APRIL 1990 - VOLUME 11 - NUMBER 4
E D I T O R I A L
Structural adjustment doesn't work. Structural adjustment doesn't work. Structural adjustment doesn't work.
How many times does it have to be said? Structural adjustment doesn't work.
"Structural adjustment" is the name the IMF and World Bank give to the austerity measures they require countries to implement in order to receive loans desperately needed to meet payments on their debt. The measures range widely, from trade liberalization and currency devaluation to raising interest rates to cutting government expenditures and privatizing state-owned enterprises.
Structural adjustment packages are premised on the notion that relying on market forces is the most efficient way to distribute resources. By freeing up market forces and correcting distortions in the economy, the IMF and World Bank expect poor countries to increase export earnings and cut expenditures so that they can reduce their balance of payments deficits.
Structural adjustment plans gained prominence in the early 1980s, with the onset of the debt crisis. Third World debtor nations found themselves without the money to repay commercial bank loans taken out in the 1970s. The primary solution available to them was to borrow more, and the only financial institutions willing to lend more were the IMF and the World Bank.
In fiscal year 1989, the IMF had structural adjustment arrangements in effect with 46 countries; in the same year, the World Bank made structural adjustment loans to 26 countries.
The conditions attached to these loans have wreaked havoc with Third World economies and taken a devastating human toll. In the 1980s, per capita incomes declined slightly in Latin America and more sharply in Africa. Infant mortality rates rose throughout Africa in the 1980s, and now range between 100 and 170 for every 1,000 live births.
These consequences should not be surprising, as critics of the austerity measures have repeatedly pointed out. Currency devaluations in less developed countries do make exports cheaper, but they also make imports--which usually include machinery, energy resources, medicines and food--more expensive, thereby squeezing import-reliant domestic industries and causing severe social ills. Higher interest rates, which are supposed to encourage savings, deter the investment needed to create jobs. Cuts in government spending, designed to eliminate waste and save money, create further unemployment and devastate vital social services, including healthcare and education.
Proponents of structural adjustment claim that these sacrifices will be offset by the economic growth generated by exports. But with almost all of Africa and Latin America caught in the structural adjustment trap, Third World countries are trying to export similar, and often identical, agricultural products and mineral resources to the industrialized nations. The result is a glut. Staple export prices collapse and people in the Third World suffer.
Yet because structural adjustment fulfils the International Monetary Fund (IMF) and the World Bank's fundamental, but unarticulated, mission to serve the corporate powers of the industrialized nations, they remain committed to it.
By forcing poor countries to open their borders to foreign investment from multinational corporations, to orient their economies to exports and to privatize state-owned enterprises, structural adjustment ensures that these countries stay enslaved to the industrialized world.
Structural adjustment guarantees the continued exploitation of the Third World by the First. The abolition of all protective trade barriers and the orientation of economies to exports thwarts efforts of Third World nations to escape from their dependence on the industrialized nations and to become economically self-sufficient. The reliance on exports forces the poor countries to provide their raw resources to the developed world. And the continued efforts of Third World debtors to repay their loans have led to the irony--despite IMF and World bank loans--of poor countries engaging in a net transfer of wealth to the rich nations.
The multilateral lending institutions view mass impoverishment as an unfortunate consequence of structural adjustment programs, but it is not their concern. Poverty is a peripheral issue to them. The IMF's most recent annual report notes, for example, that "in a discussion of poverty issues in economic adjustment, the [Fund's Executive] Board reiterated that questions of income distribution should not form part of Fund conditionality."
While IMF officials can ignore widespread suffering, the victims of structural adjustment policies cannot. They see the impact of austerity measures in human terms: babies dying of preventable disease, children starving, adults unable to find work. These are not short-term problems associated with "adjustment," as IMF and World Bank officials assert; these tragedies are the natural outcome of unmitigated free enterprise policies.
Because structural adjustment programs are working to promote the IMF and World Bank's real agenda of keeping the Third World locked into dependent status, they are not open to reform.
Only the joint renunciation of their debt by Third World governments can put an end to the human carnage wrought by the IMF and World Bank loan policies.