden" of SAPs "falls disproportionately on women and young children," the article explains.

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