Neo-liberalism, structural adjustment and poverty reduction strategies.
Very brief notes from Chapter 2.5 in the Companion to Development Studies.
The rise of neo-liberalism:
- Oil price increases 1973 & 1979 – slowed economic growth, triggered debt crisis 1981-2
- Failure of Keynesian policy towards state à faith in the magical market
- Free trade agenda, based on neoclassical economics
Structural adjustment and economic recovery programmes
Initial responses to the debt crises:
- Brazil,Mexico&Poland1981 – no longer able to afford debts.
- Panic spread about repayment failures that could undermine global finance.
- IMF played leading role.
- Blame placed on indebted nations – corrupt, interventionist, bureaucratic.
The anatomy of structural adjustment policies:
- Involved: mobilisation of domestic resources, policy reforms to increase economic efficiency, generation of foreign exchange revenue from non-traditional sources (diversification) & reduction of the economic role of the state (focus on reducing inflation).
- Achieved through stabilisation and adjustment measures.
- Stabilisation (short term): public sector wage freeze, reduced subsidies & currency devaluation
- Adjustment (long term): export promotion, downsizing of the civil service, privatisation & tax reductions.
- Economic conditionality later supplemented by political conditionality.
Refining SAPs and economic recovery programmes:
- Adapted to suit country-specific needs.
- Economic recovery programmes implemented to supplement SAPs.
- Despite the harsh conditions of this support, the programmes have proved popular – this highlights the desperate economic position of many states.
Evaluating SAPs and ERPs:
- The IMF has admitted initial SAPs damaged social development; elites rarely bore the brunt of the reforms.
- Many nations have not gained the expected growth from reform but the costs of transition were immediate.
- Urban poor negatively impacted, beneficiaries have been traders, import-export merchants & rural farmers with saleable surplus.
- Food sovereignty threatened in many nations however.
Poverty reduction strategies: Substantive change or business as usual?
- Programmes renamed as Poverty Reduction Strategies (image management/changing fashion).
- New Labour’s adoption of poverty reduction as key development objective in 1997.
- The Enhanced Structural Adjustment Facility (main finance mechanism for SAPs) renamed Poverty Reduction and Growth Facility.
- Based on deep and wide ranging consultation with civil services & focus on prioritising anti-poverty measures –
- Many remain sceptical – Poverty Reduction Strategy is a dressed-up term for neo-liberal macroeconomic reform and social control.