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.