Structural Adjustment Programmes Flashcards
pressure for reform of the IMF and World Bank
Two main issues have emerged concerning the global economic system whether it is fit for purpose and whether it perpetuates global structural inequality rather than solving it
what is one of the biggest controversies surrounding the IMF and World Bank?
(can be used as evaluation)
Structural Adjustment Programmes (SAPs)
what are SAPs?
Structural adjustment programs or loans provided by either the IMF all the World Bank to the country experiencing economic crisis which requires the recipient state to meet certain conditions
The IMF and the World Bank began to adopt SAPs in the late1970s
why have SAPs been criticised?
the use of SAPs By the IMF and the World Bank has been criticised for attaching conditions to loans to poorer countries such as privatising state owned industries cutting public spending encouraging for investment and the production of goods for export
all of which leaves these countries vulnerable to TNCs and reduces the living standards of citizens
what did the 2007-09 global financial crash do?
The 2007 to 9 global financial crisis expose the weakness of international financial regulation and cast doubt on the role of the IMF as a global financial regulator and upholder of international economic stability as the IMF was not able to foresee the global financial crash
h
This was seen as a radical approach to promoting economic development adopted because of the growing debt crisis and an ideological shift in global economic policy
h
Developing countries have been borrowing heavily from the west to finance economic development but the 1973 oil crisis lead to a world recession
For many countries the debts became unsustainable the economics surpluses were lower than the interest payments on their loans
The debt repayments of these heavily indebted poor countries HIPCs was so big that there was a high risk that they would never be able to repay them
h
The stagflation of the 1970s gave rise to monetarism which focused on instruments and policies that create the right environment for economic growth
When applied to developing economies it was suggested that structural adjustment was needed to remedy the inefficiencies of developing economies and Missguided government policies
h
From the start SAPs were controversial
not all economists agreed that western neoliberal economic policy was appropriate to the developing world especially since much economic development in western states have been fostered by state intervention and protectionism rather than the neoliberal conditions attached to SAPs
There was also no empirical evidence that such an approach would work
h
Integrating week are less developed academies into the international economic system risks exposing these countries to the full brunt of competition
g
By the 1990s it became apparent that SAPs were making poor countries problems worse
Exposure to foreign competition drove down Wages lead to worsening working conditions and increased unemployment
Many countries sold of state owned utilities quickly to meet the conditions of loans often cheaply to attract buyers but this reduce the revenue available to repay loans as well as depriving the government of revenue from potentially profitable businesses
Also TNCs demand incentives in the form of local operation tax or fewer protections for workers
h
Another effect of SAPs Was to encourage HIPC Economies to refocus their economies on production of goods for export
For these less industrialised Countries this usually means cash crops such as timber coffee tea sugar bananas and cocoa
This damage the environment and the food supply put in developing countries at a further disadvantage compared with the developed world
TNCs control the trade in products such as coffee meaning that they dictate the price form is received for their crops which is usually far lower than the price of the product sales for in the west this perpetuates global inequality and leads to a continuing cycle of poverty
h
Many countries are suffering from the effects of deforestation because of logging this leads to flooding and landslides as well as raising carbon dioxide levels globally
Producing cash crops reduces the amount of land of the cultivation to produce food for the local population which increases food prices and can lead to famine and continuing poverty
h
Over the last 50 years the GDP of the richest 20 states in the world has grown by 300% but the poorest 20 states in the world have only got 20% richer
g
Saps required reduced public spending which decrease the public services that would alleviate the effects of low wages and poor working conditions
Reduced spending on health and education programs also meant poor health and low levels of education reducing the economic potential of citizens most of all women and girls
