(iii). Structural Adjustment Policies - Sapping the Poor

Quote from JUBILEE SOUTH PAN-AFRICAN DECLARATION ON PRSPs Kampala, 10-12 May 2001 (signed by 39 organizations representing several pan-African and regional networks and civil society groups in 15 African countries. It is also signed by the World Council of Churches):
"The World Bank and International Monetary Fund (IMF) have produced their Poverty Reduction Strategy Programmes (PRSPs) within the context of corporate globalisation. This process is being driven by and for the giant transnational corporations (TNCs) and global financial forces. These utilise the economic, political and military powers of their governments, and the World Bank, IMF and World Trade Organisation (WTO) to impose policies on the South and to restructure and run the world to serve their interests."

The widespread imposition of Structural Adjustment Programmes (SAPs) by the IMF and World Bank, which have emanated from and have been intrinsically inter-connected with the debt-crisis (i.e. being as they are policies conditional upon re-negotiation of debtor nations' loan repayment schedules) is the third interrelated factor which has been required to enable the process of 'neoliberal restructuring' for the benefit of the multinationals. These rigid macro-economic policy prescriptions, which by the 1980s had become the accepted doctrine of the International Monetary Fund and World Bank, are based upon the deregulatory, anti-inflationary austerity policies of "monetarism"- first associated with the Thatcher and Reagan era. The World Bank and IMF largely took over responsibility for most of the "bad debt" incurred by the "Third World" countries by the mid-1980's. Much of this debt was initially owed to private banks like Barclays, Credit Lyons, Chase Manhattan etc, but the IMF and the WB moved in and 'loaned' money to a wide range of countries who were about to default on these loans. This saved the big "private banks" from disaster, and gave the IMF and WB a position of overwhelming power that they have never relinquished.

The austerity programmes of governments and the IMF and World Bank are based on misleading criteria, and not-least narrowly focused theory, combining deflationary policies such as use of interest rates and fiscal restraint (holding down government expenditure), with holding down exchange rates (so as to encourage cheaper exports and so, improve balance of payments - the supposed prospects for increased national wealth for the given indebted country). The crudity of attaching disproportionatly more weight to tampering with the rigid interelationship between these 2 policies so as to rely on this as the main platform for economic growth while ignoring microeconomic conditions is damaging. This supersedence of aggregate national statistics happens dangerously at the expense of local conditions and intangible effects such as environmental costs or the creation of isolated areas of poverty from privatisation of parastatals such as water provision (due to increased charging - for e.g. in Ghana where after privatisation of the urban water supply - one of the conditions for further World Bank loans, the state is making villages pay for the upkeep of the boreholes and water pumps. (Source: The Guardian, Feb 8th 2002 by John Kampfner).

A further microeconomic oversight is the imbalanced development born out of restructuring due to the removal of state subsidies under pressure from the WTO, such as, for instance, concentrating on export production instead of domestic agriculture.

"In the village of Kpembe, the chief invited us for lunch. We ate chicken feet, soup and American rice. And yet the Katanga valley, just a couple of miles away, was until recently Ghana's rice bowl. It now lies fallow. Ghana used to be self sufficient in rice. The World Bank and IMF decreed subsidies had to stop, that poor countries should concentrate their efforts only on what they can export. And yet the US rice industry receives tens of millions of dollars in support. The double standards apply to water. No state help in Ghana, but subsidy aplenty in countries like the US".
(From The Guardian, "Cash and carry misery in Ghana", by John Kampfner, Friday February 8th, 2002)

Even the benefits of the macroeconomic discipline of interest rate and exchange rate policy on their own have not been easily realised (this being because the inflationary effect of increased import prices from the tendency towards low exchange rates means that the extent of fiscal rigidity to keep down inflation is higher than it should have to be, all stemming from the misplaced blind faith in comparative advantage when the holding down of exchange rates to maximise export revenues occurs within a world marketplace already awash with cheap commodity prices - dictated by multinational encroachment and the plethora of countries trading the same narrow range of commodities).

Infact, it is the intricate combination of indebtedness, imperialist Structural Adjustment conditionality and privatisation, and unfavourable terms of trade between economies in the North and countries of the South which is structured in such a way that perpetuates the neocolonial subjugation of the majority of the world's population, just as was the case in colonial times. Since th e 1970's, the 'Third World' debt crisis meant that in country after country across the developing world, the overbearing, unrelenting pressure to repay (since the level of spiralling debt in relation to national wealth was usually very high due to compound interest), became the driving force that forced these primary-good commodity suppliers to compete with one another, driving down the price of their goods.

Naiwu Osahon of the World Pan-African Movement:
"We were told too by the SAP (Structural Adjustment Policy) protagonists that we needed to increase our foreign currency earnings to be able to pay our strangulating foreign debts; import more goods and, of course, technology that uses foreign raw materials and spare parts to stay in operation. SAPs, we were told, ensure increased foreign exchange earnings by liberalising trade and scandalously marginalising the naira to enhance our export capabilities. Share jargon because, the liberalising business turned out to be a one way trap. A vicious circle in effect, encouraging us to export more at low prices to import more at high prices because they dictate the prices and no matter what we do, we always en d up the debtors".

"Our IMF African gurus argued that afterall, the Japanese yen was 120 or so to the dollar. What they concealed from us was that the yen was fixed deliberately that way from inception, with local values set in much the same way as a hundred British shillings was fixed to produce one pound. In other words, the yen was worth a shilling relatively, from the start. The yen didn't just jump overnight from 1 - 120 to the dollar as African currencies were forced to do by the IMF"(Ref: "Just Before We All Die", by Naiwu Osahon - World Pan-African Movement, June 2001.)

Go to next section >>

<< Back to contents