The structural adjustment program ( SAPs ) consists of loans provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries experiencing economic crisis. Both Bretton Woods Institutions require borrowing countries to apply certain policies to obtain new loans (or lower interest rates on existing ones). The terms clause attached to the loan have been criticized for its influence on the social sector.
SAP is created with the aim of reducing the fiscal imbalance of borrowing countries in the short and medium term or to adjust the economy to long-term growth. The bank in which a borrowing country receives its loan depends on the type of needs. The IMF usually implements a stabilization policy and the World Bank is responsible for adaptation measures.
SAP should enable developing country economies to become more market-oriented. This then forces them to concentrate more on trade and production so as to boost their economies. Through these conditions, SAPs generally implement "free market" policies and programs. These programs include internal changes (especially privatization and deregulation) as well as external ones, especially reducing trade barriers. Countries that fail to enforce these programs may be subjected to severe fiscal discipline. Critics argue that the financial threat to poor countries is extortion, and that poor countries have no choice but to abide by it.
Since the late 1990s, some supporters of structural adjustment, such as the World Bank, have been talking about "poverty alleviation" as a goal. SAP is often criticized for applying generic free-market policies and due to lack of involvement from borrowing countries. To increase the involvement of borrowing countries, developing countries are now encouraged to develop Poverty Reduction Strategy Paper (PRSPs), which essentially replace SAP. Some believe that increasing local government participation in creating policies will lead to greater ownership of lending programs and thus better fiscal policy. The contents of the PRSP are similar to the original content of SAP made by the bank. Critics argue that equality shows that the banks and countries that fund it are still too involved in the policy-making process. Within the IMF, the Enhanced Structural Adjustment Facility is replaced by the Poverty Reduction and Growth Facility, which in turn is succeeded by the Extended Credit Facility.
Video Structural adjustment
Terms
Typical stabilization policies include:
- balance of payments deficit reduced through currency devaluation
- budget deficit reduction through higher taxes and lower government spending, also known as savings
- restructure foreign debt
- monetary policy to finance the government deficit (usually in the form of loans from the central bank)
- remove food subsidies
- raise the price of public services
- cut wages
- reduce domestic credit.
Long-term adjustment policies typically include:
- market liberalization to ensure the price mechanism
- privatization, or divestment, of all or part of a state-owned enterprise
- create a new financial institution
- improve governance and combat corruption (from the perspective of neoliberal formulations of 'governance' and 'corruption')
- increase the rights of foreign investors vis-ÃÆ'-vis national law
- focuses the economic output on direct export and resource extraction
- boost investment stability (by increasing foreign direct investment with the opening of the domestic stock market).
These conditions are also sometimes labeled as the Washington Consensus.
Maps Structural adjustment
History
A structural adjustment policy emerged from two Bretton Woods, IMF and World Bank institutions. They emerge from the requirement that the IMF and the World Bank have attached their loans since the early 1950s. Initially, this condition is focused on a country's macroeconomic policy.
From 1950 onwards, the United States distributed loans and other forms of financial assistance to Third World countries (now often referred to as least developed countries, or LDCs). The free market economy was encouraged in the Third World, not only as a measure against the spread of socialist ideology during the Cold War but also as a means of encouraging direct foreign investment (FDI) and promoting the access of foreign firms within OECD countries to certain target economic sectors. In particular, Western companies are seeking access to the extraction of raw commodities, particularly minerals and agricultural products. Where loans are negotiated on the basis of the implementation of major infrastructure projects such as roads and electricity dams, Western countries benefit by using their domestic business and by extending the means by which Western companies can more easily extract these resources.
Loans made under SAP conditions at the time were suggested by top IMF and World Bank economists.
Once executed in dollars 1979-80, the United States adjusts its monetary policy and implements other measures so as to start competing aggressively for capital on a global scale. This works, as can be seen from the state's balance of payments account. The enormous capital flows to the United States have consequences that dramatically reduce the availability of capital to poor and middle-income countries. Giovanni Arrighi has observed that the scarcity of this capital, which was heralded by the Mexican standard of 1982,
creating an enabling environment for the counterrevolution in development thinking and the practice that the neo-liberal Washington Consensus began to advocate at about the same time. Taking advantage of the financial difficulties of many low- and middle-income countries, consensus bodies inserted on them "structural adjustment" measures that did nothing to improve their position in the global hierarchy of wealth but greatly facilitated the diversion of capital flows towards sustaining the awakening of wealth and US forces.
During the 1980s, the IMF and WB made a loan package for most countries in Sub-Saharan Africa because of their economic crisis.
To this day, economists can point to some, if any, examples of substantial economic growth among LDCs under SAP. In addition, very little loan has been repaid. Pressure is increasing to forgive these debts, some of which demand a large share of government spending on services.
The structural adjustment policy, as it is known today, stems from a series of global economic disasters during the late 1970s: the oil crisis, the debt crisis, the economic depression, and stagflation. This fiscal disaster encourages policymakers to decide that deeper interventions are needed to improve the welfare of the country as a whole.
In 2002, SAPs underwent another transition, the introduction of Poverty Reduction Strategy Papers. The PRSP was introduced as a result of bank confidence that "a successful economic policy program must be based on strong state ownership". In addition, SAP with its emphasis on poverty reduction has sought to better align itself with the Millennium Development Goals. As a result of the PRSP, a more flexible and creative approach to policy-making has been implemented at the IMF and World Bank.
While SAP's main focus continues to balance foreign debt and trade deficits, the reasons for the debt have been transitioning. Currently, SAP and their lending institutions have increased their sphere of influence by providing assistance to countries experiencing economic problems due to natural disasters or economic mismanagement. From the beginning, SAP has been adopted by a number of other international financial institutions.
Criticism
There are some critics that focus on various SAP elements.
Undermining national sovereignty
Critics claim that SAP threatens national economic sovereignty because outside organizations dictate the economic policies of a country. Critics argue that the creation of sound policies is in the best interests of a sovereign nation. So, SAP is not necessary considering the state acts in the best interest of it. However, advocates assume that in many developing countries, the government will support political gain over the interests of the national economy; that is, he will engage in lease-seeking practices to consolidate political power rather than address crucial economic problems. In many countries in sub-Saharan Africa, political instability has come hand in hand with economic decline.
SAPS is seen by some postcolonialists as a modern procedure of colonization. By minimizing the government's ability to organize and regulate its internal economy, a pathway is made for multinationals to enter the state and take their resources. After independence from the colonial government, many countries that took on foreign debt could not repay it, limited as they were to the production and export of commercial crops, and were restricted from control of their own more valuable natural resources (oil, minerals) by free SAP-demands and low regulatory requirements. To pay interest, these postcolonial states were forced to secure further foreign debt, to pay off previous interests, resulting in an endless cycle of financial conquest.
Osterhammel's The Dictionary of Human Geography defines colonialism as "the eternal relationship of domination and mode of deprivation, usually (or at least initially) between the indigenous majority (or enslaved) and the minority of interlopers, who believe in their own superiority , pursue their own interests, and exercise power through a mixture of coercion, persuasion, conflict, and collaboration ". The definition adopted by the Dictionary of Human Geography shows that Washington Consensus SAPs resemble modern financial colonization.
Investigate Immanuel Kant's conception of liberal internationalism and opposition to the commercial empire, Beate Jahn says:
... personal interests in liberal capitalist countries continue to pursue market openings abroad, and they continue to seek their government support, through multilateral and bilateral arrangements - conditional assistance, the International Monetary Fund (IMF), and the World Trade Organization (WTO). While the latter agreement is formally "voluntary," in the light of the desperate economic dependence of many developing countries, they are for all intents and purposes "imposed." Moreover, the beneficiaries of these agreements - sometimes deliberately, often unintentionally - become rich countries. The TRIPS, which has been debated, has been debated, turning the WTO into a "royalty collection agency" for rich countries. The Structural Adjustment Program (SAPs) linked to the IMF loan has proven to be incredibly catastrophic for poor countries but provides large interest payments to the rich. In both cases, the "voluntary" signature of poor countries shows no agreement on the details of the agreement, but is necessary. Clearly, trade - with a liberal or non - liberal state - is not a moral obligation, but conditional help, such as the IMF and WTO policy, aims to change the cultural, economic and political constitution of the target country clearly without its consent.
Privatization
The general policy required in structural adjustment is the privatization of state-owned industries and resources. This policy aims to improve efficiency and investment and to reduce state expenditure. State-owned resources will be sold whether they generate fiscal profit or not.
Critics have condemned this privatization requirement, arguing that when resources are transferred to foreign companies and/or national elites, the goals of public prosperity are replaced with the purpose of personal accumulation. In addition, state-owned companies can exhibit fiscal losses because they fulfill a wider social role, such as providing utilities and cheap jobs. Some scholars argue that SAP and neoliberal policies have negatively affected many developing countries.
Savings
Critics are holding SAP responsible for much of the economic stagnation that occurs in borrowing countries. SAPs emphasize maintaining a balanced budget, which compels austerity programs. Victims balancing the budget is often a social program.
For example, if the government cuts education funding, universality is disrupted, and therefore long-term economic growth. Similarly, cuts to health programs have allowed diseases such as AIDS to destroy some regional economies by destroying the workforce. A 2009 book by Rick Rowden entitled The Deadly Ideas of Neoliberalism: How the IMF has Tackled Public Health and Fighting Anti-AIDS claims that Monetist monetary approach to price stability priorities (low inflation) and fiscal control (budget deficit low) is unnecessarily limiting and has prevented developing countries from being able to increase long-term public investment as a percentage of GDP in the underlying public health infrastructure. The book claims that the consequences are a fund-deficient public health system, resulting in a dilapidated health infrastructure, inadequate number of health personnel, and demoralizing working conditions that have triggered "push factors" that are driving the migration of migrant nurses migrating from poorer countries to rich countries. , all of which have undermined the public health system and the fight against HIV/AIDS in developing countries. Counter argument is unreasonable to assume that reducing funding to the program automatically reduces its quality. There may be factors in these sectors that are vulnerable to corruption or staff surplus that cause initial investment to be not used as efficiently as possible.
Recent studies show a strong relationship between SAP and tuberculosis rates in developing countries.
Countries with indigenous people living with traditional lifestyles face unique challenges in terms of structural adjustment. The authors of Ikubolajeh Bernard Logan and Kidane Mengisteab make this case in their article "IMF-World Bank Adjustment and Structural Transformation in Sub-Saharan Africa" ​​for the ineffectiveness of structural adjustment in part because it is associated with a disconnect between the informal economy as generated by the traditional society and the formal sector produced by modern urban society. The rural and urban scales and the different needs of each are usually untested factors when analyzing the effects of structural adjustment. In some rural areas, traditional societies, the lack of land ownership and resource ownership, tenure, and labor practices because customs and traditions provide a unique situation with respect to the structural economic reforms of a country. The kinship-based society, for example, operates under the rule that the resources of the collective group are not to serve an individual purpose. Gender roles and obligations, family relationships, lineages, and household organizations all play a role in the functioning of traditional societies. It will therefore be difficult to formulate an effective economic reform policy that takes into consideration only the formal sector of society and economy, leaving communities and a more traditional way of life.
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SAP IMF versus World Bank SAP
While both the International Monetary Fund (IMF) and World Bank loans to countries that are depressed and growing, their loans are meant to address different problems. The IMF primarily lends to countries with balance of payments issues (they can not pay their international debt), while the World Bank offers loans to fund certain development projects. However, the World Bank also provides balance of payments support, usually through an adjustment package jointly negotiated with the IMF.
SAP IMF
The IMF loan focuses on fixing the temporary problem facing the country as a whole. Traditionally the IMF loan is intended to be paid within a short period of between 2½ and 4 years. Currently, there are a number of long-term options available, which reach up to 7 years. as well as options that lend to countries in times of crisis such as natural disasters or conflicts.
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Donor countries
The IMF is fully supported by its member countries, while the World Bank finances its loans with a mix of member and corporate bond contributions. There are currently 185 IMF Members (As of February 2007) and 184 World Bank members. Members are given quotas to be reevaluated and paid on a rotating schedule. The assessed quota is based on the donor portion of the world economy. One of the criticisms of SAP is that the highest donor countries have too much influence on the countries that receive loans and SAPs that accompany them.
Some of the largest donors are:
- Great Britain
- United States
- Japan
- Canada
- German
- French
src: www.newstatesman.com
See also
- IMF Standby Settings
- Washington Consensus
- Bretton Woods System
- International Monetary Fund
- The World Bank
- Balcerowicz Plan
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References
src: www.socialistworkeronline.net
Bibliography
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External links
- IMF Factsheet on Conditionality
Source of the article : Wikipedia
... personal interests in liberal capitalist countries continue to pursue market openings abroad, and they continue to seek their government support, through multilateral and bilateral arrangements - conditional assistance, the International Monetary Fund (IMF), and the World Trade Organization (WTO). While the latter agreement is formally "voluntary," in the light of the desperate economic dependence of many developing countries, they are for all intents and purposes "imposed." Moreover, the beneficiaries of these agreements - sometimes deliberately, often unintentionally - become rich countries. The TRIPS, which has been debated, has been debated, turning the WTO into a "royalty collection agency" for rich countries. The Structural Adjustment Program (SAPs) linked to the IMF loan has proven to be incredibly catastrophic for poor countries but provides large interest payments to the rich. In both cases, the "voluntary" signature of poor countries shows no agreement on the details of the agreement, but is necessary. Clearly, trade - with a liberal or non - liberal state - is not a moral obligation, but conditional help, such as the IMF and WTO policy, aims to change the cultural, economic and political constitution of the target country clearly without its consent.
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