SAPS Flashcards
The washington consensus
The Washington consensus refers to the conditionality policies of the IMF and World Bank that are attached to saps
The consensus is driven by bias in the Decision-making process and structures of both the World Bank and IMF which favoured the interests of the USA the west and TNCs
Washington consensus policies
The policies involve
austerity measures to reduce inflation
government spending and government involvement in the economy
They also include measures for privatisation the regulation and the opening up of domestic markets including financial markets to foreign competition known as trade liberalisation and export led growth
What does the washington consensus refer to
The Washington consensus refers to the conditionality policies of the IMF and World Bank that are attached to saps
The consensus is driven by bias in the Decision-making process and structures of both the World Bank and IMF which favoured the interests of the USA the west and TNCs
a dynamic that occurred in the context of loans and Structural Adjustment Programs (SAPs) imposed by international financial institutions, particularly the World Bank and the International Monetary Fund (IMF).
Transitioning and developing states were forced to except austerity and trade liberalisation in return for loans saps
This reflects the fact that the World Bank and IMF have a vault from seeing markets as the problem to be tackled by state intervention to government being the problem of free markets the solution
Critisism of IMF and World Bank
This is a major criticism of the World Bank and IMF is they prioritise the interests of western states at the expense of developing states
Saps are not always the best policy is for developing states many countries with the most economic growth have rejected these loans
Three main policy conditions attached to saps
Austerity involves shrinking the role of the state
Trade liberalisation involves opening up domestic markets to foreign competition
Export led growth exports are seen as the key source of economic growth
examples of SAPs: Pakistan (SAP requirements)
SAP requirements - Increase the amount of taxes the central government raises in order to help these government debt in 2009 it was estimated that 3.2 million Pakistanis who owned multiple properties and bank accounts were not registered for paying tax
Privatise the national airline and 67 of a state owned companies that had accumulated losses amounting to billions of dollars
examples of SAPs: Pakistan (impact)
Removing taxbreaks created progress but the IMF assessed tax revenue collection in 2016 as still below Pakistan’s potential
Pakistan received several new loans despite not making progress on privatisation
examples of SAPs: Greece (SAP requirements)
Reduce public spending on government wages and welfare benefits the Greek system of state pensions was costing 17.5% of Greece’s
GDP
The Greek government was required to make €1 billion of savings through pension reforms alone
examples of SAPs: Greece (impact)
The Greek parliament voted in 2016 to approve reforms to income tax and general state pension schemes
Greases governing anti-austerity party, Syriza, Proposed the reforms in the face of public protests pensions have been cut many times and are now estimated to be worth 25 to 55% ess but at the
beginning of the debt crisis
IMF AND WORLD BANK - CRITISISM
The IMF and World Bank have been criticised for seeking to impose inappropriate Neo liberal economic policies on developing countries through structural adjustment programs
Opening up markets to foreign competition can mean that developing countries are swamped by cheap foreign goods destroying indigenous industries and relegating that country to peripheral status so that it never achieves a proto-industrial stage of development
This can be seen in the way in which Ghanaian rice farmers the Jamaican peasantry and the Cenegal groundnut Industry have all been ruined by cheap foreign imports
Saps seem to reinforce the north south divide by keeping developing countries in a peripheral status
