by Charles Mutasa

These developments have left many wondering whether the very institutions they accused of impoverishing Third World Countries through Structural Adjustment Programs (SAPs) can be trusted with poverty reduction of the same. This paper seeks to critically review the policies pursued by the Bretton Woods institutions, especially in Sub-Saharan Africa and propose recommendations for social development financing.

The implementation of the structural adjustment programs (SAPs) has since become a hotly debated issue because of the adverse impact on social development and in particular people’s living standards. When the program started the main proponents who are the Bretton Woods institutions – the International Monetary Fund (IMF) and the World Bank (WB) hoped that most developing countries experiencing problems related to economic growth, incomes and employment would have them resolved. The World Bank provides about half of its financial support in the form of SAPs and the other half as project investments, whereas all of the IMF’s support is in the form of SAPs.

Despite voluminous literature on SAPs, it became clear by the end of the 20th century that the intended objectives of these programs had mixed results. Both internal and external factors played a part in generating the current situation, and it is extremely hard to sift out and assess the special effects of structural adjustment from those of other processes/pressures. However, it is fact that the economic policy reforms by the Bretton Woods institutions overlooked the likely impact of exogenous factors such as drought, the global recession, HIV/AIDS and civil strife in the region, on one hand and the economic legacy characterized by a combination of frictional and structural vulnerability and skewed resources, on the other. A drought for instance can disrupt both policy and all economic and social development. In addition, political rhetoric resulted not only in less commitment to the program, but also adversely affected resource utilization, performance of certain sectors of the economy and the people’s living conditions.


Did SAPs achieve anything at all?

If there is anything that SAPs managed to do – it is to question and possibly eliminate the excessive and inefficient state control of many aspects of local, national and international markets. SAPs opened the door to greater willingness by all stakeholders to discuss Third World countries’ development requirements. They have made it clear that forceful and undemocratic governments can no longer be overlooked or tolerated. SAPs required a certain code of decency and ethics of leadership from Third World governments. The issues of good governance and democracy, which are a prerequisite to social development, have been brought to the fore.
Secondly, it is worth-mentioning that a combination of aid flows, devaluation and removal of restrictions on private trade relieved constraints on the import of much needed inputs and goods and provided incentives for a stabilization of export earnings in a period of sharp declining terms of trade.

SAPs successfully liberalized the economy but failed to control budget deficits. Foreign exchange systems were largely dismantled, foreign investment regulations were liberalized, price controls on a variety of commodities (including food) were eliminated and the public monopoly on agriculture marketing was removed. However, the accompanying social safety nets (which were an after-thought) were over-stretched, under-funded and reached only a small percentage of the poor.


The gloomy picture of SAPS

Despite efforts to implement far reaching economic reforms and maintain macroeconomic stability Third World countries remain associated with material deprivation and abject poverty. Africa’s share in total foreign direct investment inflows has dropped from 11% in the second half of the 1990s to a meagre 1.2% of world foreign direct investment (FDI) inflows in 1997.

Africa’s development is strait-jacketed by a $300 billion debt burden since 1992. It has been argued that the more you adjust the more debts you incur as a nation. Today, in Sub-Saharan Africa, every man, woman and child owes US$357 despite the fact that millions live in abject poverty earning around US$100 per year, or 27 cents a day. (Business in Africa magazine December 1999-January 2000). It is a fact of life that some African countries now spend as much as four times on servicing debt as they do on education and health care and up to 40% of their national budgets.

A number of weaknesses have already been noted in current SAPs provisions as they affect human development and poverty alleviation. Countries implementing SAPs have become accustomed to operating under an ‘external policy command’, which discourages national dialogue on societal reform. SAPs destroyed the ‘social contract’ so necessary for policies to work. They were forced down the throats of the marginalized and materially deprived citizens. This eroded the capacity of the developing countries to develop their own programs for development.

Oloko Onyango’s 1993 study of Uganda reveals that national budgets are drawn by technocrats in the Ministry of Planning and have to be endorsed by donors before parliament examines them. Even then parliament merely rubber-stamps. In fact, SAPs can be viewed as based on a criticism of the nationalist state development project.

Permanent employment has been substituted by casual, insecure forms of employment, with a loss in health, pension and other benefits, and unemployment has exacerbated urban poverty. Households that lack housing tenure, education and skills are reported to be particularly vulnerable to these shocks, as have been households headed by single parents, the elderly, children, disabled persons, polygamous households and immigrant households. One man had this to say, “We are caught between the rock and the hard place, the challenge is how to move forward.”


Traditional criticism of SAPs

Traditional criticism of SAPs mainly center on three points. First, SAPs made poor people still poorer and has speeded the massive deterioration of social services, although the World Bank still insists that people are better off since incomes increase from freeing markets.
Secondly, it is an open secret that SAPs were introduced without sensitivity to local circumstances and the neo-liberal paradigm is too simplistic and misleading in important aspects. It fails to recognize the significant though limited role for the state with all its faults. The demonisation of the post-colonial state was part of the IMF and World Bank premises of the adjustment programs.

Thirdly, the Bank lacks a social assessment (SA) policy, although one is reportedly, being developed. Critics of the IMF and World Bank have pointed to the gulf between their rhetoric and the reality of their operations that too often, dishonours the social and environmental dimensions of development. The majority of loans do not address poverty directly, the likely economic impact of proposed operations on the poor, or ways to mitigate negative effects of reform.


Globalisation & Social Development

In the era of globalization, the IMF and World Bank have special functions to play: they police and facilitate globalisation as well as assist governments to adopt to the process of globalisation and help them cushion the blows of the process on the poor. One chief economist was quoted saying “it is important to send the “ambulances” (social programs) after the “tanks” (SAPs) have rolled through a country.” If a government strays from the path of globalisation the ‘seal of approval’ to borrow from public and private creditors is withdrawn by IMF and World Bank, and gradually the government’s sources of credit may dry up.

In the Anti-Poverty Pact contained in the blue-print document- “A better World for All”, the Bretton Woods institutions, in partnership with others, guarantee the world of their commitment to poverty reduction by 2015. The report measures progress in seven areas, world poverty, gender gaps in school enrolment, primary school enrolment, infant mortality and maternal mortality, access to health services and sustainable development.

Although, the ideals of the report include cutting by half the number of people living on US$1 a day, decreasing rates of infant mortality by two thirds and maternal mortality by three fourths by 2015, providing access to all that need health service by 2015, and ensuring all children are enrolled in primary school by 2015, it offers no alternative to the kind of economic globalization that has exacerbated the situation. What is worrisome to most civil society activists is that it is wrong for the IMF and World Bank to advocate for poverty reduction since they are known perpetrators of problems of poverty and inequality through their harsh conditions imposed on loans to developing countries. More disturbing is the fact that they have not been held accountable for their own mistakes that have generated abject poverty in developing countries.

Poverty Reduction Strategy Papers

In response to criticisms from campaign groups and UN agencies, that IMF conditions concentrate too much on austerity measures, and not enough on poverty, the Bretton Woods institutions introduced in September 1999 a new set of economic hurdles for indebted
countries to jump. These take the form of Poverty Reduction Strategy Papers (PRSP), which should be country-driven with the broad participation of civil society.

The speed with which interim and full PRSPs have to be developed militates against meaningful participation by civil society actors. The lack or reluctance of government openness to meaningful civil society participation renders the assumption of participation a difficult one to meet. Lack of capacity and often the attitude of non-interference in political issues cripple NGO work to a large extent. This is because criticism of political affairs is often construed and confused with political opposition. Furthermore, the neo-liberal sentiments still lingers in this process, with the Bretton Woods still retaining the power to endorse and approve development assistance to participating countries.


Recommendations

• The Bretton Wood institutions need environmental and social policies with “teeth” – that can help predict and address the impacts of their operations on vulnerable people and ecosystems.
  
• There is need for the international community to introduce discipline into sovereign lending and borrowing arrangements to address the careless, unregulated foreign borrowing by developing countries’ elites and dependency on Washington-based creditors which undermines autonomous decision-making and erodes democratic accountable institutions.
  
• There is need for comprehensive reform aimed at broad-based social development that empowers local democratic institutions. Reform programs must take into account the need to protect and extend poor people’s access to resources and services such as land, credit and healthcare.

Conclusion

In conclusion let me quote the words of Kofi Annan, the United Nations Secretary General when he officially opened the 2000 UN Special General Assembly on Social Development:

“A healthy and prosperous society is not just about attainment
of numerical benchmarks, but it also requires investment in
people-their health, their education and their security.
It takes care of all and allows all of its members to
participate in decision making”

There is need to involve all stake-holders in the design, implementation and evaluation of policies. Clearly, given that ‘trickle down’ policies inherent in SAPs have failed to deliver, we ought to give a human-centered strategy a chance.

References

• Adedeji, Adebayo. (1990) “Foreword” in B. Onimode (ed), Alternative Development Strategies for Africa, Vol. 1. London: Institute for African Alternatives.
• Cornia et al (1994) From Adjustment to Development in Africa. Conflict, Controversy, Convergence, Consensus. St Martin’s Press, New York.
• Huber, Rob (2000) “The Geneva Special and Beyond” in Social Development Review, ICSW, London p.16
• Loewenson et al (1991) “Challenges to equity in Health and Health Care: A Zimbabwean Case Study” Social Sciences in Medicine Vol.32:10 p.1079-1088.
• Obasanjo, O. (1999) “The Global Era” Business in Africa Magazine December 1999/January 2000, London.
• Oloka-Onyango, Joe (1993) “Judicial Power and Constitutionalism in Uganda Kampala” Center for Basic Research Working Paper No.30
• Spring 2000. News & Notices for IMF and World Bank Watchers, Vol.2: 2. Washington D.C.
• Poul Engberg-Pedersen et al (ed.) (1996) Limits of adjustment in Africa, Heinemann, UK.
• Stewart F (1991) “The Many of Adjustment” World Development Vol.19: 12
• World Bank (1989) Sub-Saharan Africa: From Crisis to Sustainable Growth World Bank, Washington D.C.
• World Bank (2000) Can Africa Claim the 21st Century? The World Bank, Washington D.C.
• World Bank (1980) The Impact of World Bank Support to the HNP Sector in Zimbabwe, OED Evaluations, Washington D.C.

Charles Mutasa, Poverty Reduction Forum, Zimbabwe, Email: cmutasa@avu.org