Problem

Social hardships of economic reform


Experimental visualization of narrower problems
Other Names:
Excessive social costs of structural adjustment in debtor countries
Negative social impacts of economic restructuring
Neglect of human resource development in transition economies
Development with an inhuman face
Reduction in public expenditure on human resources in borrower nations
Negligent implementation of austerity measures in debtor countries
Delay in social benefits from reform in transition economies
Nature:

It is generally recognized that the development of human resources both benefits from and contributes to the development process. Effective programmes to promote education and training, science and technology, and popular participation in economic activity, including the participation of women, are therefore key elements in development strategies. However, in many nations struggling with structural readjustment, austerity measures and general recessionary conditions have brought sharp declines in per capita incomes. Unemployment, especially of the young, continues to increase in debtor countries. Hunger and poverty in absolute numbers continue to rise. This forces more people back into subsistence agriculture, where they draw heavily on the natural resource base and thus degrade it. Austerity programmes inevitably include government cutbacks in both the staff and expenditure of new and unproven environmental agencies, undermining even the minimal efforts being made to bring ecological considerations into development planning.

Incidence:

[Developing countries] Debtor developing countries have to bear the burden of arduous structural adjustment with insufficient external support in order to benefit from the facilities offered by the International Monetary Fund in rescheduling their debts. The restructuring required by the IMF is designed to restimulate the economy. However the austerity measures associated with this process include reduction of government spending on: welfare, subsidized food and housing, wages and credit facilities. All these measures impose increased hardships on the poor. They redistribute wealth and opportunities to the wealthy who have capital to invest, in order to encourage them to generate more economic activity, notably exports. These measures tend to have a serious impact on social development and well-being, as education and health needs remain unfulfilled, especially amongst the most vulnerable groups. Human resource development is neglected because although economic growth is a necessary condition for attacking poverty, complementary policies focusing resources and programmes towards the more deprived tend to be given a low priority through force of circumstances. The possibility of addressing serious environmental concerns is also thwarted, thus affecting long-term development prospects. The persistence of acute poverty is another dimension of the problem. Vast poverty persists in Asia. The population living below a minimally acceptable level has increased in Latin America and Sub-Saharan Africa. Many of the countries in Africa which have embarked on programmes of structural adjustment have been unable to sustain them in the face of their immediate social and economic consequences.

 

 

Claim:

Economic restructuring measures, although quite successful in getting an economy going (in narrow terms at least), is primarily of advantage to transnational corporations and to consumers of exported products in industrialized countries. The cost is borne by the impoverished who can least afford to pay it. IMF prescriptions are designed by and for the developed capitalist countries and are inappropriate for developing countries of any kind.

 

 

 

 

Counter Claim:

Social and human costs of adjustment are transitional. The assertion that structural adjustment programmes have increased indebtedness and poverty, notably in Africa, does not match the evidence where such programmes have been carried out in a sustained manner. It also ignores the fact that the pace of progress achieved has varied across countries, depending on the nature and the severity of the pre-existing economic conditions, the effects at times of unfavourable external developments (such as worsening terms of trade and drought), and domestic political realities.

Macro-economic and structural adjustment programmes aim to help countries attain higher growth, lower inflation and improve balance of payments and external debt positions. The programmes aim to direct public spending away from non-essential or unproductive uses, including excessive military expenditure, and into social, infrastructural and other priority needs. It is only through successful stabilization of their economies and determined structural adjustment (to expand supply capacities) that countries will eventually generate resources to promote development and reduce poverty, strengthen debt servicing capacities and withstand external shocks.

Adjustment policies may indeed have temporary adverse affects on some of the poor, but the programmes include the design of social safety nets and targeted social programmes to assist the poor during periods of adjustment. Great care is required in tailoring macroeconomic policies to the individual circumstances of countries in need.

Related Problems:
Social corporatism
Problem Type:
D: Detailed problems
Related UN Sustainable Development Goals:
GOAL 1: No PovertyGOAL 2: Zero HungerGOAL 3: Good Health and Well-beingGOAL 4: Quality EducationGOAL 5: Gender EqualityGOAL 6: Clean Water and SanitationGOAL 7: Affordable and Clean EnergyGOAL 8: Decent Work and Economic GrowthGOAL 9: Industry, Innovation and InfrastructureGOAL 10: Reduced InequalityGOAL 11: Sustainable Cities and CommunitiesGOAL 12: Responsible Consumption and ProductionGOAL 13: Climate ActionGOAL 14: Life Below WaterGOAL 15: Life on LandGOAL 16: Peace and Justice Strong InstitutionsGOAL 17: Partnerships to achieve the Goal
Date of last update
10.04.2019 – 15:27 CEST