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Imf structural adjustment programs and the neoliberal view economics essay

Prior to 1980, many countries quite deliberately adopted policies that were designed to insulate their economies from the world market in order to give their domestic industries an opportunity to advance to the point where they could be competitive. The policy of development via import substitution, for example, was often associated with protective tariffs and subsidies for key industries.

Performance requirements on foreign investment were also common. These measures often required foreign investors to employ native workers in skilled positions, and to purchase inputs from domestic producers, as ways of ensuring technology transfers. It was also common for developing countries to sharply restrict capital flows. This was done for a number of purposes: Smith notes, every rich nation today has developed because in the past their governments took major responsibility to promote economic growth.

There was also a lot of protectionism and intervention in technology transfer. There was an attempt to provide some sort of equality, education, health, and other services to help enhance the nation. The industrialized nations have understood that some forms of protection allow capital to remain within the economy, and hence via a multiplier effect, help enhance the economy.

Yet, as seen in the structural adjustment initiatives and other western-imposed policies, the developing nations are effectively being forced to cut back these very same provisions that have helped the developed countries to prosper in the past.

The extent of the devastation caused has led many to ask if development is really the objective of the IMF, World Bank, and their ideological backers. Focusing on Africa as an example: The past two decades of World Bank and IMF structural adjustment in Africa have led to greater social and economic deprivation, and an increased dependence of African countries on external loans.

The failure of structural adjustment has been so dramatic that some critics of the World Bank and IMF argue that the policies imposed on African countries were never intended to promote development. On the contrary, they claim that their intention was to keep these countries economically weak and dependent. The most industrialized countries in the world have actually developed under conditions opposite to those imposed by the World Bank and IMF on African governments.

Under World Bank and IMF programs, African countries have been forced to cut back or abandon the very provisions which helped rich countries to grow and prosper in the past. Their free market perspective has failed to consider health an integral component of an economic growth and human development strategy.

Instead, the policies of these institutions have caused a deterioration in health and in health care services across the African continent. While the phrase Welfare State often conjures up negative images, with regards to globalization, most European countries feel that protecting their people when developing helps society as well as the economy. It may be that for real free trade to be effective countries with similar strength economies can reduce such protective measures when trading with one another.

However, for developing countries to try to compete in the global market place at the same level as the more established and industrialized nations—and before their own foundations and institutions are stable enough—is almost economic suicide. A UN report looking into this suggested that such nations should rely on domestic roots for growth, diversifying exports and deepening social safety nets.

The type of trade is important. As the UN report also suggested, diversification is important. Just as biodiversity is important to ensure resilience to whatever nature can throw at a given ecosystem, diverse economies can help countries weather economic storms. Matthew Lockwood is worth quoting in regards imf structural adjustment programs and the neoliberal view economics essay Africa: What Africa needs is to shake off its dependence on primary commodity exports, a problem underlying not only its marginalization from world trade but also its chronic debt problems.

Many countries rely today on as narrow a range of agricultural and mineral products as they did 30 years ago, and suffer the consequences of inexorably declining export earnings. Matthew Lockwood, We must breed tigers in AfricaThe Guardian, June 24, 2005 Asia too has seen development where policies counter to neoliberalism have been followed, as Lockwood also notes.

Structural Adjustment in Rich Countries As the global financial crisis which started in the West around 2008 has taken hold, many rich nations themselves are facing economic problems. Perhaps surprisingly many have prescribed to themselves structural adjustment and austerity programs. Some have been pressured onto them by others. For example, in Europe, Germany is influential in requiring austerity measures if countries want bailouts from Germany or the European Union.

The International Monetary Fund and the World Bank were conceived by 44 nations at the Bretton Woods Conference in 1944 with the goal of creating a stable framework for post-war global economy. The IMF was originally envisioned to promote steady growth and full employment by offering unconditional loans to economies in crisis and establishing mechanisms to stabilize exchange rates and facilitate currency exchange.

Much of that vision, however, was never born out. Instead, pressured by US representatives, the IMF took to offering loans based on strict conditions, later to be known as structural adjustment or austerity measures, dictated largely by the most powerful member nations.

Critics charge that these policies have decimated social safety nets and worsened lax labor and environmental standards in developing countries. Its vision too, however, soon changed. World Bank and IMF adjustment programs differ according to the role of each institution. In general, IMF loan conditions focus on monetary and fiscal issues.

They emphasize programs to address inflation and balance of payments problems, often requiring specific levels of cutbacks in total government spending. The adjustment programs of the World Bank are wider in scope, with a more long-term development focus.

They highlight market liberalization and public sector reforms, seen as promoting growth through expanding exports, particularly of cash crops.

  • The failure of structural adjustment has been so dramatic that some critics of the World Bank and IMF argue that the policies imposed on African countries were never intended to promote development;
  • Matthew Lockwood is worth quoting in regards to Africa;
  • This means that a government generally must first be approved by the IMF, before qualifying for an adjustment loan from the World Bank;
  • This paper assesses the application of neoliberal economic policies to post- over viewing the logic behind the approach, how it is applied, and the the implementation of structural adjustment programs saps bank economist william easterly undertook a study of the imf structural adjustment;
  • Instead, the policies of these institutions have caused a deterioration in health and in health care services across the African continent.

One way is called cross-conditionality. This means that a government generally must first be approved by the IMF, before qualifying for an adjustment loan from the World Bank. Their agendas also overlap in the financial sector in particular. Both work to impose fiscal austerity and to eliminate subsidies for workers, for example.

The market-oriented perspective of both institutions makes their policy prescriptions complementary. Ann-Louise Colgan, Hazardous to Health: As a result of policies by the IMF, World Bank and various powerful nations, basic human rights have been severely undermined in many countries, as also noted sharply by Global Exchange: By insisting that national leaders place the interests of international financial investors above the needs of their own citizens, the IMF and the World Bank have short circuited the accountability at the heart of self-governance, thereby corrupting the democratic process.

The subordination of social needs to the concerns of financial markets has, in turn, made it more difficult for national governments to ensure that their people receive food, health care, and education—basic human rights as defined by the Universal Declaration of Human Rights.

The IMF web site has a breakdown imf structural adjustment programs and the neoliberal view economics essay the quotas and voting powers. While some say that parts of Europe have resisted giving up some share which would be appropriate, the changes also mean the US no longer has veto power that it had for decades.

Journalist John Pilger also provides a political aspect to this: This meant that the economic direction of each country would be planned, monitored and controlled in Washington. Liberal containment was replaced by laissez-faire capitalism known as the free market. At the same time, the different cultures are not respected when it comes to prescribing structural adjustment principles, either.

In Africa, the effects of policies such as SAPs have been felt sharply. As an example of how political interests affect these institutions, Africa Action describes the policies of the IMF and World Bank, but also hints at the influences behind them too: The dependence of poor and highly indebted African countries on World Bank and IMF loans has given these institutions leverage to control economic policy-making in these countries.

The policies mandated by the World Bank and IMF have forced African governments to orient their economies towards greater integration in international markets at the expense of social services and long-term development priorities. They have reduced the role of the state and cut back government expenditure.

They performed a political function by subordinating development objectives to geostrategic interests. They also promoted an economic agenda that sought to preserve Western dominance in the global economy.

Combined, the Group of 7 U. But it is not just health. Basic food security has also been undermined. An example in 2002 at least made it to mainstream media attention in UK. As Ann Petifor, head of debt campaign organization, Jubilee Research noted, the IMF forced the Malawi government to sell its surplus grain in favor of foreign exchange just before a famine struck.

  • As a result of policies by the IMF, World Bank and various powerful nations, basic human rights have been severely undermined in many countries, as also noted sharply by Global Exchange;
  • World Bank and IMF adjustment programs differ according to the role of each institution.

This was explicitly so that debts could be repaid. But its [sic] worse than that, said Petifor. Because Malawi is indebted, her economic policies are effectively determined by her creditors—represented in Malawi by the IMF. Malawi spent more than the budget the foreign creditors set. Other western donors, acting on advice from IMF staff, also withheld aid, pending IMF approval of the national budget.

To add to the humiliation of the Malawian government, the IMF has also suspended the debt service relief for which she was only recently deemed eligible—because she is off track.

That is not the end of the story unfortunately. As Petifor also mentioned, under the economic program imposed by her creditors, Malawi removed all farming and food subsidies allowing the market to determine demand and supply for food.

Structural Adjustment—a Major Cause of Poverty

This reduced support for farmers, leading many to go hungry as prices increased. As she also noted, the rich countries, on the other hand, do not follow their own policies; Europe and the US subsidize their agriculture with billions of dollars.

But the US, for example, sees this situation as exploitable. Humanitarian and national self interest both can be served by well-designed foreign assistance programs.

  1. Historically democracy and power have not gone well together, and as journalist John Vandaele has found, The most powerful international institutions tend to have the worst democratic credentials.
  2. The past two decades of World Bank and IMF structural adjustment in Africa have led to greater social and economic deprivation, and an increased dependence of African countries on external loans. Focusing on Africa as an example.
  3. Saps are based on a short-term, profit-maximization model that perpetuates reforms and adherence to the prescriptions of the world bank and imf the neoliberal philosophy of economic development revived the old precepts viewing the strict economic reforms required by saps as the best way to.
  4. Ifis, by far, are the international monetary fund imf and lay the foundations of the postwar economic order 2 the imf has similar programs, run by ' structural adjustment' lending aimed at market- included a diversity of points of view on the role years after bretton woods. These measures often required foreign investors to employ native workers in skilled positions, and to purchase inputs from domestic producers, as ways of ensuring technology transfers.
  5. The industrialized nations have understood that some forms of protection allow capital to remain within the economy, and hence via a multiplier effect, help enhance the economy. Structural Adjustment in Rich Countries As the global financial crisis which started in the West around 2008 has taken hold, many rich nations themselves are facing economic problems.

Food aid has not only met emergency food needs, but has also been a useful market development tool. Rigged Rules and Double Standards: Most rich countries do this. Even notebooks and pens were flown in from Washington rather than purchased locally. Throughout the period of structural adjustment from the 80s, various people have called for more accountability and reform of these institutions, to no avail. However, as Oxfam noted, some of the reform suggestions may not be the way to go and may do even more harm than good.

Imf structural adjustment programs and the neoliberal view economics essay

In their own words: While some of the reform proposals now being debated are sensible, the thrust of the reform agenda is a source of concern for the following reasons: However, such an abrupt course of action may itself lead to a gaping hole in international financial policies without an effective alternative.

And that is another topic in itself!

  • As a result of policies by the IMF, World Bank and various powerful nations, basic human rights have been severely undermined in many countries, as also noted sharply by Global Exchange;
  • Structural adjustment programmes saps consist of loans provided by the international monetary fund imf and the world bank wb to countries that experienced economic some scholars have argued that saps and neoliberal policies have negatively affected many developing countries read edit view history;
  • Even notebooks and pens were flown in from Washington rather than purchased locally.

Into 2008, and the global financial crisis has been so severe that rich countries have been affected. Calls for reform have therefore increased, even from within some of these institutions themselves. These calls have included more transparency and accountability as well as specifics such as creating a more stable financial system, and cracking down on tax havens.

This time, however, developing countries are demanding more voice, and have more power that in past years to try and affect this.