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RROJAS DATABANK Vol. 1, No. 2 /1995
( This set of articles on structural adjustment is background
reading for Dr. Robinson Rojas' teaching on development )
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STRUCTURAL ADJUSTMENT: BANKING ON POVERTY
1.- Brutal Banking
2.- Preserving Inequality: The World Bank in Zimbabwe
By Patrick Bond
3.- The Economics of Debt
By Lance Taylor
4.- The Economics of Debt Disastrous Decade: Africa's Experience with
Structural Adjustment
By Nancy E. Wright
5.- Ghana : The World's Bank Sham Showcase
by Ross Hammond and Lisa McGowan
6.- GOVERNMENTS REFUSE TO ADDRESS ROOT CAUSES OF POVERTY
AT BEIJING CONFERENCE
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[] MULTINATIONAL MONITOR VOLUME 11, NUMBER 4, APRIL 1990
1.-EDITORIAL BRUTAL BANKING
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.
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[] MULTINATIONAL MONITOR VOLUME 11, NUMBER 4, APRIL 1990
2.- PRESERVING INEQUALITY: The World Bank in Zimbabwe
By Patrick Bond
Patrick Bond is a Visiting Research Associate in the Department
of Political and Administrative Studies at the University of
Zimbabwe.
Harare, Zimbabwe--In Zimbabwe, the beleaguered northeastern
neighbor of South Africa, the result of the World Bank's new
role as policeman for the big commercial banks is discouragingly
clear. Zimbabwe's ruling ZANU party's fierce pride and Marxist-
Leninist rhetoric notwithstanding, President Robert Mugabe and
his conservative finance minister, Bernard Chidzero, are now at
the mercy of the World Bank's money mandarins.
Numerous confidential World Bank staff loan reviews of Zimbabwe
were leaked to the press shortly after World Bank President
Barber Conable's November 1989 visit to Zimbabwe's capital of
Harare. They illustrate the Bank's control over national
planning and key economic sectors.
The World Bank's influence stems from its adoption in the last
few years of many of the traditional functions of the
International Monetary Fund (IMF). With the IMF facing hostility
from many quarters and fast running out of money, the World Bank
joined the Fund in making short-term, "structural adjustment"
loans designed to address balance-of-payment problems. Though
the Bank recently announced its intention to shift away from
these loans, 25 percent of its loans are currently devoted to
structural adjustment.
Not their own masters
Today, 10 years after Mugabe wrested power over what was then
Rhodesia from Ian Smith, Zimbabwe's economy is still in the
hands of several thousand whites, while most of the nine million
blacks remain landless, unemployed and highly vulnerable to
periodic droughts. The country's commercial banks, for example,
make 97 percent of their loans to whites, the Financial Times
recently reported. Effective prohibitions on land reform
combined with greater integration with and dependence on a
hostile world economy have distorted what was potentially a
model developing country economy employing an import-
substitution strategy and striving toward self-reliance. Even
the broadly-based manufacturing sector, inherited intact from
the sanctions era, has withered under the strain of Zimbabwe's
dept repayment schedule.
Although a black middle class of high-ranking civil servants has
emerged and luxury goods are abundant, much of the illusion of
economic prosperity is due to stock market and real estate
speculation. From the recent meteoric stock market rise--
valuation increased from US$ 150 million in 1984 to $800 million
at present--just $50 million of the increase can be attributed
to productive capital investment, the rest being mainly gambling
by insurance companies.
Zimbabwe's political and economic landscape was molded by
British and U.S. geopolitical strategists who organized the
Lancaster House settlement (which brokered the end of the civil
war and mandated a transfer of political power to the black
majority) in London just over a decade ago. Western goals were
to constrain ZANU's mild socialist urges, to prevent white
flight (only half of 200,000 settlers left, and some have since
returned) and to make Zimbabwe a responsible actor in world
politics. Most importantly, argues Zimbabwe's leading political
economist, Ibbo Mandaza, the 1980 settlement was to serve as a
model for transition to pro-Western majority rule in South
Africa.
Enter the World Bank and IMF. These lenders provided loans to
Zimbabwe on the condition that the new country adhere to their
orthodox economic prescriptions. As early as 1982, the IMF was
pressuring Zimbabwe to cut wages and limit domestic demand.
According to a 1983 Bank report, "Zimbabwe's major short-run
problem is controlling domestic demand so as to reduce
inflation.... The Government is discussing with the IMF a
stabilization program which stipulates a number of measures
including: an exchange rate adjustment--as a result of the
dialogue, the Government devalued the Zimbabwean dollar by 20
percent on December 9, 1982 in order to restore export
competitiveness that had been eroded by large increases in labor
costs and high domestic inflation; an adjustment in the basket
of currencies on which the value of the Zimbabwean dollar is
determined; a reduction in the budgetary deficit; limitations to
wage and salary increases; and ceilings to short-term external
debt and domestic credit."
Chidzero termed the IMF pressure "a psychological-political
situation which we can't ignore;" he eventually agreed to the
entire list. But the IMF later cut Zimbabwe off from the $385
million line of credit that followed, because the finance
minister presented a 1984 budget driven into deficit by
horrendous drought and the costs of South African
destabilization efforts.
Most of Zimbabwe's cabinet "hated the IMF," says one former
official. So Mugabe authorized the treasury to repay the Fund
completely and invited the World Bank to expand its activities.
For the Bank, Zimbabwe was not completely unfamiliar turf.
The World Bank and Rhodesia
In 1956 the World Bank had largely funded the Kariba Dam on the
Zambezi River (a few hundred miles below Victoria Falls),
producing what was then the biggest artificial lake in the
world. But the loan for the dam and power generation
infrastructure--which amounted to $80 million (in 1956 dollars),
the Bank's largest project up to that point--made inadequate
provisions for the 56,000 Batonka tribespeople who were
displaced from their traditional grounds on the shores of the
Zambezi.
Based on numerous academic studies, World Bank critic Cheryl
Payer concludes that the forced resettlement destroyed the
Batonka's matrilineal land rights, cut their food supplies and
access to fresh water and dramatically increased disease and
death rates. The instigators of the Kariba Dam project--and its
major beneficiaries--were the copper subsidiaries of the Anglo
American Corporation (See Multinational Monitor, September 1988)
and American Metal Cimax, Inc. Hundreds of workers were killed
while constructing the dam.
The World Bank sent another US$ 60 million to what was then the
racist colony of Southern Rhodesia. According to Payer, major
agricultural loans were largely geared to forcing privatization
of plots in the Communal Lands. This had the dual effect of
avoiding the real moral issue--the equitable return of the
people's land--and also breaking up the local culture which was
resisting Rhodesian white capitalism. With his Unilateral
Declaration of Independence, Ian Smith defaulted on those early
World Bank loans, but the British repaid some of them.
The Bank's surprising new allies
The World Bank returned shortly after independence, initially
funding imports--mainly raw materials and spare parts--for the
manufacturing industry and railways. An initial goal was to
limit the country's import-substitution policy and integrate
Zimbabwe into the international capitalist economy. Chidzero's
Finance Ministry has been instrumental in achieving this goal.
In 1982, Chidzero made clear to U.S. investors--including top
officials of Citibank, Chemical Bank, Chase Manhattan,
Manufacturers Hanover Trust and First Bank of Boston--how he
felt about his Government's official policy of socialist
transformation, saying "We talk about ideologies without doing
much about it." (Citibank and Bank of Boston accepted
invitations to open offices in Harare, but withdrew shortly
afterwards because of hostility from the local banking industry,
led by London-based giants Barclays and Standard Chartered.)
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[] MULTINATIONAL MONITOR VOLUME 11, NUMBER 4, APRIL 1990
INTERVIEW
3.- THE ECONOMICS OF DEBT
Lance Taylor is a professor of economics at the Massachusetts
Institute of Technology in Cambridge, Massachusetts. He received
a B.S. in mathematics from the California Institute of
Technology in 1962 and a Ph.D. in economics from Harvard
University in 1968. His articles have been published extensively
and his books include Macro Models for Developing Countries and
Varieties of Stabilization Experience.
MULTINATIONAL MONITOR: How did the current international debt
problem develop?
LANCE TAYLOR: Beginning in the seventies, there was an episode
of loan pushing from the commercial banks to developing
countries. The chief source of supply was the recycling of OPEC
bank deposits after the oil shock in 1973. You began to get
overheating of the economies and overborrowing. The loans were
cut off drastically in 1982, which gave rise to the debt crisis.
After 1982 [there] was a phase of running around twisting
commercial bankers arms to try to push in a little bit of money
to keep countries afloat on the notion that they were liquidity
constrained. So you got these endless negotiations in 1982-83
which were succeeded by the Baker Plan. The rationale of the
Baker Plan came from U.N. studies saying that countries had
dramatically cut back investment as part of the adjustment to
the debt crisis and also the declining terms of trade and export
shocks. The notion behind the Baker Plan was that if investment
could be built back up again then countries might be able to
grow fast enough to grow out of their debt obligations. But
there never were enough resources put in the Baker Plan to allow
countries to do that, and its not clear that the Treasury was
paying much attention to the rationale anyway. I think the
hidden agenda was to give U.S. banks a chance to regroup, which
they roughly did between 1984 and '87, ... [by] building up some
equity against the bad loans they had made in the developing
countries.... Some of the worst hit banks were able to do that
beginning in 1984-85. In 1984 there was a real chance of bank
failure but by about 1987 there was not much of a chance. What
the Baker Plan did was permit the banks to do that but it did
very little for the developing countries. The Baker plan gave
them time and pushed in enough money and generated enough
political pressure to keep countries from defaulting.
Then, beginning in 1987, you get different countries doing
different things. There were debt-equity swaps, which the
Chileans took first, and Bolivia did a sort of half-way debt
buyback supported by foreign donors. Argentina went in and out
of debt moratoria and tried to put pressure on the banks. And
then you wind up with the Brady Plan, the rationale of which is
close to the Baker Plan: if countries were provided access to
foreign exchange, they might be able to grow out of their
difficulties. But the trouble with the plan is there's not
enough money around. The commitment to refunding of debt in the
Brady Plan is about $30 billion, which might generate something
like $4 or $5 billion in net additional inflow to developing
countries and that's just nothing.
MM: What would be needed?
TAYLOR: Oh, maybe three times, four times that. So the capital
commitment would probably have to be upwards of $100 billion,
and that seems unlikely.
MM: What were the characteristics of the debt-led growth in the
seventies?
TAYLOR: Basically, you had access to foreign exchange and you
could use that to support growth in consumption or growth in
investment.... And all the countries, to a greater or lesser
extent, were also subject to capital flight. Firms borrowed
abroad and then redeposited the money in the United States. So
there was some investment, some consumption, some capital
flight, with the exact mix depending very much on local
circumstances.
In Mexico, for example, maybe half of the net inflow went back
abroad in the form of capital flight. Of that which remained,
roughly half went into true capital formation and half probably
went into some kind of consumption.
MM: What happened to the developing countries' economies when
the debt crisis erupted in the 1980s?
TAYLOR: Traditionally, the big borrowing countries have been
able to run trade deficits on the order of 2 or 3 percent of
Gross Domestic Product (GDP). But during a debt crisis to meet
their interest [payments] they have to run trade surpluses. So
basically you get an enormous macroeconomic shift from a 2-3
percent trade deficit to a 2 or 3 percent trade surplus. That is
5-6 percent of GDP and a tremendous macroeconomic shock.
MM: Which means that they would have to increase exports and cut
back on imports.
TAYLOR: Yes, that's right. And the way they increase exports and
cut back on imports is to run a recession--that's the most
effective way--and then have some inflation which takes money
out of people's pockets. And combining those two things, a lot
of the capacity that had been created by investment in the 1970s
was now going underutilized and decaying rapidly in the sense of
becoming technologically obsolete.
MM: Did this phenomenon of recession plus inflation apply across
the board to the borrowing countries?
TAYLOR: Well, you got different reactions. There are only a few
developing countries that borrowed assets in major commercial
bank lending; the rest essentially got very little. African
countries, for example, have big debt problems, but that's due
to official lenders. The big countries that borrowed from
commercial banks are Mexico, Brazil, Argentina, Venezuela, the
Philippines and Korea. Korea has switched over to having a
surplus because they have had historically unprecedented export
growth for three decades now. Mexico, Argentina and Brazil have
gone in and out of moratoria and in and out of negotiations. The
Philippines and Venezuela are sort of on the edge. Turkey is
sort of on the edge. Romania has paid back essentially by
squeezing the citizenry to the bone. Chile also paid back, but
the Chilean per capita income in the late 1980s is roughly what
it was in the late 1960s.
M: How has the practice of running a recession and having
inflation in order to generate a trade surplus related to the
policy of the IMF?
TAYLOR: The IMF has excellent policy tools to force a country to
run a recession; they claim they're doing otherwise but
basically that's what they do. The inflation they'd like not to
have. If prices go up by 10 percent a month let's say and you
only index wages 70 percent to prices, then you get dramatic
reductions in real wages which cut back on consumption. You see
real wage reductions via inflation all over the debtor
countries. At the same time, inflation erodes the value of the
money supply and that also tends to cut back on consumption. The
IMF, in principle, doesn't want that to happen, but it's an
unavoidable side effect when you have to make these major
macroeconomic adjustments.
MM: What has been the net effect of the lending boom and the
austerity plans that followed on the income distribution and the
internal organization of the economies in the borrowing
countries?
TAYLOR: The general effect of austerity and recessions is to put
people out of jobs or to destroy jobs. There are various
adjustments that people within the country can make in terms of
inventing ways to share work and inventing different kinds of
urban subsistence strategies. In the African context, for
example, that depends on the existence of family structures
which can absorb people who get put out of jobs.
Within Mexico, probably relatively poor people in agriculture
have not been hit as hard as have people in urban areas. On the
other hand, the agricultural sector is now lagging for other
reasons so there may be some distributional loss there. Real
wages have gone down very dramatically, employment has not gone
down that much. So the shock has been taken by the working class
is in terms of payment per job rather than destruction of the
job per se. But there probably have been adverse shifts in
distribution. At the same time, the people who have put capital
abroad have had capital gains because of the depreciation of the
peso.
Brazil has had more open unemployment with some real wage loss.
Capital flight historically was not as severe in Brazil, but it
has been picking up. And there has been tremendous out-migration
from Brazil.
MM: How has the debt crisis affected the financial relations
between the rich and poor countries?
TAYLOR: I helped organize a study for a branch of the UN
university in Helsinki called The World Institute for
Development Economic Research (WIDER). We did detailed case
studies of macroeconomic adjustment and resource transfers in 18
developing countries and used econometric statistical techniques
to look at the developing world as a whole. Beginning around
1983 84, instead of a net resource transfer from North to South,
there was a net resource transfer the other way. That's
basically what the trade surpluses of the debtor countries have
spawned. In the mid-1980s, it was about $50 billion a year. By
the late 1980s the transfer was someplace between $20 and $40
billion a year.
MM: What will be the likely distributional effect in Brazil of
recently elected President Fernand Collor's program?
TAYLOR: It is an interesting program and it may well turn out to
be favorable. Brazil was, of course, the extreme case of
indexation, with all financial contracts essentially indexed to
the rate of inflation in the so-called overnight market. In a
sense, the whole government's assets were turned over every 24
hours. This gave rise to enormous amounts of speculation and the
banks were making a tremendous amount of money out of it. With
the overnight, the banking share of GDP in Brazil rose from 2 to
15 percent. What the plan did was freeze all this funny money,
if you like, but left real money in the hands of poor people who
never participated in the overnight game anyway. By freezing all
this stuff, including the stuff in people's safe deposit boxes,
they succeeded in, I hope, putting an end to all this
speculation and perhaps making an opening for the price and wage
freeze which are also part of the package to work in getting rid
of the inflation.
MM: Even if this does revive growth, will it necessarily do
anything to the distribution?
TAYLOR: No. Presumably if growth revives, it will go back to the
traditional Brazilian model. Brazilians have never really wanted
to confront their distributional problem in any serious way.
MM: Brazil is a special case because it is such a large country,
but do you think that, given the international mobility of
capital now, it is possible for a small, poor country to move
toward a genuinely alternative course that emphasizes
redistribution without being subject to a capital boycott and
outside political pressures?
TAYLOR: Well, for a very small country, like Nicaragua, it is
pretty hard to do. For a larger, less explicitly revolutionary
country, I should think it would be possible. No one is going to
accuse the Christian Democrats in Chile of being revolutionary,
but they are reformist and they have an explicit, progressive
redistribution agenda. If they are lucky, I think they will be
able to pull it off.
MM: What about Peruvian President Alan Garcia's policy?
TAYLOR: Well, I see it as an example of the dangers of pursuing
the expansionist redistributive policy. That is, expansion
itself adds to aggregate demand and if you do progressive income
redistribution, that's also going to add to aggregate demand.
MM: So there is the danger of high inflation if you tried to do
both?
TAYLOR Yes. If you're starting out with excess capacity, then
redistribution looks like a good thing. It worked very well, for
example, under the first year of [the ousted government of
President Salvador] Allende in Chile. But then you begin to bump
into capacity limits. If you're really a revolutionary
government, you also run into external foreign exchange and
trade limits imposed by others. And then you sort of switch over
from a regime in which the redistribution is helpful into a
regime in which it is completely counter-productive because
you're pushing demand up against the supply limits and prices
begin to take off. And you start losing foreign reserves and
then you've really had it.
That in fact is the Peru story. Garcia said he would use only 10
percent of export revenue to pay for debt. That was a policy
inherited from his predecessor, who essentially stopped paying
the foreign debt because he figured that was the only way to
keep the country on track. And Peru was a small enough debtor so
he was able to get away with that for a while. But then Garcia
turned it explicitly into a policy and ended up paying more in
fact than he had promised he would pay....
MM: What do you think about the policy of debtor countries
putting moratoria on their repayments?
TAYLOR: They are essentially negotiating ploys more than
anything else. The real issue in macroeconomic terms is whether
they'll continue to run the 2-3 percent trade surplus. And if
they do, then they're going to continue to have macroeconomic
difficulties. Now, putting on a moratorium and sticking with it
or defaulting and sticking with it essentially puts you into
unchartered financial waters. And nobody has yet wanted to try
that.
MM: You don't know whether you'll be able to get money in the
future.
TAYLOR: Well, you know perfectly well you're not going to get
money in the future for long-term capital formation. The real
issue is whether you're going to get money for trade finance.
MM: What's your view of Poland's new economic policies?
TAYLOR: I think [Poland] is in a phase, like a two-year-old kid.
They're going to go through this exercise in free markets and
they're going to run a huge recession and then they'll, one way
or another, try to invent managed capitalism.
MM: What would be a wiser course for the Eastern European
countries?
TAYLOR: Not to go through the free market flirtation. We had a
meeting of the WIDER project a couple of weeks ago and we got
into a very interesting discussion about what was going on in
Poland. At least according to the person who gave the
presentation, their hope was that you'd get all kinds of
entrepreneurs coming out and setting up free market operations.
But that's not happening because their aggregate demand has gone
down very dramatically. And nobody has any reason to consider
undertaking entrepreneurial activities because she or he would
know that they couldn't sell anything. So ultimately you're
going to have to have the state entering in, establishing rules
of the game, supporting aggregate demand and probably pushing
people into private enterprise activity. But it'll take them a
while to learn that and they'll probably have a year or so of
recession before they decide. What they're trying to do, in a
sense, is re-invent nineteenth century capitalism which, I
think, having read a lot of Marx and Engels, they should know
had its problems.
MM: Some have said Eastern Europe may economically become the
Central America of Western Europe. Is that plausible?
TAYLOR: Well, as a low-wage, peripheral, capitalist area, sure.
Czechoslovakia less, Romania more. But the per capita income
levels in Yugoslavia, Hungary, Poland are well above Central
American levels. It will be different in the sense that the
Central American countries are very poor and are essentially in
the agro-export business. Presumably in Eastern European
countries there's going to be some kind of basis for low-wage
manufacturing industry.
MM: For the smallest, poorest Third World countries, what do you
currently see as the best balance to strike between developing
the internal market and export orientation?
TAYLOR: The balance depends very much on the historical and
institutional circumstances of the country. Small countries--
populations of say one to 10 million--are just never going to
have enough internal market size to pursue an import
substitution strategy very far. It's just too expensive to
pursue for every product, which means they have to import a lot,
which means you have to export a lot to pay for it. And then
there's the question of what you want to export and finding
exports which have income elastic demands and advanced country
markets....
A larger economy has enough market size to isolate itself from
the world for a while. There are advantages and disadvantages to
that. The disadvantage is that the domestic market is never
going to be as big as the world market so you lose a chance for
technological advance and economies of scale. On the other hand,
with a dynamic inwardly-oriented industrialization, you're much
more sheltered from international shocks.
MM: What would be the impact of debt relief on an economy like,
say, Mexico?
TAYLOR: The Brady plan, depending on how you juggle the numbers,
would give Mexico relief of between $1 and $2 billion a year. If
you got $3 or $4 billion, that would be enough, according to our
modelling in the WIDER project, to let Mexico have a growth rate
of say 4.5 to 5 percent per year.
There has been zero per capita growth over this decade, which
means there has been something like 2 percent real growth. So to
restore historical per capita growth in Mexico, you need a
transfer of roughly $5 billion per year, growing at the same
rate as the economy over time.
At this point, the Mexican government is basically turning
somersaults and handsprings to say, "We are the most open,
capitalist, friendly, low-wage economy in this hemisphere, so
why don't we get a lot of direct foreign investment to be
partially financed by repatriated capital flight and by American
enterprises?" So, in a sense, what the Mexican version of the
Brady plan is doing is giving a modicum of debt relief and
hoping that changes people's expectations enough so that they
will get a massive recovery of capital.
MM: Is there any chance for an actual cancellation of the debt?
TAYLOR: I don't think a cancellation is in any sense in the
cards. About the only thing that might happen is a massive
recycling of the outstanding debts of the commercial banks. That
is,you would have to get money to pay off the commercial banks,
or countries would have to be given access to long-term loans
which they could use to pay off the commercial banks, and then
think about paying off those long-term loans in the future. So
there would essentially be a transfer from whoever made the
loans to the commercial banks, and the countries would pick up
the corresponding long-term liability.
MM: Is there any prospect for alleviating the most basic
suffering in Africa and Latin America? Would it involve
sacrifices in the living standards of the wealthiest countries?
TAYLOR: There are different issues involved. In the WIDER study,
we estimated that $40 billion in transfers to developing
countries would yield 1 percent capacity growth. If you really
wanted to help, you are talking $60, $70 billion. Now, in terms
of advanced country income, which is $12 trillion or so, that is
a drop in the bucket. But there are lots of potential slips.
First, the global macroeconomic system appears quite sensitive
to shocks on the order of $100 billion. That is, if you look at
the magnitude of the two oil shocks or the U.S. trade and fiscal
deficit or the Volcker interest rate increase in the late 1970s,
they were on the order of $100 billion and they made the world
economy ring like a bell. So it is not clear in that sense that
the transfer would be effective. Whether or not African
economies can absorb much more money at this point, whether they
can absorb an extra $5 billion--those are tiny economies--[is
unclear].... We think $5 billion would give them an extra 1
percent capacity growth. So that means you are going around
dropping $50 million here and $100 million there in economies
whose size is only $1 or $2 billion. And whether or not they can
absorb that money effectively in terms of investment projects
and government cadres is very much an open question. Due to
austerity programs, the public sector has been virtually
destroyed in much of Africa. It will be a very long, slow
process to build it back up.
---------------------------------------------
[] MULTINATIONAL MONITOR VOLUME 11, NUMBER 4, APRIL 1990
ECONOMICS
4.- DISASTROUS DECADE
Africa's Experience with Structural Adjustment
By Nancy E. Wright
Nancy E. Wright is a former research associate for the United
Nations and a former consultant for the United Nations.
The 1980s were disastrous for sub-Saharan Africa. Per capita
income was lower at the end of the decade than at the beginning,
and a host of other social indicators--infant mortality rates,
per capita calorie intake, number of students enrolled in
primary and secondary schools--also suggest that the continent
made no progress or slipped in the effort to alleviate social
ills. A diverse set of factors produced this tragedy, including
shifts in the terms of trade, high interest rates on huge debts
to international lending institutions, structural adjustment
programs imposed on African nations by the International
Monetary Fund (IMF), economic mismanagement, corruption, massive
allocation of resources to the military, military
destabilization and the legacy of colonialism.
As a new decade begins, a struggle is underway to define what
course Africa should follow to escape its predicament.
International lending institutions, which play a major role in
African economies, and other actors in the field of
international development are evaluating the failures of the
1980s and battling to set the agenda for Africa in the 1990s.
Last year, both the World Bank and the United Nations Economic
Commission for Africa (ECA) issued major reports on the African
economy. The ECA's report, "African Alternative Framework to
Structural Adjustment Programs for Socio-Economic Recovery"
(AAFSAP), criticizes the structural adjustment programs of the
IMF and World Bank and their emphasis on export-led growth,
privatization of state entities, limiting domestic demand and an
overall reliance on market forces. While accepting some of the
prescriptions of structural adjustment, the Alternative
Framework calls for a continued role for the state in the
guidance of African economies and a heightened focus on meeting
human needs.
Five months after the release of the ECA's report, the World
Bank issued its most comprehensive report on African development
to date. Entitled "Sub-Saharan Africa: From Crisis to
Sustainable Growth," the report diverges from some of the Bank's
recent policies and clearly constitutes a response to some of
the criticisms embodied in the ECA document as well as those
made by nongovernmental organizations (NGOs). "The
transformation taking place within the World Bank reflects the
Bank's uneasiness about structural adjustment," says Doug
Hellinger of the Development Group for Alternative Priorities
(Development GAP). "The Bank is now trying to find a way out. We
will definitely see some evidence of change within the next
year, because the Bank is under attack from the public and
markets alike."
"From Crisis to Sustainable Growth" recommends government
involvement in human resource development, improvements in
infrastructure and environmental action plans. The report
acknowledges that "there are certain social and economic
activities that market forces and private initiative cannot
deliver," states Seyoum Haregot, a senior policy analyst at the
Center for Study of Responsive Law and former head of the
Ethiopian prime minister's office. "Therefore, the World Bank
has conceded, the state must intervene to develop human
resources in general and specifically to provide education and
health services." The Bank's report calls for a "human-centered
development strategy," including a doubling of expenditures for
human resource development, which would bring such costs to
between 8 and 10 percent of sub-Saharan Africa's gross domestic
product.
Still committed to structural adjustment
The shift in World Bank thinking is limited, however, and the
Bank has not abandoned the central tenets of structural
adjustment. Reliance on market forces remains the key element of
the World Bank's policy prescriptions. "The new report views
structural adjustment as fundamentally important, but within a
broader context," explains one World Bank source. "It uses the
phrase 'adjustment with a difference.' ... It is an adjustment
that is more sensitive to social dimensions." Though it places
some importance on regional integration, environmental
protection and human resource development, "From Crisis to
Sustainable Growth" still calls on African governments to allow
market forces to govern both agricultural and industrial
production, to involve multinational companies in exploiting
Africa's mineral resources and to produce manufactured and
agricultural goods for export.
The ongoing promotion of structural adjustment draws attacks
from critics like Hellinger, who fault adjustment programs for
their effect on the internal distribution of wealth and for
increasing developing countries' dependence on external economic
forces. "There is no doubt that [structural adjustment] polices
have made things worse, by widening economic disparities,"
Hellinger says. "While larger farmers can benefit because they
participate in the export trade, landless rural workers do not
have access to the increased producer prices brought about by
structural adjustment. Urban dwellers, deprived of subsidies and
[hurt by] job cutbacks, also suffer," Hellinger adds.
"Adjustment programs are the antithesis of what the World Bank
says they are. Rather than ensuring fair wages and promoting
economic self-sufficiency, they divert economies to an export
focus and bring about diminishing demand."
Evidence in the ECA's report indicates that the aggregate impact
of structural adjustment programs has been negative. The report
reveals that countries pursuing strong structural adjustment
programs had significantly lower rates of growth in the 1980s
than ones which did not, though it notes that exogenous factors
make direct correlations problematic. Additionally, the ECA
report provides evidence that structural adjustment fails to
correct even the problems it is designed to address. Sub-Saharan
African countries which implemented structural adjustment
programs experienced: "GDP growth decline from 2.7 percent to
1.8 percent; a decline in the investment/GDP ratio from 20.6
percent to 17.1 percent; a rise in the budget deficit from -6.5
percent of GDP to -7.5 percent of GDP; and a rise in the debt
service/export earning ratio from 17.5 percent to 23.4 percent."
The World Bank, however, stands by the record of structural
adjustment. Pierre Landell-Mills, principal co-author of "From
Crisis to Sustainable Growth," claims that "structural
adjustment has worked where it has been undertaken on a
sustained basis. Guinea and Ghana are now growing at a rate of
5 to 6 percent per year, and Madagascar has grown from -2 to 2
percent per year."
The Bank's report cites Ghana as an important example of the
benefits of structural adjustment policies. In 1983, Ghana
negotiated two Stand-By agreements with the IMF. Four years
later, a Structural Adjustment Facility and an Extended Fund
Facility were introduced along with a $115 million structural
adjustment credit from the World Bank. Ghana undertook two
Economic Recovery Programs, from 1984-1986 and again from
1987-1989. The goal of the first recovery program was to reduce
inflation and fiscal and external deficits by reducing demand.
The second recovery program subsequently sought to reverse
declining agricultural production, restore Ghana's economic
credibility in the eyes of western creditors, increase foreign
exchange earnings, reform prices and reestablish production
incentives for cocoa, as well as to improve living standards and
continue to control inflation. The ultimate goal of both
measures was to maintain 5 percent yearly economic growth,
achieve balance-of-payments equilibrium and improve public
sector management. During this time, significant agricultural
reform did take place, and by 1988 cocoa production had
increased by 20 percent.
At the same time, however, the world price of cocoa fell, and
the prices of imports escalated. As a result, many Ghanaians
have not experienced the improved conditions which adjustment
was supposed to bring. Discussing Ghana recently, Flight
Lieutenant Jerry John Rawlings, Chairman of the governing
People's National Defense Council, stated, "I should be the
first to admit that the Economic Recovery Program has not
provided all the answers to our national problems. In spite of
all the international acclaim it has received, the effects of
its gains remain to be felt in most households and pockets....
Many families continue to experience severe constraints on their
household budgets." Eboe Hutchful, a Ghanaian national and a
professor of political science at the University of Toronto,
confirms that the results in Ghana have not been altogether
commensurate with the economic recovery efforts. "Many local
populations do think things have improved somewhat," he
acknowledged, "but not as dramatically as one would have
hoped.... There is significant concern over the disparities in
resource distribution."
Even the limited success Ghana has achieved is tainted by its
continuing heavy dependence on foreign development assistance.
With a population of just over 14 million, Ghana receives more
than $500 million per year in aid. The International Development
Association, the World Bank's soft loan arm, has contributed
more to Ghana than to any other country except China and India.
Yet, in addition to persistent poverty and a stagnated domestic
industrial sector, Ghana's debt service ratio exceeds 70
percent, one of the highest in Africa.
World Bank critics claim that such facts disprove the Bank's
claim that Ghana is a structural adjustment success story. "The
World Bank has bent the rules in the case of Ghana, including
allowing Ghana to postpone its debt payments, to be able to
exhibit a successful model," argues Fantu Cheru, professor of
development studies at American University in Washington, D.C.
The battle over the interpretation of the success of structural
adjustment programs in Africa has tremendous significance for
the African people. The World Bank wants not only to continue to
rely on structural adjustment programs, but also to extend the
use of the market as a resource allocator. "From Crisis to
Sustainable Growth" promotes user charges as a means to cover
the costs of providing basic social services, including
"universal primary education, primary health care and water
supply." The report denigrates African governments, which,
"encouraged by donors, ... insist on providing water free."
The ECA report criticizes the World Bank's exaltation of market
forces, condemning "the substitution of the profitability
criterion for the social welfare criterion in vital areas such
as water supply in a continent where the majority of the
population has no access to potable water."
The ECA alternative
As well as diverging from the World Bank's focus on market
forces, the Alternative Framework proposed by the ECA focuses on
self-sufficiency, especially in food production, rather than
Africa's role in the international market. Instead of
constraining demand merely to achieve financial balances, it
advocates the strengthening and diversification of Africa's
productive capacity. The Alternative Framework also calls for
greater and more efficient domestic resource mobilization,
improvement in human resources capacity, strengthening Africa's
scientific and technological base and vertical and horizontal
diversification, both to meet the needs of all sectors of the
population and to lessen single-commodity export dependence.
Other policy objectives recommended in the ECA report include
establishing a more pragmatic balance between the public and
private sectors, achieving broader bases of decision-making,
correcting the imbalance between military and social
expenditures, and improving the pattern of income distribution
among different sectors.
Grassroots development?
Despite their competing perspectives, the ECA and the World Bank
reports both fail to focus attention on the issue of grassroots
participation in economic development. Though the ECA places a
greater emphasis on the importance of local involvement, it does
not go nearly far enough. This is not surprising given the
absence of grassroots participation in the preparation of the
ECA report. "The Alternative Framework came out of an exercise
by governments; that is, the process came from the top. While
this is not necessarily bad, it does suggest that the process
did not include local participation," says Gayle Smith of
Development GAP.
The ECA's failure to include local input in its research is
mirrored by a similar weakness in its proposals, according to
Smith. "The report calls for consultation at the local level,
but does not propose mechanisms for doing this," she says. "Even
if the mechanisms are put into place, how can governments be
held accountable to those mechanisms?"
In any case, the ECA position will have far less impact on
developing countries than that of the World Bank. "Ultimately,
[the entity] that controls the purse is the one that influences
policy," says Haregot. "The World Bank, not the ECA, provides
funds, and therefore it influences disproportionately the
policies of developing countries."
In the area of grassroots involvement, critics have little hope
that the World Bank will change. "The so-called 'shift' in World
Bank policy is actually rhetorical," says Cheru. "The World
Bank's mission is not promoting grassroots development, but
facilitating global economic integration. Therefore, the Bank is
not set up to do bottom-up development." Cheru says that the
massive structural changes which would be necessary for the Bank
to support grassroots development effectively are extremely
unlikely. "An effective bottom-up method would mean
restructuring the entire lending approach of the Bank--turning
it completely upside down."
Yet it is exactly this "bottom-up" approach of democratic,
grassroots development which non-governmental organizations
believe is fundamental to achieving sustainable growth that
benefits all levels of society. "A truly progressive approach
must have two elements," claims Hellinger, "first, a
participatory approach, and second, a fundamental change in the
local economic structure." Countries must allow and encourage
the development of "civic organizations, such as producer
cooperatives, farmer associations and urban dweller
organizations which both perform economic functions and provide
feedback and input to policymakers," says Haregot. "Moreover,"
he adds, "there can be no economic democracy without political
democracy. African countries must provide basic democratic
rights, not only the right to vote, but the right to speak
freely, the right to organize political parties and so on."
The relatively minor shifts in World Bank policy may translate
into some benefits for the African people, but as long as the
Bank remains committed to the framework of structural
adjustment, Africa's future will remain bleak. "Structural
adjustment works under an international economic system of which
Africa is not a part," explains Eugenie Aw, a Senegalese
journalist and the Africa Coordinator for Development Education
with Interaction. Sustainable development will require a wholly
different approach. "To have a real adjustment," Aw says, "one
must have the agreement of the people." The World Bank has never
been responsive to this factor.
---------------------------------------------
[] Multinational Monitor -- September 1993
5.-Ghana : The World's Bank Sham Showcase
by Ross Hammond and Lisa McGowan
Ghana's structural adjustment program, one of the longest-running
International Monetary Fund /World Bank -initiated economic-reform
programs in Africa, is regularly cited by Fund and Bank economists
as the prime example of how structural adjustment cures failing
economies and places them on a path to sustainable growth. Although
there is overwhelming evidence of the program's failure, it continues
to be used to legitimize adjustment programs elsewhere on the continent.
In 1983, the Ghanaian economy had reached a state of virtual collapse,
the victim of falling cocoa prices, decreased government revenue, spiraling
inflation and political instability. At the same time, $1.5 billion in
loan repayments fell due as debts rescheduled in 1974 matured. Faced with
possible bankruptcy, the Ghanaian government, led by Flight Lieutenant
Jerry Rawlings, undertook a series of structural adjustment programs,
designed and financed by the World Bank and the IMF. The programs became
known collectively as Ghana's Economic Recovery Program (ERP), which was
divided into three phases: Stabilization, Rehabilitation, and
Liberalization and Growth.
As part of the ERP, the government has slashed public spending, devalued
the currency (the cedi), invested in natural resource exporting industries
and carried out a number of other IMF/World Bank-prescribed reforms
designed to orient the economy to export production and open it to
foreign investors.
As reward for its relentless pursuit of World Bank and IMF-inspired
reforms, Ghana has been showered with foreign aid. In its decade-long quest
for economic recovery, the government has drawn upon virtually every
funding mechanism available at the Bank and Fund, contracting more than
$1.75 billion in Bank loans and credits by the end of 1990. In
fact, by 1988 Ghana was the third largest recipient in the world of credit
from the International Development Association (IDA), the Banks soft-loan
window. Only India and China, each with populations over 850 million,
received more than Ghana, whose population is only 15 million. IMF
funding under the ERP has totalled over $1.35 billion, and total financial
resources from bilateral and multilateral sources amounted to $8 billion
over the first seven years of the program, making Ghana one of the most
favored aid recipients in the developing world.
Macroeconomic failures of the ERP
Despite massive amounts of foreign financing, Ghana can
claim little real progress under its structural adjustment
programs. The most regularly cited indicator of success
real gross domestic product (GDP) growth averaging 3.88
percent annually between 1983 and 1990 is indisputably an
improvement over the negative growth rates experienced in
the immediate pre-adjustment period. However, this figure
looks less impressive when one takes into account population
growth (3.1 percent a year), huge inflows of foreign
exchange from donors, relatively good weather conditions
over the adjustment period and the initial goodwill of the
Ghanaian people towards the ERP. Furthermore, an examination
of the sectoral distribution of GDP growth shows that:
growth has taken place principally in those areas
receiving direct financial/investment support;
while the minerals and forestry sectors have grown,
manufacturing has declined;
the performance of the domestic food and livestock
sub-sectors, critical to the well-being of most Ghanaian
consumers, has on balance been negative; and
the service sector (especially the transport,
wholesale and retail subsectors) has grown from a 37-percent
share of GDP to 42.5 percent, indicating that the economy is
increasingly becoming a buying and selling one.
The evidence strongly suggests that growth in Ghana is
aid-driven and, as such, is fragile and skewed toward those
areas in which the donors are interested such as natural-
resource extraction rather than towards domestic capacity
building.
The goals of the latest phase of the ERP are to reduce
inflation, generate a substantial balance-of-payments
surplus, promote private investment and stimulate growth in
the agricultural export sector. These goals have remained
elusive, however, with the countrys economy slipping
notably during the past few years.
by 1990, real annual growth of GDP had fallen to 2.7
percent, down from over 6 percent in the mid-1980s;
inflation, which dropped from 123 percent in 1983 to
25.2 percent in 1989, jumped to 37.7 percent in 1990;
the ratio of investment to GDP is lower than it was
in the 1960s and 1970s; and
the tightening of credit (designed to control
inflation) has decreased domestic investment and increased
reliance on foreign borrowing; by 1992 the interest rate had
risen to 37 percent.
Cocoa crowds out food
The World Band and IMF point to the growth of Ghanas
agricultural export sector as chief among the ERPs
successes. As a result of government incentives that
included higher producer prices and increased investment,
the volume of cocoa exports rose by more than 70 percent
between 1983 and 1988. Cocoa is now responsible for more
than 70 percent of Ghanas export earnings. Unfortunately,
the world market price of cocoa has been dropping steadily
since the mid-1980s. According to a U.S. congressional
study, world consumption of cocoa has increased by only 2
percent annually while supply has grown by 6 to 7 percent.
This emphasis on cocoa production has exacerbated local
and regional income disparities. While approximately 46
percent of government expenditure in the agricultural sector
has been invested in the cocoa industry, cocoa farmers
comprise only 18 percent of Ghanas farming population and
are concentrated primarily in the South, which has
traditionally been favored by both government and donors
over the disadvantaged Northern savannah region. Since the
1970s, land, power and wealth within cocoa-producing
communities have become increasingly concentrated as well.
Currently, the top 7 percent of Ghanas cocoa producers own
almost half of the land cultivated for cocoa, while 70
percent own farms of less than six acres.
The government has not made economic incentives similar
to those extended to agro-export producers available to
those who produce food for domestic consumption. It has
failed to promote food security through measures to raise
productivity, yield and storage. As a result, Ghanas food
self-sufficiency declined steadily during the 1980s and the
per capita income of non-cocoa farmers stagnated. Producers
of rice, vegetable oils and other cash crops were hit hard
by a flood of cheap imports, the product of trade-
liberalization measures and exchange-rate adjustments.
Unequal burdens
It is the Ghanaian poor who have had to bear the
greatest burden of adjustment. In the critical fishing
industry for example, as a result of a series of currency
devaluations, inputs have become more expensive,
particularly for small-scale operators who fish to meet
local needs. Increased production costs are then passed on
to the nations consumers, most of whose real wages have
been falling. Since Ghanaians obtain 60 percent of their
protein from fish and fish by-products, the decrease in fish
consumption resulting from higher prices has contributed to
increased rates of malnutrition in the country.
Malnutrition and illness among the poor have also
increased as a result of cuts in wages and public
expenditures, currency devaluation and the introduction of
user fees for health and educational services. In addition,
illiteracy and drop-out rates have risen. When the minimum
daily wage of 218 cedis was announced in 1990, the Trades
Union Congress calculated that an average family needed
2,000 cedis a day for food alone.
The effects of eliminating thousands of government jobs
under the adjustment program are spreading throughout the
economy and to more and more people. Aside from the direct
impact these cutbacks have had on urban unemployment rates,
second-tier effects are being felt by the dependents of the
newly unemployed, many of whom have been forced to take to
the streets in search of income for their families. It is
estimated that in Ghana an average of 15 people are at least
partially dependent on each principal urban wage earner.
In contrast, rich Ghanaians have fared quite well under
adjustment. Data generated by the 1987 Living Standards
Measurement Survey indicate an increase in income inequality
in the 1980s, compared to the 1970s. Land holdings and
agricultural export earnings have become more concentrated,
especially in the cocoa sector. Import-liberalization
measures have led to increased food imports; the rich, with
more money to spend, have more access to a wider range of
higher priced food products, while more of the poor are
going hungry.
Cutting down the forest for the trees
The economic-reform program has also promoted the
export of timber, Ghana's third most important export
commodity after cocoa and minerals, with a devastating
effect on the nation's forests. The IDA and other aid
agencies have funneled aid and credit packages to timber
companies to enable them to purchase new materials and
equipment. As a result, timber exports, in terms of volume
and value, have increased rapidly since the start of the
ERP, rising from $16 million in 1983 to $99 million by 1988.
This quick-fix solution to Ghana's need for foreign-
exchange earnings has contributed to the loss of Ghana's
already depleted forest resources. Between 1981 and 1985,
the annual rate of deforestation was 1.3 percent, and
current estimates now place the rate as high as 2 percent a
year. Today, Ghana's tropical forest area is just 25 percent
of its original size. In its desperate drive for export
earnings, the government has allowed timber companies and
fly-by-night contractors to cut down the Ghanaian forests
indiscriminately.
Such widespread deforestation is exacting a high toll
on the country, leading to regional climatic change, soil
erosion and large-scale desertification. Deforestation also
threatens household and national food security now and in
the future. Seventy-five percent of Ghanaians depend on wild
game to supplement their diet, but with the forest stripped,
wild game is increasingly scarce. For women, the food, fuel
and medicines that they harvest from the forest provide
critical resources, especially in the face of decreased food
production, lower wages and other economic shocks that
threaten household food security. These resources are lost
when trees are cut for export.
They call this success?
After nine years of economic recovery programs and huge
inputs of foreign aid, Ghana's total external debt has risen
from $1.4 billion to almost $4.2 billion. Current investment
and savings are too low to sustain the GDP growth rate in
the absence of foreign funding, and capital flight has
become a serious problem. Since 1987, Ghana has paid more to
the IMF than it has received. Environmental degradation is
fast-paced and is exacerbated by the policies of the ERP.
All of these indicators suggest that the long-term prospects
for Ghana's recovery are bleak and that Ghana's budget-
cutting, free-trade program, so enthusiastically applauded
by Western creditors and commentators, is hardly a model for
the rest of Africa.
===============================
Sidebar
Stated Goals of the "Economic Recovery Program" (ERP):
ERP I (1984-1986): Stabilization
arrest and reverse the decline in production
control inflation
reform prices and restore production incentives
restore overseas confidence in Ghana
mobilize both domestic and foreign resources to restore
the living standards of Ghanaians
improve the overall availability of foreign exchange
and improve allocation mechanisms
ERP II (1987-1989): Rehabilitation
ensure substantial economic growth (around 5 percent)
stimulate substantial increases in the levels of
savings and investment
place the balance of payments on a sounder footing
improve public sector management
ERP III (1989-1993): Liberalization and Growth
ensure an average annual growth of 5 percent, or about
2 percent per capita
reduce inflation
generate a substantial balance-of-payments surplus
promote private investment
promote growth in the agricultural sector
=========================================
-----------------------------------------
To: Robinson Rojas <rojas7@vax.sbu.ac.uk>
Date: Thu, 14 Sep 1995 06:34:53 -0700
From: Jagdish Parikh <jagdish@igc.apc.org>
Subject: SAPs, Globalisation - Major Threats
PRESS RELEASE
FOR IMMEDIATE RELEASE: Contact: Barbara Hopkins
12 September 1995
Dzodzi Tsikata
202-4433, Laodong Hotel
6.- GOVERNMENTS REFUSE TO ADDRESS ROOT CAUSES OF POVERTY
AT BEIJING CONFERENCE
Governments have refused to address the structural causes of
women's poverty and marginalization, members of the NGO Economic Justice
Caucus of the Fourth World Conference on Women said today.
The Caucus noted that every regional NGO meeting leading to
Beijing, as well as cores of panels and worshops held in Huairou in the
past ten days, identified globalization and structural adjustment
policies (SAPs) as major threat to women's well-being and economic
rights. NGOs presented evidence on the failure of the current economic
model which underlies international policy and which assumes that the
market is the best means of distributing resources, including social
services.
According to Helen Hill of Australia "by empowering
multinational capital vis-a-vis the state and the worker, globalization
not only weakens the ability of governments to provide health,
education, and other public services to their citizens, but it also
weakens citizens' voices in economic decision-making."
"Governments gathered in Beijing have refused to address a major
cause of women's weakening economic status, while claiming to support
women's economic empowerment. The United States and the European Union
are leading the pack by refusing to allow language and analysis in the
Platform for Action that links their eocnomic policies to poverty," said
Lisa McGowan of The Development GAP, a public-policy organization in
Washington D.C. that tracks economic issues.
According to the caucus, the sections of the Platform dealing
with poverty, women's economic empowerment, and women and eocnomic
decision-making fail to provide long-term solutions to poverty and
economic inequalities. This is very serious, given that the Platform is
contradictory, lacks a coherent economic analysis, and therefore runs
the danger of being reduced to nothing more than rhetoric.
Women attending the NGO Forum and the FCWC reported similar
impacts of SAPs and other economic liberalization policies. In Africa,
contrary to World Bank claims that SAPs would generate economic growth,
promote investment, create jobs, and alleviate poverty, women's
experience tells a different story. Economic policies such a high
interest rates, trade liberalization, devaluation, and the full removal
of subsidies on inputs have undermined food production and local
industries. For example, in Senegal, women were encouraged to invest in
tomato production for sale to local processing plant. Massive
devaluation of the CFA, coupled with increased input prices and the
sudden importation of cheap tomato paste from Italy wiped out the market
for locally produced tomatoes, leaving women worse off than they were
before.
According to Dzodzi Tsikata of Third Word Network Africa
Secretariat in Ghana, economic growth, even where it has been achieved,
has depended on women's unpaid and low-paid labor, including that of
migrant workers, such that women are actually providing a subsidy to
their economies. Moreover, the modest economic growth in a few
countries does not justify the extreme and long-term hardship SAPs
impose." Women from both the North and South express similar views.
In Asia, Rukmini Rao from India reported that massive coversion of prime
agricultural lands into export-processing zones has decreased women's
food production, displaced women farmers, and destroyed the environment.
Rural women have been forced to undertake multiple piece-rate jobs,
domestic services, and other informal sector activities. This means
longer hours for women, very poor working conditions with no worker
rights and extremely low pay, without even the security of being able to
produce food for household consumption.
In Latin America, widespread retrenchments, coupled with a
decrease of both men's and women's wages and increase in women's
unemployment, has forced women into the informal sector, also making
their work status more precarious.
Women from East and West Europe said that reductions in social
services, increasing unemployment, and decreased worker benefits have
increased women's responsibilities in their homes and communities, while
decreasing their access to resources. In the U.S. and Canada, women
reported similar experiences arising from trade agreements such as
NAFTA, decreasing real wages, and a labor market increasingly dominated
by temporary work.
Women in all countries reported a widening gap between the rich and
the poor.
The Economic Justice Caucus rejects the claim by governments
that there is no alternative to current economic policies. Women are
calling for alternative trade practices based on fair exchange, social
and economic investment policies that increases women's control over and
access to resources, tax and investment policies that bring about an
equitable distribution of resources, gender analysis as a basis of
ecnomic policy, and national accounting systems that count women's paid
and unpaid work.
The Caucus also rejects the claim that resources are too scarce
to increase social investment and bring about a transformation to a more
equitable ecnomic system. It is a question of redirecting national
priorities. The Caucus is call for multilateral debt relief for the
poorest countries to free up funds for social investment, and a shift
from milittary to a social spending.
One thing is clear from the NGO Forum and the FWCW: women around
the world are mobilizing to influence economic structures, invited or
not, and will hold their governments and the international financial and
trade institutions accountable to the needs and priorities of women.
Ten years ago in Nairobi, violence against women was barely mentioned in
the Forward Looking Strategies, despite the fact that women had
identified it as a key issue.
Ten years later, there is a U.N. Declaration condemning violence against
women. Women are leading the way to an equitable and sustainable
economic order, and will not rest until their calls for profound change
in the economic system are met.
================================RRojas Research Unit/1995================
==============================================================
Multinational Monitor [ISSN 0197-4637] is published monthly by
Essential Information, Inc., P.O. Box 19405, Washington, DC
20036. Telephone: (202) 387-8030.
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RRojas Research Unit/1995======================================
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