Faltering structural adjustment in the world economy

Experimental visualization of narrower problems
Other Names:
Inadequate economic integration
Failure to restructure economic relations between countries
Economic imbalances among countries
Retardation in economic structural adjustment
Faltering adaptation of economic agents to accelerating pace of structural change
Policy-making delays in response to accelerating structural change
Lag in results from economic restructuring

The decade of the 1970s witnessed a retardation of structural adjustment at a time when the need for structural change was greatest owing to rapid shifts in patterns of comparative advantage, especially as regards the increased export competitiveness of a number of industrializing developing countries and a certain developed countries. In addition, the severe recession of the 1980s has had a serious impact on structural adjustment. In general, adjustment costs tend to be higher in stagnant than in fast-growing economies as, for example, the prospects of alternative employment are unlikely to be very bright for the adversely affected factors of production when growth is sluggish.


[Developing countries] In the less developed countries with a low level of industrialization, the mere integration of market through the removal of trade barriers, without substantial effort to expand production capacities through joint or harmonized programmes, has achieved very little. The real test of progress for economic integration schemes in developing countries is the extent that the member states are able to coordinate and harmonize their economic activities, most especially in those critical sectors – transport and communications, hydroelectric power, river basins development and heavy industries – where joint effort is the very basis of success. Such effort at coordination and harmonization also assumes that the member states are able to reconcile whatever divergences may arise from their separate pursuit of national economic policies.

[Least developed countries] In most of the least developed countries, the crisis in the manufacturing sector is difficult to resolve, without regional or subregional harmonization, because the sector is highly dependent on foreign factor inputs, in particular raw materials and expertise. In Africa in 1982, for example, more than $62 billion (about 47% of the region's total debt) had been spent on importing major industrial commodities which could in fact have been produced within the region. In this region the major obstacles to integration are structural rigidities, poor policy coordination, continuing external dependence and serious payments difficulties, and moving beyond market integration to the integration of production. The implication is that the scarcity of foreign exchange with which to purchase raw material inputs for industrial development will continue to give rise to widespread under-utilization of capacity or outright plant closures with undesirable consequences for output, employment and income. Furthermore, such countries are unable to develop significant inter-sectoral linkages which would increase the multiplier effect of domestic investment, reduce overall import content of domestic expenditures and enable each economic sector to contribute more significantly to economic development.


Related Problems:
External debt crisis
Related UN Sustainable Development Goals:
GOAL 3: Good Health and Well-beingGOAL 8: Decent Work and Economic GrowthGOAL 9: Industry, Innovation and InfrastructureGOAL 10: Reduced InequalityGOAL 11: Sustainable Cities and CommunitiesGOAL 16: Peace and Justice Strong Institutions
Problem Type:
F: Fuzzy exceptional problems
Date of last update
16.10.2021 – 10:52 CEST