Structural Adjustment: The SAPRI Report: The Policy Roots of Economic Crisis, Poverty and Inequality
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Structural Adjustment: The SAPRI Report: The Policy Roots of Economic Crisis, Poverty and Inequality
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| ISBN-13: | 9781848137851 |
|---|---|
| Publisher: | Bloomsbury Publishing |
| Publication date: | 07/18/2013 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 256 |
| File size: | 922 KB |
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Structural Adjustment: The SAPRI Report
The Policy Roots of Economic Crisis, Poverty and Inequality
By The Structural Adjustment Part (SAPRIN)
Zed Books Ltd
Copyright © 2003 The Structural Adjustment Participatory Review International Network (SAPRIN)All rights reserved.
ISBN: 978-1-84813-785-1
CHAPTER 1
Structural Adjustment and the SAPRI/CASA Experience
In the mid-1970s, Western aid agencies and attendant think tanks were aglow with optimism. As more and more money flowed into their field of endeavour, predictions were made that world poverty would be conquered by the end of the century. The World Bank, under its new president, Robert McNamara, led this charge, expanding its lending five-fold in real terms while also encouraging bilateral donors and private banks to increase their outlays. Today, the field of international development has evolved into a multi-billion-dollar industry, but poverty has broadened and deepened around the globe, and inequality, both within and among nations, has increased at an astounding pace.
A generation ago, as countries in the South borrowed heavily from banks in the North flush with petrodollars they needed to recycle, they were sowing the seeds of severe economic crises. Interest rate charges on external debt skyrocketed and the terms of trade (prices paid and received for goods and services traded) shifted against their exports of primary commodities. The combined effect led to an explosion of debt service charges and of accumulated debt. Non-productive and poorly conceived investments, made with, and often promoted by, private and official lenders, made the repayment challenge even more daunting. And many governments, particularly in Latin America, took on the added responsibility of repaying not only their own debts but also those of private companies, including many loans that they had not guaranteed.
The Origins of Structural Adjustment
The debt crisis and the consequently increased vulnerability of poor nations facilitated the spread of the Thatcher/Reagan economic 'revolution' of the late 1970s and the 1980s. 'Stabilization' measures designed by the International Monetary Fund (IMF) imposed strict fiscal and monetary discipline on indebted countries as a condition for receiving short-term balance of payments credits. These policies were designed to generate savings and foreign exchange with which to bring countries' internal and external accounts into balance and facilitate the repayment of their foreign creditors. When food, fuel and transport costs soared with the removal of government subsidies, and street riots and protests consequently erupted in a number of countries, the World Bank stepped in with funds that were conditioned on longer-term, structural and institutional changes that had less immediate impact than the austerity measures required by the Fund. These structural and, subsequently, sectoral adjustment policies were designed to open markets and reduce the state's role in the economy. They came to include measures of: trade liberalization; investment deregulation; privatization of public utilities, marketing boards and other state enterprises; reform of the agricultural sector, the labour market and pensions; and the liberalization of almost all domestic markets. Along the way, the two principal international financial institutions (IFIs) would cross into each other's territory, sometimes in collaboration, at other times in conflict.
By the second half of the 1980s, one quarter of overall World Bank lending was being extended in the form of non-project, structural adjustment loans at a time when adjustment programmes had not yet been imposed to a significant extent on either Asian or Central European countries. While adjustment programmes were justified at that time as medium-term prescriptions designed to turn around emergency economic situations, they turned out, in fact, to be long-term, one-size-fits-all economic restructuring programmes imposed on countries regardless of their circumstances. Two-year time frames for success turned into five-year, ten-year and, in most cases, two-decade projects without sustained economic development in sight.
The economic theory underlying adjustment programmes came to justify not only measures that would both squeeze savings from national budgets and generate foreign exchange in order to ensure the repayment of foreign creditors, but also those that would create a friendly investment environment for foreign investors. The liberalization of markets, deregulation and privatization – all keyed on the systematic erosion of traditional roles of the state – would, it was argued, attract and retain investment that, in turn, would guarantee growth and development. Structural adjustment became the only economic strategy acceptable to the US Treasury, to the IFIs and, by extension, to other official lenders and donors. When reality contradicted theory, and investment and growth did not consistently ensue – and as foreign investors and some national élites gained handsomely while development prospects dimmed for the vast majority of citizens – these failures of the adjustment 'model' were typically explained away with claims about the long-term nature of the problem or the lack of full compliance of governments in implementing economic reforms.
In reality, full compliance with the usual myriad of Fund and Bank policy conditions has seldom been feasible, especially in the face of extensive public opposition to the implementation of the policies. Yet, the vast majority of measures required – ranging from the dropping of trade barriers that protected the livelihoods of small farmers and fledgling domestic industries to the rewriting of national labour laws – have typically been adopted as governments have been forced, under threat of being cut off from international financing, to respond to the interests of their official and private creditors over those of their own people. Such policy conditionality has also raised major political issues, including the implications for the sovereignty of states and for the democratic control of policy by national electorates. Although the IFIs are, by statute, prohibited from interfering in the political affairs of their member countries, governments have been pressured to change laws to comply with adjustment conditionality, legislatures have been kept in the dark about loan requirements, and cabinet ministries other than those responsible for strictly financial and economic matters have often been left out of the loop.
Equally problematic and debilitating for these countries and their people has been the impact of the policies themselves. Without democratic control over the key economic decisions that so directly affect their lives, the vast majority of citizens have seen the past generation of policies serve other interests while their own circumstances deteriorate. The worsening plight of urban workers, farmers and small businesspeople, of women, indigenous peoples and the young, of their natural environment and of the productive sectors of the economy as a whole has been one of the major and tragic stories of the past two decades.
By the mid-1990s, before the Seattle, Prague, Washington and other demonstrations in the North against the World Trade Organization (WTO), the World Bank and the IMF, the world had already witnessed almost twenty years of strikes, mobilizations and other forms of popular protest across the countries of the South in reaction to the economic policies of these institutions. The people most affected by those policies were seen by the IFIs as having neither the wisdom nor the right, and certainly not the leverage, to contribute to the economic policy debates in their own countries. Their continued exclusion from the economic decision-making process both at the national and global levels guaranteed that economic policy programmes would not be changed to reflect their growing needs and priorities.
To force the architects of adjustment programmes to confront publicly the local economic reality of the South and to give voice to marginalized populations suffering under the weight of those programmes, a broad array of civil society organizations came together across national and sectoral lines to initiate the tripartite initiative that is the subject of this book. While the results of the multi-country investigation launched with governments and the World Bank have contributed to the apparent dissolution of the so-called Washington Consensus behind adjustment policies, the main components of adjustment programmes remain firmly in place as conditions of continued lending by aid agencies.
Some Northern governments, no longer able to justify traditional adjustment programmes to their electorates, claim that IFI-promoted initiatives ostensibly geared towards poverty reduction indicate a change in course, but poverty-generating adjustment policies are, in fact, an integral and required part of these initiatives. Furthermore, civil society consultations supposedly designed to help shape such endeavours are conspicuously void of meaningful discussion of economic policy issues, despite the fact that for two decades changes in economic policy have been emphasized by the IFIs as the road to economic development. In short, the IMF, the World Bank and their most powerful board members still determine national economic frameworks, while the majority of populations, particularly the poor, as well as important economic sectors, continue to suffer the effects of these policies.
At the same time, the rich local knowledge that civil society can contribute to economic policy formulation in the interests of eradicating poverty, reducing inequality and strengthening national economies continues to be ignored in policy determination. This book describes an innovative civil society initiative designed in the mid-1990s to alter this reality. Although new inroads have been made as a result, substantive changes have yet to materialize.
The Genesis of SAPRI
In the context of increasing protests against structural adjustment by civil society in the global South and a growing recognition in official circles of the failure of these policies to deliver on their promise, a number of nongovernmental organizations (NGOs), engaged in the original '50 Years Is Enough' campaign, presented the incoming World Bank president, James Wolfensohn, with a new challenge. These and other groups, subsequently organized under the umbrella of the Structural Adjustment Participatory Review International Network (SAPRIN), challenged Wolfensohn to involve his staff in an exercise with civil society organizations in the South in order to bring critically important knowledge, perspectives and analysis into the formulation of Bank economic advice and policy making. Wolfensohn accepted the challenge and requested that a mechanism be proposed by these and other organizations for carrying out such an initiative.
In a letter dated 9 April 1996 to the global civil society network organized for this purpose, he noted that 'policy reform has had a mixed track record . ... Adjustment has been a much slower, more difficult and more painful process than the Bank recognized at the outset'. He went on to address the proposed initiative:
What I am looking for – and inviting your help in – is a different way of doing business in the future. My objective is to ensure that economic reform programs make maximum contribution to poverty reduction, that we fully appreciate the impact of reform on disparate population groups, that we promote measures which narrow income differentials, and that we encourage governments to consult and debate with civil society on policy reforms.
Thus was born the Structural Adjustment Participatory Review Initiative (SAPRI), a joint five-year, multi-country participatory investigation into the effects of specific structural adjustment policies on a broad range of economic and social sectors and population groups. Financed by generous contributions from five European governments, the European Union, the United Nations Development Programme (UNDP) and various foundations and NGOs, SAPRI sought to add local knowledge to the economic policy-making process and to legitimize a voice for organized civil society in such decision-making processes at both the national and global levels. The Initiative was a tripartite arrangement involving national governments, World Bank teams and national networks of hundreds of civil society organizations that mobilized around the opportunity to influence the economic course of their respective countries. These networks form the national chapters of the three-tiered SAPRIN structure that was built originally around this engagement with the Bank and that coordinated civil society's participation in SAPRI.
The country exercises followed guidelines negotiated by the SAPRIN global civil society steering committee and its World Bank counterpart. These national assessments of the impact of specific adjustment measures were structured in four stages. The first stage called for extensive and highly inclusive and participatory outreach to, and mobilization of, a broad cross-section of local populations affected by the country's adjustment programme, particularly those who had been most marginalized by the economic decision-making process. The second step in the process involved the convening of national public fora, organized by local civil society steering committees in conjunction with Bank and government officials, to discuss key adjustment measures and issues prioritized by citizens' organizations. The fora were designed to bring local knowledge and analysis related to the impact of adjustment programmes to the doorstep of World Bank country and Washington officials. They were followed in each country by participatory research into the selected issues in order to deepen this analysis. Designed and carried out jointly by World Bank and SAPRIN teams and research consultants, this research constituted the third and longest phase of the programme. The joint results were then reviewed publicly by dozens of civil society organizations and Bank and government representatives at a Second National Forum in each country, at which modifications were suggested for the final national report.
A great deal has been learned from this Initiative, not only with regard to the impact of structural adjustment programmes, but also about the mobilization, organization and participation of civil society in matters related to international economic policy making, as well as about the Bank itself and its much vaunted but highly problematic relationship with civil society. Below, two principal characteristics that made SAPRI unique – the joint, if difficult, nature of the exercise with the Bank and the highly participatory and inclusive nature of the methods employed by civil society independently and with their Bank and government counterparts – are emphasized in a description of the evolution, implementation and methodologies of the SAPRI experience.
Forging a Joint Initiative with the World Bank while Maintaining Civil Society Independence
While President Wolfensohn's acceptance of the NGO challenge to carry out a collaborative grassroots assessment of structural adjustment programmes led to the development of a concrete NGO action proposal, that step was but the first in a rather lengthy process of establishing a truly joint initiative. The proposal, which was the product of a collaboration among some 30 NGOs and NGO coalitions around the world – including Third World Network–Africa, Development Alternatives for Women in a New Era (DAWN), Equipo Pueblo (Mexico), Oxfam–America and The Development GAP as its coordinator in Washington – was sent to Wolfensohn in December 1995. It placed programme emphasis on public and highly inclusive national consultations in 10–12 countries, including emerging-market economies, across four continents, in order to yield representative results. A smaller meeting with Wolfensohn in March 1996, required to cut through bureaucratic delay at the Bank, generated a personal commitment from him to engage his institution seriously in a collaborative endeavour and a mutual acknowledgment that both parties were taking a risk by engaging in the Initiative and hence had to trust each other for it to work. With Wolfensohn's blessing, the NGO proposal became the basis of negotiations that were consummated with an agreement in July 1996.
The Bank's Development Economics Vice-Presidency (DEC), led by the institution's chief economist, took responsibility for the Initiative and insisted on adding a research component to the exercise. It was a proposal that promised to extend the length of the endeavour considerably but was acceptable to the civil society negotiators as long as the field investigations were participatory in nature and studied the political economy of the selection and implementation of the adjustment measures being assessed. The core of the exercise was still to be consultative, however, in order to ensure that affected populations, their knowledge and experience would be at the centre of the process, and that a unique contribution would be made to the knowledge base and decision-making processes related to economic policy programmes. Towards that end, the field research would be bracketed by two public fora, one (as originally proposed by the NGOs) at which citizens' organizations would present their experience with, and analysis of, specific adjustment policies that had directly affected their lives, and the other to assess the research undertaken to deepen the understanding of the issues that these groups had raised.
(Continues...)
Excerpted from Structural Adjustment: The SAPRI Report by The Structural Adjustment Part (SAPRIN). Copyright © 2003 The Structural Adjustment Participatory Review International Network (SAPRIN). Excerpted by permission of Zed Books Ltd.
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Table of Contents
1. SAPRI/CASA Experience2. Trade Liberalization Policies and Their Impact on the Manufacturing Sector - Bangladesh, Ecuador, Ghana, Hungary, Mexico, the Philippines and Zimbabwe
3. Financial Sector Liberalization, Effects on Production and the Small Enterprise Sector - Bangladesh, Ecuador, El Salvador and Zimbabwe
4. Employment under Adjustment and the Effects of Labor Market Reform on Working People - Ecuador, El Salvador, Mexico and Zimbabwe
5. The Economic and Social Impact of Privatization Programs - Bangladesh, El Salvador, Hungary and Uganda
6. The Impact of Agricultural Sector Adjustment Policies on Small Farmers and Food Security - Bangladesh, Mexico, the Philippines, Uganda and Zimbabwe
7. The Socioeconomic and Environmental Impact of Mining Sector Reform - Ghana and the Philippines
8. The Effects of Public Expenditure Policies on Education and Health Care under Structural Adjustment - Ecuador, Ghana, Hungary, Mexico, the Philippines, Uganda and Zimbabwe
9. Structural Adjustment, Poverty and Inequality