Structural Adjustment Programmes (SAPs)
In 1989, no less than the UN Economic Commission for
Africa (ECA) issued a document African Alternatives Framework to
Structural Adjustment (AAF-SAP). This was a comprehensive critique
of the World Bank’s SAP agenda for Africa. According to the ECA, SAPs
have not achieved their macro-economic objectives. ‘The World Bank was
oblivious to the social costs of adjustment: increased poverty and
unemployment: ‘debt service obligations have become unbearable…starvation
and malnutrition, abject poverty, and external dependence have worsened,
while other structural weaknesses and deficiencies of the African
economies have intensified’ (Mihevc 1995:116-117).
The SAPs packages entailed sweeping economic and
social changes designed to siphon the indebted country’s resources and
productive capacity into debt payments and to enhance international (TNCs)
competition. They included massive deregulation, privatisation, currency
devaluation, social spending cuts, lower corporate taxes, export driven
strategies (ie export of agricultural products and natural resources)
and removal of foreign investment restrictions. (Clarke 1995:301). In
order to find the foreign exchange to pay the debts, countries were
forced to export their timber, fisheries, wildlife, minerals, and oil
and grow crops for the global market. In the absence of strict
regulations in these countries, TNCs polluted water systems, destroyed
forests, depleted fish stocks and wildlife, and dumped toxic wastes in
the process. In fact, several African countries in June 1988 made the
world newspaper headlines when it was revealed that toxic wastes were
offered by the North and dumped in some African countries: with soaring
debts and the plunge in commodity prices, these cash strapped countries
were in dire need of foreign currency.
SAPs was imposed to promote efficiency and a more
rational allocation of productive resources based on the market
mechanism. More important, through SAPs the WB-IMF set the development
agenda of the Third World. Loans were given to debtor countries to ‘help
them adjust’. But these monies were tied to strict conditionalities.
These loans were only granted when the countries agreed to the adoption
of a comprehensive programme of macro-economic stabilisation and
structural economic reform (Chossudovsky 1997:52) In fact these loans
did not lead to the development of the local economy as the donors
determined how the funds could be used. None of these monies were
channeled into investment. Instead the adjustment loans diverted
resources away from the domestic economy and encouraged countries to
keep on importing large quantities of consumer goods and food staples
from the North. So money granted in support for example, of the
adjustment of agriculture was not meant for investment in agricultural
projects. The loans could be spent freely for commodity imports
including consumer durables and luxury goods. This resulted in the
stagnation of the domestic economy, the increase in the balance of
payments crisis and the ballooning of the debt burden. With decreasing
commodity prices, earnings from the depressed export sector, the debtor
countries find themselves unable to meet servicing obligations (Ibid
52-53). While commodity prices have tumbled since the early 1980s
leading to a decline in the value of exports, an increasing larger share
of export earnings had been earmarked for debt servicing.
In essence this meant that debtor countries will have
to devalue their currencies, remove price controls and food subsidies,
reduce spending on health care and education, reduce budget deficits,
remove tariffs, and import quotas, privatise state assets, deregulate
commercial banking systems, and liberalise foreign exchange movements
(through electronic transfers). These measures eventually lead to
inflation, price hikes in food, consumer durables, gasoline, fuel, farm
inputs, equipment; governments curtailing spending; reducing real wages;
laying off civil servant jobs; closing down schools, hospitals and
clinics; collapse in public investments and domestic manufacturing.
While the IMF-WB dictates budget cuts for social
spending, in the indebted countries, SAPs have not targeted military
spending which in Third World countries are seven times higher than they
were in 1960 (Sivard 1988). The US is the world’s biggest arms dealer:
in 1999 US contractors sold some $11.8 billion in weapons with $8.1
billion in sales to the Third World (Myers August 22, 2000). From 1972
to 1982 Third World countries’ military expenditures rose from $7
billion to over $100 billion while spending on health and education
fell. By 1986 the 43 countries with the highest infant mortality rates
spent three times as much on defence as on health. By 1988, military
spending in the Third World totaled $145 billion which is sufficient to
end absolute poverty in the world within the next ten years, satisfy
needs for food, clean water, health care and education for all. (UNICEF
1990). The Third World is the arms industry’s fastest growing market:
often promotion is expedited by US aid. Massive supply of arms is
increasing armed violence and militarisation in the Third World which
has an escalating impact on health.
Through SAPs Northern economic interests (which
include the TNCs, banks, and governments) through the WB-IMF dictate
economic policy reforms and facilitate globalisation in the Third World.
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