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STRUCTURAL ADJUSTMENT PROGRAM

Structural adjustment is a term used by the International Monetary Fund (IMF) for the changes it recommends for developing countries. These changes are designed to promote economic growth, to generate income, to pay off the debt which the countries have accumulated. Imposition of these changes has been a condition for getting new loans from the IMF and the World Bank for many developing countries. Structural adjustment includes internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Due to the near universality of Third World debt, structural adjustment's terms became a template for the governance of much of humanity.

Since the late 1990s, the term "structural adjustment" has been somewhat replaced by an emphasis on "poverty reduction", with developing countries encouraged to draw up Poverty Reduction Strategy Papers (PRSPs); the content of these is often quite similar to Structural Adjustment Programs.

Contents

Conditions

Structural Adjustment Programs (SAP) are loans from the IMF given to a nation with certain conditions. Nations are required to follow these conditions for approval of the loan. These conditions are technically known as "conditionalities".

Some of the conditions commonly are:

Effects

Critics claim that SAPs threaten the sovereignty of national economies because an outside organization is dictating a nation's policy. They also criticize the economic impact of SAPs. Lowered wages cause local purchasing power to be reduced, privatization of public enterprises reduces state capacity and export expansion often displaces local production systems. The agricultural, anti-land reform and food trade policies associated with SAPs have been pointed to as a major engine in the urbanization of the global South, the ballooning of megacities, worldwide migration towards the global North, and the growth in urban poverty and slums.

Some critics hold SAPs responsible for much of the economic stagnation that has occurred in countries experiencing them. For example, by cutting education funding, universality has been impaired, and therefore economic growth. Similarly, cuts to health programmes have allowed diseases such as AIDS to devastate some areas' economies by destroying the workforce.

This negative view of SAPs is not universal. Many claim that countries are running on borrowed time, and will eventually have to make such changes to balance their budgets or control inflation. If these conditionalities are not implemented, the country can expect even bigger problems in the future.

In principle, conditionality is a tactic used not only to make sure loans are paid back, but also to ensure that they are used effectively. If there are no conditions on the loan, the country might not use the money to reduce poverty (see fungibility), or even if it does it might implement economic policies which support the loan-funded programs. For example, giving people more resources to start businesses will not be that effective if the market is highly restricted.

Further reading

  • Chossudovsky, Michel. The Globalization of Poverty and the New World Order. Global Research, 2003
  • Davis, Mike. "Planet of Slums," NLR, 2005 (PDF)
  • Perkins, J. Confessions of an Economic Hitman. Random House, 2005.
  • SAPRIN, (Structural Adjustment Participatory Review International Network) Structural Adjustment: The SAPRI Report. Zed Books, 2004
  • Stiglitz, J. Globalization and its Discontents. Penguin Press, 2002.
  • Desai, Manisha. Transnational Solidarity: Women's Agency, Structural Adjustment, and Globalization

External links