Social hardships of economic reform

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.

The widespread collapse of integration groupings' defence mechanisms against a resurgence of all sorts of barriers against mutual trade and non-payment of commercial debts in clearing arrangements is matched by the narrowness of the groups of populations involved and committed to the integration process at present. A stronger focus on the social aspects and on the spread of the effects of economic cooperation will be required to strengthen its base. New measures touching wider ranges of people ought to be combined with increased participation in the design and decision-making process by enterprises, workers and other social groups.

The IMF, the World Bank and other international lending institutions and aid agencies have forced African nations to adhere to "structural adjustment programmes" which have imposed enormous preventable suffering on African people. These programmes orient economies toward export production, placing downward pressure on wages, encouraging unsustainable resource exploitation and undermining food security. They slash government spending, including in the crucial areas of education, healthcare and environmental protection; and they particularly harm women, who are most severely hurt by the elimination of the social safety net and the model's discrimination against small and domestically oriented farmers. The programmes impose a deregulatory and trade liberalization agenda that removes crucial government protections for society and leaves local business vulnerable to foreign multinationals; and they encourage wage cuts, including in the minimum wage, and government and private sector downsizing. Structural adjustment programmes force recessionary policies that most seriously victimize the poor; and they tend to exacerbate income and wealth inequalities.

The interdependence of the national economies of States and their dependence on the current framework of the world economy make cooperation between States increasingly important and heighten the responsibility of agents and partners in development in connection with structural adjustment programmes which, it should be recalled, are merely techniques or ways of managing shortages with the declared purpose of bringing debt under control. This attempt at debt control has so far been a failure as blatant as it is significant. These structural adjustment programmes have inflicted enormous inhuman and counter-productive suffering on the deprived populations of the debtor countries. These methods of managing shortages which steadily worsen the state of dire poverty of the peoples concerned were imposed on them by the debtor countries with the complicity of the international financial institutions in a fictitious context of negotiation in which the creditors had the power to lay down the law.

Structural adjustment programmes impose a heavy burden on workers and their families and on other vulnerable groups such as women, children, the unemployed, the jobless and the handicapped. They imperil public spending on education, health and collective social services. Wage levels fall and job losses are frequent. In short, no economic, social or cultural human right is observed or protected. The measures adopted in the context of structural adjustment programmes have culminated in a downward revision of exchange rates which reduces the purchasing power of the workers and have caused inflation which is intolerable for the less favoured segments of the population.

Bringing about drastic cuts in the budget provisions of the States concerned, structural adjustment programmes eventually prevent them from meeting their social and general welfare obligations to their peoples. Structural adjustment programmes have merely worsened the state of economic ruin of the underdeveloped countries. They are actually means of distraint designed to recover the sums owed to the wealthy countries without any concern for the difficulties of the debtor countries.

Downward adjustments of exchange rates or currency devaluations have considerably weakened the economies of the third-world countries. Quite apart from the economic power of the State, the multiplier effects of such monetary policies damage the investment possibilities of private companies and individuals; they are sources of inflation and of uncontrollable surges in prices. Companies then downsize and lay off workers with a clear reduction in income. Devaluation leads to a change in the relative prices of imports, which become dearer in the national currency, and exports, which become cheaper in foreign currencies. In view of the fact that the developing countries are already suffering from the deterioration in the terms of trade, a fall in exchange rates cannot but be disastrous for their economies.

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.