Impact of SAPs in the Third World
Increased Poverty
Since the 1980s, the social impact of SAPs has been
recognised: poverty has increased both in the rural and urban areas;
real salaried earnings in many countries have plummeted by more than 60
percent since the beginning of the 1980s; while the situation is much
worse in the informal sector. In 1991, a university trained teacher in
Hanoi received a monthly salary of less than US$15. In Peru after the
IMF-WB sponsored reforms in 1990, fuel prices shot up 31 times overnight
and the price of bread increased 12 times: the real minimum wage had
declined by more than 90 percent compared to levels in the mid 70s
(Chossudovsky 1997:38).
In South America, SAPs have rolled back the progress
achieved in the 1960s and 70s. The number of people living in poverty
rose from 130 million in 1980 to 180 million at the dawn of the 1990s.
One decade of negative growth only worsened income inequalities, while
the cost of adjustment fell on the middle and lower income groups, the
top five percent retained and even increased their living standards.
(Bello 1996:292). Income disparities widened with privatisation and
deregulation as massive resources were concentrated in the hands of a
few. In Mexico the richest 20 percent received more than 52 percent of
the national income while the income of the poorest 20 percent had less
than five percent. The number of billionaires rose from two to 24 while
17 million people subsisted on less than $350 per person per year during
the Salinas administration (Heredia & Purcell 1996:283).
The shift from food production for domestic
consumption to export needs under SAPs has affected nutritional levels.
In Brazil, production of foodstuffs per capita like rice, black beans,
manioc and potatoes fell by 13 percent from 1977 to 1984. Per capita
output of exports like soybeans, oranges, cotton, peanuts and tobacco
shot up by 15 percent. As a result of these policies 50 percent of
Brazilians suffer malnutrition (Morris 1996:223)
In Mexico the health budget in the 1980s fell from
4.7 percent to 2.7 percent. Between 1980 and 1992, infant deaths from
nutritional deficiencies tripled to rates higher than those in the 1970s
as a result of cutbacks in social and health spending (Heredia &
Purcell 1996:277). In 1990, half of all Mexicans (42 million) were
living in poverty, with 18 million living in conditions of extreme
poverty and ‘malnutrition has become the normal condition of society’
(Ibid:282).
In Chile between 1980 and 1990, the proportion of
families below ‘the line of destitution’ rose from 12 to 15 percent
while those below ‘the poverty line’ (but above the destitution
line) from 24 to 26 percent. Some 40 percent or 5.2 million people were
classified as poor in a country that once boasted of a large middle
class. (Bello 1996:291) This has led to increased hunger and
malnutrition; for some 40 percent of Chileans the daily calorific intake
dropped from 2,019 in 1970 to 1,751 in 1980 to 1,629 in 1990 (Ibid:291).
Corruption
Privatisation of public enterprises and downsizing of
the civil services have engendered the spread of corruption in the Third
World. A recent report reveals that Western business interests pay
bribes worth $80 billion a year - about the amount the UN believes is
needed to eradicate poverty. It ‘is largely the result of the rapid
privatisation (and associated practices of contracting out and
concessions) of public enterprises worldwide: … this process has been
pushed by Western creditors and governments and carried out in such a
way as to allow multinationals to operate with increased impunity. Thus
multinationals supported by Western governments and their agencies are
engaging in corruption on a vast scale in North and South alike’
(Hawley: 2000).
Efficient, accountable, adequately paid and well
motivated civil services are essential for combating corruption. Civil
service reform, a major plank of SAPs since the 1980s has meant
downsizing. These cuts as the World Bank discovered produced neither
efficiency or increased revenue: eight out of 15 countries in Africa
actually increased their wage bills after downsizing from pay offs to
retrenched workers. In 40 percent of cases laid off civil servants had
to be rehired. An internal World Bank staff report noted in 1999, that
civil service reforms were eroding governance (Ibid). SAPs
induced decline in wages have resulted in lack of motivation, low morale
and increased risks of petty corruption among civil servants who remain
employed.
Bribery enables companies to gain contracts like
public works and military equipment, or concessions, which they would
not otherwise have won. In 1999, the US Commerce Department reported
that in the last five years, bribery was a factor in 249 commercial
contracts worth $145 billion. Yet corruption is increasingly cited as a
reason for withholding foreign aid or debt relief for the South, despite
the fact that it is through WB-IMF led deregulation, privatisation, and
SAPs requiring civil service reform, and economic liberialisation
policies, and their manner of implementation that have increased
corruption (Ibid).
Social Dislocation & Unrest
There is a brain drain from the Third World countries
to the North: as many as 30,000 African PhDs live abroad, while the
continent itself is left with only one scientist and engineer per 10,000
people. At least 30 million women migrants are in the Third World: a
large share of migrants from the Philippines, Sri Lanka and Indonesia
are women, many doing work that is dirty, dangerous and demeaning (UNDP
1999).
The situation in many Third World countries is
desperate if not hopeless. Anti SAP riots have occurred in many
countries as reported by Chossudovsky (1997:36) like the following:
-
Venezuela: In 1989, the President declared a
state of emergency to quell riots in Caracas sparked off by a 200
percent increase in the price of bread; men, women and children were
fired upon and unofficial reports listed a thousand people were
killed;
-
Tunis, Tunisia: In January 1984, bread riots
occurred as a result of the rise in food prices;
-
Nigeria 1989: anti-SAP student riots led to the
closing of six universities by the military government;
-
Morocco 1990: There was a general strike and
popular uprising against the government’s IMF sponsored reforms;
-
Mexico 1993: Economic polarisation and
declaration of war by the Zapatista Army of National Liberation
(EZLN) in Chiapas, and the assassination of a presidential
candidate;
-
Bolivia 2000: WB pressured the sale of Cochabamba’s
water to the US firm Bechtel: the company hiked water rates and
citizens took to the streets. Martial law was declared (The
Ecologist June 2000).
Social Conditions Worsen
Reforms in the social sector have had dramatic impact
on the status of education, health, environment and women and children.
The restructuring of the health sector had led to the collapse of both
preventive and curative care due to the lack of medical equipment,
supplies, poor working conditions, low pay of medical personnel and the
resulting low morale. User fees in primary health care and education
have led to the exclusion of large sectors of the population from health
services as they are unable to pay.
In fact the utilisation of health centres by high
risks groups dropped when cost recovery schemes and user financing were
introduced. In Kenya, user fees at a centre for sexually transmitted
diseases, caused a sharp decline in attendance leading to a likely
increase in the number of untreated STDs in the population. In 1994,
medical experts voiced fears that the introduction of user fees, along
with SAPs may be contributing to the rapid spread of AIDs in Africa. In
the Upper Volta region of Ghana, health care use plummented by 50
percent when cost recovery was introduced. In Dar es Salaam, Tanzania,
the three public hospitals saw attendance drop by 53.4 percent in a
matter of months in 1994 when user fees were introduced. In Niger, cost
recovery measures implemented between 1986 and 1988 led to: a sharp
decline in the use of preventive care services; increased exclusion of
the most impoverished from care at Niamey Hospital, where outpatients
who did not pay for care would wait some 24 days before seeking care
while an outpatient who did have to pay for care would wait an average
of 51 days; exemptions that were applied to the benefit of urban,
military and civil service families and not for the intended
beneficiaries (the most impoverished) led to a drop in already very low
primary school enrolment rates: these went from 17 percent in 1978 to 28
percent in 1983 to 20 percent in 1988 (50 Years is Enough July
14, 2000).
In Nicaragua, about one quarter of primary school
children have not enrolled in primary school since charges for
registration and a monthly fee were introduced. However, when school
fees and uniform requirements were eliminated in Malawi in 1994, UNICEF
reported primary enrollment increased by some 50 percent virtually
overnight from 1.9 million to 2.9 million and the main beneficiaries
were girls (Ibid).
In China, when user payment for tuberculosis
treatment was introduced, some 1.5 million cases of TB remained
untreated, leading to 10 million additional persons infected: many of
the three million deaths from TB in China during the 1980s could have
been prevented (Werner & Sanders 1997:103). Elsewhere, community
involvement in health care amounts to replacing the government salaried
nurse or medical assistant by an untrained and semi literate health
volunteer. The shortage of funds for medical supplies like disposal
syringes and pharmaceutical drugs as well as price hikes in electricity,
water and fuel (required to sterilise equipment) have led to an increase
in the incidence of infection (including AIDS) (Chossudovsky 1997:72).
In Sub-Saharan Africa (SSA), the inability to pay for prescription drugs
tends to reduce the levels of visits and the use of government health
centres so that health infrastructure and personnel is no longer
utilised cost-effectively (Ibid:72).
Cuts in public expenditure under SAPs have led to a
drastic decline in control and prevention measures. As a result,
diseases, once under control or eradicated have made a comeback.
Sub-Saharan Africa records a resurgence of cholera, yellow fever and
malaria. In South America the prevalence of malaria and dengue has
worsened dramatically since the mid 80s. The outbreak of bubonic and
pneumonic plague in India in 1994 has been seen ‘as the direct
consequence of a worsening urban sanitation and public health
infrastructure which accompanied the compression of national and
municipal budgets under the 1991 IMF-WB, sponsored structural adjustment
programme’ (Ibid: 72). The three country studies of the impact
of SAPs on health outlined below are from Chossudovsky’s research
(1997).
SAPs Reform in Peru
Peru implemented SAPs at the outset of the debt
crisis and by 1985 estimated food intake had fallen by 25 percent in the
space of ten years since 1975: real earnings at the minimum wage level
fell by more than 45 percent; the average decline in earnings of
blue-collar workers and white-collar workers were 39.5 percent and 20
percent respectively. The annual rate of inflation for the same period
was 225 percent. In 1990, a new government carried another round of
economic reform under IMF tutelage. Since 1985, Peru had declared a
moratorium on the payment of debt servicing obligations and the country
was on the IMF blacklist. The new government unconditionally accepted to
reimburse Peru’s debt areas to the IFIs. This was through negotiations
of ‘new loans’ earmarked ‘to pay back old debts’. Peru was
obliged to start servicing its debt immediately. As a direct result of
these loans Peru’s debt servicing obligations more than doubled in
1991 from US$ 60 million a month to over $150 million (Ibid:193).
The growing economic crisis led to another round of
economic stabilisation, which entailed an ‘economic shock treatment’
as a condition for the renegotiation of its external debt. To solve Peru’s
hyperinflation, wages were further lowered and social expenditures cut
further together with the massive lay-off of public sector workers. A
few days before the ‘Fuji shock’ a state of emergency was declared
in Peru on 8 August 1990. The IMF austerity measures led to a reduction
of health and educational expenditure and the collapse of civil
administration in the regions. The Sendero Luminoso (Shining
Path) insurgency gained ground and under the Fujimori regime,
controlling the insurgency became a pretext to systematically harass
civilian opposition to the IMF programme like the peasant movements,
trade union leaders, students, intellectuals and activists. The IMF
programme had an immediate impact on the rural economy: domestic
producers were displaced by cheap food staples imports; immediate and
abrupt hikes in the prices of fuel farm inputs, fertilisers and
agricultural credit; in many areas cost of production was more than the
farmgate price; many peasant communities could not sell their surplus in
local markets and increased prices of fuel and transportation cut them
off from the cash economy (Ibid: 205-207).
The cholera epidemic in 1991 received worldwide news
coverage. News reports at that time quoted the President who blamed it
on the debt crisis. With a thirty-fold increase in cooking oil prices,
the population including the ‘middle classes’ could not afford to
boil their water or cook their food. Some 200,000 declared cases of
cholera were detected and 2000 deaths registered in a six-month period (Ibid:
201). Since August 1990, tuberculosis had reached epidemic
levels aggravated by malnutrition and the collapse of the state
vaccination programme. The breakdown of the public health infrastructure
had led to a resurgence of malaria, dengue and leishmaniasis. In July
1991, an indefinite strike by teachers and health workers had closed
down schools, hospitals and universities as monthly wages were on
average $45-$70 which was 40 times lower than wages in the US. In
the-mid 90s, more than 83 percent of the population did not meet the
minimum nutritional requirements. Peru had the second highest rate of
child malnutrition in South America (Ibid: 201).
Famine in Somalia
Until IMF-WB intervention in the early 1980s,
agriculture in this country was based on reciprocal exchange between
nomadic herdsmen and traditional agriculturalists. In the 70s commercial
livestock was developed and this affected the nomadic herdsmen. Until
1983, livestock contributed to 80 percent of export earnings. Despite
recurrent droughts, Somalia was virtually self sufficient in food until
the 1970s. From the-mid 1970s to mid 1980s, food aid increased fifteen
fold at 31 percent per annum. The influx of cheap surplus wheat and rice
in the domestic market soon displace local producers and caused a shift
in food consumption patterns to the detriment of traditional maize and
sorghum (Ibid:102).
The IMF led austerity reform to service Somalia’s
debt led to a dramatic decline in purchasing power, the deregulation of
the grain market, and the influx of ‘food aid’ led to massive
impoverishment of the farming communities. In June 1981, the devaluation
of the Somali shilling led to hikes in the prices of fuel, fertiliser
and farm inputs. This affected both the rainfed agriculturalists and
irrigated farming communities. At the same time Somalia was encouraged
to produce ‘high value added’ fruits, vegetables, oilseeds and
cotton for export, on the best-irrigated lands.
Prices of livestock drugs increased with devaluation:
user fees for veterinarian services and the vaccination of animals were
introduced; the functions of the Ministry of Livestock were phased out
and the Veterinary Laboratory services were to be fully financed on a
cost-recovery basis. The privatisation of animal health together with
the absence of emergency animal feed during drought periods, the
commercialisation of water and the neglect of water and range land
conservation led to the decimation of the herds and the pastoralists who
represent 50 percent of the population. The World Bank had succeeded in
wiping out the herdsmen and the traditional economy (Ibid:103).
Aid was increasingly given in the form of food aid.
By the 1980s, ‘ the sale of food aid’ (government would sell this on
the local market) was the principal source of state revenue and the
donors were thus in charge of the nation’s budget determining what
monies were spent where. When the herds’ died and nomadic herdsmen
were pushed into starvation, the small farmers could not barter or sell
their grains for cattle. The entire social fabric of the pastoral
economy disintegrated. The collapse in foreign exchange earnings from
declining cattle exports and remittances (from the Gulf) affected the
balance of payments and led to a breakdown in the government’s
economic and social programmes (Ibid:105).
By 1989 health expenditure had declined by 78 percent
in relation to its 1975 level. From 1981-1989 school enrolment dropped
by 41percent. Nearly a quarter of primary schools closed down. By 1989
real public sector wages had declined by 90 percent as compared to
the-mid 70s. Average wages in this sector had plunged to US$3 a month,
leading to a breakdown in the civil service. Debt servicing obligations
represented 194.6 percent of export earnings. IMF cancelled its loan
because of outstanding areas. WB froze a structural adjustment loan for
$70 million in June 1989 due to Somalia’s poor macro-economic
performance (Ibid:104). Somalia has not had a national government
since faction leaders overthrew the 21 year dictatorship of Mohammed
Siad Barre in January 1991.
Thus famine in Somalia and the collapse of civil
society was not (due to a shortage of food) caused by drought,
desertification and civil war which were the official causes and which
led to US military intervention in 1993 in the guise of ‘Operation
Restore Hope’. It was the disintegration of the peasant economy and
the destruction of its agriculture. US grain surplus destabilised
domestic food production. Since the early 80s grain markets were
deregulated under WB supervision (Ibid: 106). The nomadic and
commercial livestock industry was destroyed by SAPs. Subsidised beef and
dairy products from the European Union destroyed the pastoral economy.
European beef imports to West Africa increased seven fold since 1984. EU
beef sells at half the price of locally produced meat, and Sahelian
farmers are finding that no one is prepared to buy their herds (Ibid:
106). Thus food aid leads to famine. Years of economic deprivation and
conflict have swelled the capital Mogadishu with the influx of refugees
and gunmen.
SAPs role in undermining food security has been
repeated throughout Africa. Food aid to Sub-Saharan Africa since 1974
has increased by more than seven times and commercial grain imports have
more than doubled. SAPs undermine all economic activities that do not
serve the interests of the global market (Ibid: 106).
Economic Reform in Vietnam
The end of the Cold War and the demise of the Soviet
Union affected the Vietnamese economy. In 1986 free market reforms under
the guidance of the WB - IMF was launched. The same prescriptions were
doled out; devaluation of the currency; the closure of state
enterprises; downsizing the civil service; removal of tariff barriers,
subsidies; deregulation; and restructuring of the Central Bank. One of
the conditions for the normalisation of economic relations and the
lifting of the US embargo was that Vietnam had to pay for the debt
incurred by the US backed South Vietnamese regime during the liberation
war. The effects of the economic reforms can be compared to a new phase
of economic and social devastation in the aftermath of the Vietnam War,
which ended in 1975 after 50 years of struggle (Ibid: 149).
By 1994, the free market reforms had contributed to
the closing down of more than 5000 out of the 12,300 State owned
enterprises. The most valuable state assets were transferred to joint
venture companies. Through a series of deliberate manipulation of the
market forces, and IMF intervention, the State economy collapsed. There
was a hidden agenda to the economic reforms in Vietnam, namely to
destabilise the country’s industrial base such that all heavy
industry, oil and gas, natural resources and mining, cement and steel
production were restructured and taken over by foreign capital with
Japanese conglomerates in the lead role (Ibid:152). In the
agriculture sector, Vietnamese farmers were encouraged to switch to ‘high
value’ cash crops for export. The ‘local level self sufficiency in
food’ policy which was devised to prevent regional food shortages was
done away with under the guidance of the World Bank and the FAO. Thus
overcropping of coffee, cassava, cashew nuts and cotton together with
falling world commodity prices and the high cost of farm inputs have led
to severe food shortages and outbreak of local level famines. In areas
where rice growing had been abandoned following the policy of ‘regional
specification’ food shortages struck (while rice was being exported
below world market prices) (Ibid:159).
In 1994 famine occurred in a border province with
China which affected 50,000 people. In the Mekong Delta, World Bank data
revealed that more than a quarter of the adult population had a daily
energy intake below 1800 calories. Fall in real earnings, massive
unemployment and soaring food prices (due to the removal of food
subsidies and price controls) also affected the urban population with
lower levels of food intake and a deterioration in the nutritional
status of children as a result (Ibid: 160). The deregulation of
the grain market triggered famine and led to a high incidence of child
malnutrition.
According to the World Bank: ‘Vietnam has a higher
proportion of underweight and stunted children (of the order of 50
percent) than in any other country in South and Southeast Asia with the
exception of Bangladesh. The magnitude of stunting and wasting among
children certainly appears to have increased significantly…. it is
also possible that the worsening macro-economic crisis in the 1984 -
1986 period may have contributed to the deterioration in nutritional
status’. A FAO nutrition study revealed that Vitamin A deficiency
(which causes night blindness) is widespread among children in all
regions of the country except Hanoi and the southeast. The FAO study
also confirmed a situation of severe undernourishment, with the adult
mean energy intake per capita per day for the country was 1,861 calories
with 25 percent of the adult population below 1,800 calories. In nine
percent of households, energy intake by adults was less than 1,500
calories (Ibid: 160-61).
Health System Collapse
Until 1989, the district hospitals and commune level
health centres provided medical services and essential drugs free of
charge. With reforms, a user fees system was introduced and cost
recovery and the free market sale of drugs were applied. Consumption of
essential drugs (through public distribution) declined by 89 percent.
With complete deregulation of the pharmaceutical industry and the
liberalisation of drug prices, imported branded drugs sold exclusively
in the free market at enormous costs have displaced domestic drugs. By
1989 domestic production of pharmaceuticals had declined by over 98
percent compared to its 1980 level. A large number of drug companies
closed down and Vietnam’s pharmaceutical and medical supply industry
was pushed into bankruptcy.
The government discontinued budget support to the
health sector (under the guidance of the donors) which paralysed the
public health system. There was no money for medical equipment and
maintenance; salaries and working conditions declined. With the
emergence of private practice, tens of thousands of doctors and health
workers fled the public health sector. By 1991, commune level health
centres were not working. There was no annual check-up for TB; no
medicines, and farmers could not afford user fees at district hospitals.
With the public health system in shambles, there was
a resurgence of infectious diseases like malaria, tuberculosis and
diarrhoea. A WHO study revealed that malaria deaths increased threefold
in the first four years of reforms with the collapse of curative health
and soaring prices of anti-malarial drugs. In the words of the World
Bank: ‘despite its impressive performance in the past, the Vietnamese
health sector…there is a severe shortage of drugs, medical supplies
and medical equipment and government clinics are vastly under utilised.
The shortage of funds to the health centre is so acute; it is unclear
where the grassroots facilities are going to find the inputs to continue
functioning in the future’ (Ibid: 168).
In the area of education, Vietnam had 90 percent
literacy rates and school enrolments were among the highest in Southeast
Asia. However economic reforms have resulted in shrinking the
educational budget, depressing teachers’ salaries, and commercialising
secondary, vocational and higher education through the introduction of
tuition fees. School enrolment declined and a high dropout rate in the
final years of primary school has been recorded. The proportion of
graduates from primary school who entered the four-year lower secondary
education system declined from 92 percent in 1986 - 87 to 72 percent in
1989 - 90. A total of nearly three quarters of a million children were
pushed out of the secondary school system during the first three years
of the reforms. The economic reforms have systematically undone some 40
years of struggle and efforts of the Vietnamese people. This will have
severe repercussions on health as education is an important determinant
of health: where the mother’s educational level is the single most
important determinant of infant mortality among the poor.
According to the Ministry of Labour, War Invalids and
Social affairs (MOLiSA) joblessness is becoming a major concern for this
nation of 77 million people. Unemployment has risen from 6.8 percent in
1998 to 7.4 percent in 1999. With less land for cultivation and
increasing unemployment, uncontrolled migration to the cities is now
widespread. More than 30,000 Vietnamese have gone to work abroad.
Vietnam has workers in some 38 countries and the numbers are expected to
increase by about half a million in 2005 (Nguyen Nam Phuong July 11
2000).
Thus the World Bank and IMF through SAPs have
successfully destroyed domestic economies, disintegrated societies;
enhanced the integration of countries into the global free market;
increased the dependence of indebted countries on the North for their
survival; empowered the role of the TNCs in controlling their economies;
facilitated the spread of corruption; and increased poverty and hunger
and a deterioration in health in these societies.
Next >>
