Multinational Monitor magazine, April 1990
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
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 fulfills 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
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.
IMF, World Bank, Structural