NOTES ON STRUCTURAL ADJUSTMENT PROGRAMMES (Róbinson Rojas Sandford)(1997)
Since the late 1950s the International Monetary Fund have been
imposing monetarism (neo-classical economic theory based economic
policies) as a condition for lending money to less developed
societies facing problems with their balance of payments.
What makes of monetarist strategies a main issue for developing
societies during the 1980s and the 1990s, is that the World Bank adopted
as its main policy imposing monetarist economic policies on
less developed countries. Therefore, since the late 1970s-1980s until
today, not only the IMF but also the World Bank have been the champions
for creating deregulated markets all over planet earth. Thus, poor
countries had to apply the above policies if they needed to finance
deficit on balance of payments and/or finance new projects for further
economic and/or social development. They have to accept the "Washington
Consensus", as this neo-liberal perspective is called.
Structural Adjustment Programmes is the name for this comprehensive
economic policies imposed on or accepted by the ruling elites in less
developed societies. The main aim of structural adjustment programmes
is to transform all the economies in the world into capitalist economies
inserted in one system under the management of international capital.
If we look at the main five measures imposed by adjustment programmes
it appears very clear that they tend to facilitate an economic
environment favourable to the activities of globalized production as
controlled by transnational corporations:
1.- promotion of outward-oriented growth;
2.- expansion of the private sector's role as the growth process's
driving force;
3.- removal of barriers to international capital flows;
4.- diminishing economic role of the state; and
5.- deregulation and restructuring of domestic labour markets.
During the 1950s, 1960s and 1970s, "structuralism" was the established
orthodoxy for development theory and policy for African, Asian and Latin
American developing countries.
The basic tenets of structuralism were as follows:
1.- in poor countries, the economies were structurally different from
advanced industrial economies (capitalist center of the world
economy). This structural difference was an outcome of colonization
by Western European imperialist nations)
Because of the above:
2.- Advanced industrial economies needed economic policies as theorized
by Keynes (the management of aggregate demand -national demand),
while
3.- poor countries economies, being disarticulated ("fragmented"
economies, "fractured" economies), were a "special case" of
Keynesian economics: development economics.
4.- development economics was about the state-government playing the
main role in social and economic "modernization", and planning
economic development, in partnership with private capital -both national
and foreign- passing through stages of import-substitution leading to
export-led strategies.
All the above shaped a school of thought based on the idea that the
market economies in the world were divided in a "dual" system: modern
economies and traditional economies, being the traditional economies
in need of becoming modern through "development economics".
During the last stage of the period of the Cold War, the concept of
"mono-economics" began to develop, based on the notion of final victory,
end of history, the arrival of the final stage in human development,
because the capitalist system had defeated-destroyed all alternative
attempts to economic development.
This "mono-economics" (Friedman, Von Hayek, et al) concept allowed to
argue that the dynamics of the free-market was good for both "advanced
industrial economies and poor economies". Calling themselves
"neo-liberals", which is just another label for "neo-classicals", the
followers of "mono-economics" argue that:
1.-The free-market structure delivers economic growth, full employment,
and human development both in industrialized areas and rural areas of
the world;
2.-Structural adjustment was necessary for advanced industrial economies
and less developed economies, with the aim of unchained those
economies from Keynesian constraints and "development economics"
constraints;
3.-Structural adjustment has two main components:
a) stabilization of prices through balanced budgets, and
b) market liberalization/deregulation plus public sector reform as
the environment for free-markets.
4.-a central assumption is the primacy of macroeconomic stabilization
for both the external sector (balance of payments), and the domestic
sector (inflation under control mainly through controlling the level
of wages)
5.-to support the above notions, the following political assumptions
were necessary:
-the state is always enemy of economic growth;
-international financial institutions are more prepared to lead
structural adjustment than domestic financial institutions;
-international capital is the most efficient capital available for
poor economies in their quest for economic take-off.
Of course, the origin of structural adjustment policies has to be sought
not merely in the deteriorating international economic environment of
the 1970s, but also in the evolution of policy thinking within the
World Bank, the latter evolving from the evolution of economic thinking
within the elite groups in the US and the UK.
Structural adjustment policy is composed of:
A) Stabilization, and
B) structural adjustment.
A) is composed of
A.1 fiscal policy
A.2 monetary policy
A.3 devaluation
B) is composed of
B.1 resource mobilization
B.2 public sector allocation
B.3 market liberalization
B.4 institutional reform
B.3) market liberalization is composed of:
B.3.1 goods market (agriculture and industry)
B.3.2 current account (exports and imports)
B.3.3 domestic financial markets (banking system)
B.3.4 capital markets (treatment to foreign capital)
B.3.5 internal factor markets (capital and labour)
B.3.6 return to market-determined price
B.3.7 removal of qualitative restrictions
B.3.8 promotion of private sector operations
B.3.9 limitations on the role of government
B.3.8) promotion of private sector operations is composed of:
B.3.8.1 divestiture (leaner civil service, health,
education, housing, etc)
B.3.8.2 closure (transferring state firms to the private
sector)
B.3.8.3 privatization of services (contracting out)
B.3.8.4 exposure to competition from the private
sector (prisons, hospitals, schools, etc)
(Some basic literature:
J.Toye, "Structural Adjustment, Issues and Experience", ILO, 1995
A. Rahman Khan, "Structural Adjustment and Income Distribution",
ILO, 1993
UNDP, "Stabilization and Adjustment. Perspectives on adjustment and
economic reform in Africa", UN, 1991
L. Demery and T. Addison, "The alleviation of poverty under
structural adjustment", World Bank, 1987.
Oxfam, "Africa. Make or Break. Action for Recovery", Oxfam, 1993
Oxfam, "Embracing the Future. Avoiding the Challenge of World
Poverty", Oxfam, 1994
Oxfam, "The Oxfam Poverty Report", Oxfam, 1995
D. Reed (ed.), "Structural Adjustment, the Environment, and
Sustainable Development", EarthScan, 1996
R.Rojas: 15 years of monetarism in Latin America: time to scream
UNCTAD: The Trade and Development Report, 1997 (press release 1)
UNCTAD: The Trade and Development Report, 1997 (press release 2)
R.Rojas: Notes on economics: about obscenities, poverty and inequality
World Development Report 1997, World Bank, 1997)
By and large, any adjustment programme will 'stabilize' the internal
economy through
adjusting the exchange rate;
reducing any fiscal deficit (reducing public expenditure
and/or increasing taxes),
contraction in the money supply,
and, 'structural' adjustment will
liberalize the trade regime (reduction/abolition of
restriction on imports;
more incentive to export);
improving the productivity of public investment
(charging for services,
abolishing subsidies, etc);
restructuring the tax system (through indirect taxes);
liberalizing the allocation of credit, and
improving the incentive to save;
improving efficiency of public enterprises
(emphasis on profits);
liberalizing prices (especially price of labour,
labour markets will be the main
target here).
SOME FINDINGS
Oxfam (1994) assessed World Bank practice as follows:
"Structural adjustment programmes are undermining recovery prospects,
compounding inequalities, undermining the position of women, and
failing to protect access to health and education services.
"Project interventions often continue to cause unacceptable -and
unacceptably violent- human displacement and environmental damage.
"The Bank has failed to develop a coherent debt-reduction strategy
for the world's poorest countries.
"While endorsing 'good governance' in the South, the World Bank is
itself unaccountable to citizens and governments in the developing
world."
Focusing on structural adjustment programmes, Oxfam (1994) summarizes
that "structural adjustment programmes (SAPs), designed by the World
Bank and the IMF, proliferated in the early 1980s, as one country after
another in the South was afflicted by a lethal combination of high
interest rates and falling commodity prices. Along with the balance-of-
payments loans came conditions. These required government compliance
with targets for residing budget deficits, liberalising imports,
deregulating internal markets, and promoting exports. The stated
objective has been to support export-led recovery. More recently, the
World Bank and the IMF have claimed that SAPs constitute and integral
part of a poverty-reduction strategy geared towards 'employment
intensive' growth."
And, then says that "what is unacceptable...is the imposition of the
type of extreme deflationary measures associated with structural
adjustment. The Bretton Woods system was created to avoid such
pressures, and far more could have been done to develop alternatives.
In particular, as we argue below, the Bretton Woods agencies should have
demanded large-scale debt reduction to release development resources"...
"Instead, the IMF has imposed a monetarist strait-jacket on much of the
South. Potentially competitive labour intensive industries and rural
employment have been undermined by declining public investment in social
and economic infrastructures, credit shortages and import constraints.
Moreover, the imposition of an 'export-led growth' strategy for
resolving the debt crisis has carried the seeds of its own destruction,
especially in the world's poorest countries. Increased commodity exports
have contributed to the most protracted and deepest depression in world
markets since the 1930s..."In Oxfam's view, these adjustment policies
were in large measure responsible for the 'lost decade' of the 1980s,
when most developing countries experienced steep declines in human
welfare. The danger now is that structural adjustment policies will
consign large swathes of the developing world to another 'lost decade'
of deepening poverty, rising inequality, slow growth and mass
unemployment"...
The following was Oxfam's overview of the 'lost decade':
---In Latin America per capita incomes dropped by 10 per cent and
investment fell from 23 per cent to 16 per cent of national income
during the 1980s. Import activity dropped sharply, as governments
transferred a massive stream of wealth -totalling over $200bn, or
some 6% of GDP, during the decade- out of the region. Inevitably,
deflation on this scale increased social misery, with the costs of
adjustment passed disproportionately to the poor. The World Bank
itself estimates that nearly one third of the region's population
was living in poverty by 1990, up from 27% a decade earlier; and an
estimated 10 million children are suffering from malnutrition. Over
the 1980s, the poorest 20% of the region's population saw their share
of income fall to less than 4%. Unfortunately, the Bank has remained
oblivious to the connections between these trends and its own
adjustment policies. The Inter-American Development Bank has
identified inequality as one of the major obstacles to recovery in
the region.
---In Africa, where more than thirty countries have embraced structural
adjustment, average incomes fell by 20% during the 1980s, open
unemployment quadrupled to 100 million, investment fell to levels
which were lower than in 1970, and the region's share of world
markets fell by half to 2%. Today, sub-Saharan Africa is the only
developing region in which poverty is increasing and human welfare
is worsening. Africa recovery prospects have suffered in acute form
from the emphasis placed by SAPs on export-led recovery. As one
country after another expanded production of primary commodities for
stagnant world markets, they contributed to the worst international
price slump since the 1930s. During the second half of the 1980s,
West African cocoa producers almost doubled their production, only
to see their foreign-exchange earnings fall. The IMF now concedes
that worsening terms of trade have undermined its adjustment
programmes, and the World Bank's most recent GLOBAL ECONOMIC
PROSPECTS report acknowledges that world prices for coffee, cocoa and
tea -Africa's major primary commodity exports- have been depressed by
oversupply."
An empirical illustration of Oxfam's argument is the following:
Diverging prices for commodities and manufactured goods in the
international market during the process of globalization:
UNIT VALUE INDEX
of manufactures OIL All
exported by groups food agric. minerals,
France, Germany, raw ores,
Japan, United Kingdom, materials metals
and United States
1960 100 100 100 100 100 100
1965 108 102 98 98 78 115
1970 117 95 108 103 70 148
1975 221 251 132 164 56 91
1980 329 556 102 106 74 108
1985 275 503 81 83 64 83
1990 446 230 63 61 53 76
1996 504 184 63 62 55 69
2006 529 570 81 59 52 169
----
annual
growth
1960-80 (%) 6.1 9.0 0.1 0.3 -1.5 0.4
1980-06 (%) 1.8 0.1 -0.9 -2.2 -1.3 1.7
Source: From UNCTAD Handbook of Statistics (2007) database at:
http://stats.unctad.org/Handbook/TableViewer/
(data processed by Dr. Róbinson Rojas.
________________________________________________________________________
SUMMARY FOR FREE MARKET ECONOMIES WITH NEGATIVE
NET FACTOR INCOME FROM ABROAD ($ MILLION -1992 PRICES)
------------------------------------------------------------------
1960-1992 1960-1975 1976-1992
TOTAL -3065221.19 -672230.50 -2392990.70
PER Day -254.48 -115.11 -385.66
PER HOUR -10.60 -4.80 -16.07
------------------------------------------------------------------
AFRICA/per hour -2.21 -2.01 -2.39
LATIN AMERICA/per hour -3.26 -1.52 -4.90
ASIA/per hour -1.79 -0.72 -2.79
INDUSTR>/per hour -3.35 -0.55 -5.98
------------------------------------------------------------------
Note: Six industrialized countries received more than 95% of the
above flow (United States, Switzerland, Japan, Germany,
Luxembourg and France)
===Source: World Bank Tables 1995===processed by Robinson Rojas===
________________________________________________________________________
Oxfam (1994) added that "...economic growth has yet to translate into a
reduction of poverty and inequality...". The World Bank "...also
confirmed that there is little prospect of economic growth making an
impression on poverty in the foreseeable future. In Ghana, the star
pupil of both the World Bank and the IMF, the average citizen will not
cross the poverty line for another half-century. Moreover, after a
decade of adjustment and aid transfers equivalent to 8% of national
income, private investments in Ghana remains insufficient to replace
existing capital stock, and the country's debt has tripled to over
$4bn."
Oxfam(1994) listed the following assessment of structural adjustment
programme's effect on employment:
1) In Zambia, fragile industries have been confronted with punitive
interest rates and a surge in competition from cheap imports. More
than three-quarters of its textile factories have closed by 1993,
generating mass unemployment in urban centres. "This has not
prevented the IMF from lauding Zambia as a model to be followed by
others for its achievements in lowering inflation.
2) In countries such as Mexico, Costa Rica and Bolivia, average wages
have fallen by one third since 1980 -and they are still falling.
"This partly explains the increase of 38m to 69m in the number of
urban-based people living in poverty in the region. In Costa Rica,
one of Latin America's model adjusters, the proportion of the
population unable to meet its basic needs increased from 21% to 28%
between 1987 and 1991."
3) According to the International Labour Organisation, real wages in
Africa have fallen by between 50% and 60% since the early 1980s in
most countries. "In Tanzania, the average minimum wage was below
even the minimum food basket by 1988, and by 1991 it was insufficient
to purchase twenty day's worth of goods."
4) "In Latin America, open unemployment has risen to an average of over
10%, and is considerably higher in countries such as Peru and
Bolivia. In Sub-Saharan Africa, average unemployment in countries
such as Zambia, Tanzania and Ghana is in excess of 20%.
5) "Rising unemployment and falling wages have been accompanied by a
massive expansion of employment in the informal sector, which now
accounts for around two-thirds of employment in Africa. This has been
welcomed by the World Bank and the IMF as a move towards market
'flexibility'. However, that 'flexibility' reflects the deepening
impoverishment of women, who have been forced to take on multiple
jobs, working long hours for low pay in the informal sector to
maintain family income. Their plight has been worsened by a steep
decline in informal sector wages, which have fallen by almost 60% in
Latin America since 1980s."
6) "In Chile, widely cited as a model adjuster by the World Bank and the
IMF, income inequalities have widened dramatically. In 1990, minimum
wages were 20% lower than in 1980. Meanwhile, the income share of the
poorest 20% of the population fell by a fifth between 1980 and 1990.
Flexible labour markets are now the main cause of poverty in Chile."
( see C. Schneider, "Chile, the underside of the miracle", and
R. Rojas, "15 years of monetarism in Latin America. Time to scream")
7) Trade union rights "have been severely eroded in a number of
adjusting countries. Chile under the regime of General Pinochet is
most extreme example. But the right to collective action in defence
of wages has also been seriously curtailed in Ghana, Zimbabwe, Mexico
and the Philippines.
8) In Latin America, adjustment policies have dramatically changed the
"poverty profile in most countries. In addition to the general
increase in poverty noted earlier, the number of people living in
extreme poverty increased from 62m to 93m between 1980 and 1990. Over
the same period, falling wages and rising unemployment increased the
urban poor population, which in 1993 accounted for 60% of the total."
9) "In the Philippines, the mass unemployment and impoverishment caused
by stabilisation and structural adjustment forced millions of
destitute families to migrate to marginal upland forests and coastal
areas for a subsistence livelihood, with devastating environmental
consequences."
A. Rahman Khan ("Structural adjustment and income distribution. Issues
and experience", ILO, 1993), concludes that "the claim that, on average,
official adjustment programmes under the auspices of the World Bank and
the IMF have performed well, not only by the conventional standards of
promoting adjustment and preserving growth but also in terms of
protecting the poor, is very hard to substantiate convincingly".
Khan (1993) uses the following World Bank table to illustrate his
statement:
_______________________________________________________________________
The performance of the 19 highly intensively adjusting countries
Country Annual per Annual GDP growth Trend in poverty/
capita GDP rate (%) inequality
growth rate (%)
1980-90 1965-80 1980-90
_______________________________________________________________________
Argentina -1.7 3.4 -0.4 increasing rural poverty
Bolivia -2.6 4.4 -0.1 increasing poverty
Cote d'Ivoire -3.2 6.8 0.5 increasing poverty
Ghana -0.3 1.3 3.0 increasing rural poverty
Jamaica 0.3 1.4 1.6 not known
Kenya 0.4 6.8 4.2 increasing rural poverty
Malawi -0.5 5.5 2.9 increasing rural poverty
Mauritania -1.0 2.1 1.4 not known
Mexico -1.0 6.5 1.0 increasing rural poverty
Morocco 1.4 5.7 4.0 declining rural poverty
Pakistan 3.1 5.2 6.3 rising inequality
Philippines -1.5 5.7 0.9 increasing poverty
Senegal 0.0 2.3 3.0 not known
Togo -1.8 4.3 1.6 not known
Tunisia 1.3 6.5 3.6 declining rural poverty
Turkey 2.6 6.2 5.1 not known
Uganda 0.3 0.6 2.8 declining poverty
Venezuela -1.7 3.7 1.0 increasing poverty
Zambia -2.8 2.0 0.8 increasing poverty
________________________________________________________________________
source: World Bank, data gathered in 1992.
________________________________________________________________________
In the same work, Khan compares the performance of adjusting countries
and non-adjusting countries during the period 1980-1989.
The adjusting countries were 55:
Burkina Faso, Burundi, Cote d'Ivoire, Central African Republic, Chad,
Congo, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Madagascar,
Malawi, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone,
Somalia, Sudan, Tanzania, Togo, Uganda, Zaire, Zambia, Zimbabwe,
Bangladesh, China, Indonesia, South Korea, Nepal, Pakistan, Philippines,
Thailand, Morocco, Tunisia, Turkey, Hungary, Yugoslavia, Argentina,
Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guyana, Honduras,
Jamaica, Mexico, Panama and Uruguay.
The non-adjusting countries were 31:
Benin, Botswana, Cameroon, Ethiopia, Lesotho, Liberia, Mozambique,
Rwanda, Myanmar (Burma), India, Malaysia, Papua New Guinea, Sri Lanka,
Algeria, Egypt, Jordan, Oman, Syrian Arab Republic, Yemen AR, Yemen PDR,
Poland, Portugal, Dominican Republic, El Salvador, Guatemala, Haiti,
Nicaragua, Paraguay, Peru, Trinidad and Tobago and Venezuela.
The following were the main findings:
1.- Growth in per capita GDP between 1980 and 1990:
Adjusting countries: 27 of the 55 had negative rates of growth.
Non-adjusting countries: 16 of the 31 had negative rates of growth.
2.- Public expenditure in social sectors:
Adjusting countries:
Sectoral expenditure as % of total public expenditure
in 11 intensely adjusting countries:
Year Education Health Total (social sectors)
1980 14.8 6.6 36.2
1986 12.0 5.5 32.7
Non-adjusting countries:
Sectoral expenditure as % of total public expenditure
in 12 countries:
Year Education Health Total (social sectors)
1980 10.0 4.5 25.7
1986 12.1 4.7 28.6
3.- Infant mortality rate:
Adjusting countries: In 23 intensely adjusting countries the
of decline during 1977-82 was 12.7% and
during 1982-87 was 12.6%.
Non-adjusting countries: In 29 countries the rate of decline
during 1977-82 was 13.0% and during
1982-87 was 11.2%.
4.- Average undernutrition rate:
Adjusting countries: For 24 intensily adjusting countries
7.81% in 1980 and 8.44% in 1986.
Non-adjusting countries: For 32 countries 2.54% in 1980 and
4.31% in 1986.
5.- Primary school enrollment rate:
Adjusting countries: For 25 intensely adjusting countries
94.2% in 1980 and 90.1% in 1985.
Non-adjusting countries: For 33 countries 86.0% in 1980 and
91.1% in 1985.
________________________________________________________________________
About the rural poor, Oxfam (1994) said that "Oxfam's experience is
that, in the absence of redistributive reforms and effective state
intervention in support of the poor, the benefits of increased prices
tend to flow towards powerful traders and intermediaries. This confirms
the broader lesson, which the World Bank and the IMF continue to ignore,
that people operate in markets governed by power relations; and they
leave the market place with rewards which reflect those relations. The
evidence across the developing world is that narrowly-defined price and
marketing reforms are an insufficient mechanism for achieving poverty
reduction."
The following examples in Oxfam(1994) documented the above:
1) In Ghana, research by the International Fund for Agricultural
Development (IFAD) suggests that the benefits of pricing reforms
have gone mainly to cocoa farmers, rather than to the staple food
producers who account for the bulk of the country's poor. In
Zimbabwe, tax and pricing reforms under adjustment have brought
windfall gains for commercial farmers, but relatively modest
improvements for smallholders.
2) "In Zambia, Tanzania and Mozambique, where Oxfam works with
smallholders producers, higher prices have not 'trickled down' to the
poor, most of whom are excluded from effective participation in
markets by inadequate access to land, credit and marketing
infrastructure. Instead, the prime beneficiaries have been
monopolistic private sector traders, who are well placed to exploit
the poorest producers and most marginal areas."
3) "In the Sahel region of Africa, the liberalisation of agricultural
marketing has had adverse consequences for many of the poorest
producers. According to a World Bank technical working paper on
Senegal, Mali and Niger, "the withdrawal of parastatal agencies from
the agricultural sector resulted in increases in farmgate prices for
inputs, due to the cessation of credit schemes. These increases in
costs were not compensated by increases in process of crops and
livestock." The report goes on to note that low prices, along with
the collapse of public investment on extension services, have
remained a major disincentive to increased investment."
4) "Agricultural production is growing more slowly in Sub-Saharan
African countries adhering most closely to World Bank-IMF adjustment
policies than in other countries. Independent research suggests this
reflects the erosion of extension services and infrastructural
support caused by expenditure cuts."
5) "In Nicaragua, Oxfam works with smallholders livestock farmers who
have seen their livelihoods undermined by restrictions on access to
credit following the introduction of an IMF stabilisation programme.
As a result of tough new conditions and high interest rates, the
amount of credit taken up by smallholders fell by two-thirds in the
year following the introduction of the 1991 stabilisation programme.
In Costa Rica, agricultural credit to small-scale farmers was cut by
half during the second half of the 1980s, while the country's SAP
reoriented resources towards the commercial export sector."
6) "In Zambia, Oxfam works with poor women farmers. Because of their
urgent need for post-harvest cash and inability to market their crops
following the withdrawal of state purchasing agencies, these women
have been forced to sell to private traders at extremely low prices.
As a recent World Bank report acknowledges, smallholders across the
country have been seriously affected by an IMF-imposed credit
squeeze."
7) "In Tanzania, Oxfam project partners have been unable to market their
cotton crop, because of the collapse of state-supported
infrastructure and transport provision. As a result, producers have
lost household income and the country has lost desperately-needed
foreign exchange."
8) "In the Philippines, import liberalisation has encouraged a sharp
increase in imports of rice, corn and other food staples. These
imports have undermined the livelihoods of peasant producers and
driven down rural wages and the household incomes of the poor. In the
Andean countries of Latin America, Oxfam has witnessed a similar
process, with heavily subsidised US grain exports destroying local
livelihoods."
9) "In Mexico, adherence to IMF stabilisation guidelines resulted in a
reduction of price support and credit provision for smallholder maize
farmers. This compounded rural poverty resulted in increased male
migration to urban centres, adding to the labour burden of women. The
future of the rainfed, smallholder maize sector in Mexico remains
uncertain in the face of moves towards trade liberalisation under
NAFTA. Some estimates suggest that as many as 6 million producers,
mainly farming ecologically fragile hillsides, will be displaced by
US maize exports."
10) "Adjustment policies typically increase prices for commercial crops,
where marketing is controlled by men, rather than for staple food
crops controlled by women. This has had important implications for
the distribution of power and income within the household. It has
also resulted in additional demands on female labour to support
cash-crop production."
As Oxfam (1994) concludes "what these cases illustrate is that the state
has a vital role to play in developing agricultural production and food
security. This includes acting as a buyer of last resort to maintain
prices, providing credit and extension services to smallholder
producers, and protecting local food systems from cheap imports. The
state also has a vital role to play in supporting investment in
smallhoder agriculture."
The above is exactly what Western European governments have been doing
in wealthy Europe since the late 1950s until today with the Common
Agriculture Policy, and the United States government with their farmers.
The question is, why what is good for rich countries' farmers is
'inefficient' for poor countries' farmers. The answer is straight
forward: the IMF and the World Bank impose structural adjustment
programmes in poor countries to protect the interests of rich countries'
capitalist ruling class. Thus, IMF and World Bank claims that they are
'helping poor countries' to modernise and develop are utterly dishonest.
Ten years ago, in 1987, the United Nations/NGO Workshop on "Debt,
Adjustment and the Needs of the Poor", that took place in Oxford,
concluded:
"The economic crisis has exposed the unsustainability of the development
models adopted by the elites of the Third World and supported by
policymakers of the North and the international community; models of
development which have brought countries into greater dependence, on an
unequal basis, on the world trade and financial systems. In the
post-colonial period, many Third World countries have continued to be
dependent on the export of primary commodities as the main engine of
economic growth. However, the prices of primary commodities have
plunged 'vis-a-vis' prices of manufactured goods due to reduced demand
from the North and oversupply in the South (partly caused by the World
Bank's encouragement to Third World countries to expand primary
commodity exports and over-optimistic price projections). The fall in
terms of trade alone is causing the Third World to lose US$100 billion
a year which are transferred to the rich countries in the form of
cheaper imports and profits from exports"..."It is clear that the crux
of the development crisis rests on the unequal distribution of
resources and economic power at both the international and national
levels. This basic inequality is reinforced by outward-looking
development models (dependence on primary commodity exports, foreign
investment and foreign loans, over-dependence upon non-essential
imports) that increasingly suck resources from the Third World. At the
same time, inequalities existing at the national level in Third World
countries mean that when GDP declines, the poor suffer most in terms of
retrenchment and unemployment; sharply lower incomes due to the
collapse of primary commodity prices; government cutbacks on subsidies;
reduced access to welfare, health and education; and increased consumer
prices due to devaluation and elimination of subsidies." (from "Final
Statement of the UN/NGO Workshop on "Debt, Adjustment and the Needs of
the Poor", in WORLD DEVELOPMENT REPORT, Vol. 15, Supplement, pp. 255-
261, 1987).
IMF and World Bank-imposed cut backs on social expenditure as a
an 'efficient' measure to implement structural adjustment programmes
have been burdening the poor sectors of less developed societies.
Oxfam (1994) found that "in the Philippines, real per capita spending
on health was lower in 1992 than in 1982. Moreover, the share of health
spending in the total budget fell from 3.4% in the early 1980s to 2% for
the period 1990-1993. Meanwhile, the expansion of cost-recovery has
undermined the access of the poor to health provision".
"In India, the Department of Rural Development cut its social
expenditure budget in the first year of the country's stabilisation
programme. This was followed in 1992-1993 by a 46% cut in the rural
sanitation budget and a 39% cut in rural water-supply spending -areas
of social expenditure of vital importance to poverty reduction."
"In Nicaragua, per capita social spending is back to the level of the
mid-1970s, following a dramatic decline during the 1990s"..."Meanwhile,
infant mortality rates are increasing, after declining steadily for more
than a decade."
"In Zimbabwe, per capita spending on health and education has fallen by
one third since the introduction of an adjustment programme in 1990"...
"Infant and maternal mortality rates have increased sharply, with
maternal mortality rates have increased sharply, with maternal mortality
rates among women from Harare attending the city's main hospital
doubling between 1991 and 1992."
"In Zambia, where the World Bank pledged to protect social expenditure,
the 1992 education budget accounted for 9.1% of the total budget,
compared with 13.4% in 1985. In the health sector, the World Bank itself
has acknowledged that the introduction of user-fees is perceived by
village women as a serious threat to their health status, yet it
initially supported their introduction. These fees have had a
detrimental impact on the provision of immunisation for measles,
whooping cough, diphteria and tuberculosis -diseases which have
re-emerged as major killers across the country."
"Evidence from many developing countries have shown that economic
pressures and the introduction of user-fees in education result in
disproportionately higher drop-out rates among young girls."
"Oxfam's experience across Africa, Asia and Latin America is that the
curtailment of social services, has forced women to compensate by
increasing their unpaid work-burden. Increased poverty, the collapse of
water and sanitation services, and the erosion of primary health acre
provision has brought with it an increase in incidence of
poverty-related diseases -such as measles, cholera and malaria- and in
the amount of time spent by women caring for the family."
United Nation's "Human Development Report 1996", identified five types
of bad economic growth that were most common in the world after the
triumph of "globalization", which is equivalent to structural adjustment
programmes in less developed societies. The five types were:
-Jobless growth -the overall economy grows, but fails to expand job
opportunities.
-Ruthless growth -the rich get richer, and the poor get nothing.
-Voiceless growth -the economy grows, but democracy/empowerment of the
majority of the population fails to keep pace.
-Rootless growth -cultural identity is submerged or deliberately
outlawed by central government, as in some of the
states of former Yugoslavia or the Kurdish areas of
Iraq and Turkey.
-Futureless growth -the present generation squanders resources needed by
future generations.
About the last type of growth, two major forces contribute to increase
environmental damage when structural adjustment programmes are
implemented:
-activities of transnational corporations in the
manufacturing, agribusiness and mining sectors, creating atmospheric
pollution, water pollution, degrading fertile soil, and making million
of smallholders landless.
-activities of poor people, both in the countryside and the urban
areas through survival activities.
D. Reed (ed.), "Structural Adjustment, the Environment, and Sustainable
Development", Earthscan, 1996, wrote a
"Summary of the Environmental Impacts of External/Internal Adjustments.
"...Both devaluation and trade liberalization"...in..."the countries
included in this study"..."have had important and immediate effects on
their extractive and agricultural economies. In some cases, the growth
impacts are clearly positive; for example, new agricultural incentives
have stimulated expansion and diversification of tradeable crops and
shifts to nontraditional commodities. The environmental impacts of those
shifts are positive in that they have improved relative returns to the
agricultural sector, raised farm incomes for some producers, and thereby
encouraged on-farm investments. Over time, these improvements may also
encourage the introduction of new technologies and reduce poverty-
induced environmental damage."
"One of the key points raised in the foregoing conclusions is that the
environmental impacts of the external adjustments are determined largely
by the farmers' status in the adjusting countries. Commercial producers
are able to respond to new price incentives from international markets
by diversifying crops, intensifying production, and continuing to
introduce new technological improvements. They are also able to absorb
the rising costs of agricultural inputs without major difficulty. In
short, the changing ratio of inputs to producer prices has either
remained favourable to commercial farmers or their expanded production
has overridden the negative effects of relative price changes."
"Small farmers and rural workers with little or no land cannot absorb
the increased costs of agricultural inputs, such as seed and fertilizer,
as easily; nor have they been able to respond as effectively to the new
price incentives offered by trade liberalization. Given their precarious
situation, the small farmers' priority is to ensure their families' food
security, often by extensifying food production, with all the attendant
environmental problems. There are indications that the small farmers'
situation has opened opportunities for commercial farmers to expand
their commercial land holdings, thereby increasing their benefits from
the emerging economic system. The full impact of the emerging economic
changes on small farmers and rural populations will become more evident
when the impacts of internal adjustment, including fiscal policy reform,
are taken into account."
"The extractive sectors, including forestry and mining, have responded
quickly to the new economic incentives. Expansion in these sectors
created environmental problems, and although some are already visible,
the studies suggest that the long-term impacts may be more serious.
This point also applies to the tourist sector. Local employment may
increase as new hotels and facilities are built, but environmental
problems are already in evidence and are expected to intensify. Expanded
industrial production, coupled with expanded transport systems relying
on poorly maintained used equipment, will lower the quality of urban
environments through rising air pollution levels. These environmental
costs are not immutable features of the adjustment programs implemented
in the nine countries. They often result from disregard for the effects
of price changes on the environment and from the lack of complementary
policy reforms prior to or during the economic restructuring process."
"...As regards reductions in agricultural extension activities and
social services, the impacts fall decisively on the poor, and most
directly on the rural poor and women"..."Loss of credit for agricultural
inputs, such as hybrid seeds and fertilizer, the reduction of
agricultural extension services to encourage intensification of
production, and the disruption of marketing systems caused by
privatization are among the most direct effects of internal economic
adjustments on rural populations. These changes generated downward
pressure on the living standards of the poor and, in the process,
accelerated the most intractable environmental problem facing many
countries -that is, poverty-induced environmental degradation."
"...Poverty has deepened in seven of the nine countries, and it continues
to be pervasive in El Salvador. In these countries, the 'informalization
of the economy', declining agricultural productivity in many areas,
diminishing access to agricultural inputs and technical advice, an
increasing population pressures have converged to lower living
standards, particularly among the rural poor. Cutbacks in social
services have weakened the survival systems of the most vulnerable. The
poor respond to their falling standards of living by migrating and by
increasing their reliance on natural resources."
"Depending on conditions in each country, the direction of migration
varies: in some African countries, the poor tend to move back to the
land; in El Salvador, Jamaica, and Venezuela, they move to urban areas.
Jamaicans often emigrate from the island to the United States and
Canada. Those who remain survive through
agricultural extensification,
deforestation,
intensified use of marginal lands, and
a wide range of informal productive activities ranging
from brewing home beer to catching animal species
for export."
"The decline in living standards has been accompanied by a weakening
of institutions of both the government and civil society involved in
managing and protecting the environment. The institutional decline
resulted in the loss of resource rents, weakened control over natural
resource management, and increased extraction of natural capital. In
short, the social and institutional impacts of adjustment measures
transmitted to the environment are profound, and they may have
long-term consequences."
________________ |
