Structural adjustment is a policy generally prescribed by the International Monetary Fund (IMF) and the World Bank to debtor countries experiencing financial crisis. The policy usually involves a package of measures, including austerity measures, price liberalization, and deregulation. The main objective of structural adjustment is to improve the economic performance of a country and to encourage foreign investment.
The neoliberal principles underlying structural adjustment are a source of growing concern in many countries. Not only does this approach increase inequality, but it also has adverse consequences for social cohesion and democratic accountability. The article outlines the negative consequences of structural adjustment. It is vital that governments avoid such policies. Read on to learn more. Then, ask yourself: What is the value of structural adjustment? And is it really necessary for developing countries?
Structural adjustment is based on neoliberal principles
The idea that structural adjustment policies (SAPs) are necessary is central to the economic theories that govern them. While it is true that some countries may require corrective reforms, structural adjustment policies are fundamentally flawed. The main issue is whether the SAPs promote long-term development or short-term gains. While the World Bank and IMF have justified their actions as promoting the development of a market economy, the policies themselves have hardly promoted long-term development or progress.
One study concluded that there is no relationship between structural adjustment and child health outcomes, as a result of World Bank conditions for the study, such as the adoption of public sector management policies, macroeconomic stabilisation policies, and private sector development. The study was not random and included only five-year periods between 1980 and 2001. Another problem was that the countries that were included in the study were not chosen randomly.
It has a tendency to increase inequality
African countries in particular need corrective reforms to promote their development, but this debate over SAPs focuses on whether they are appropriate for the continent. The key question is whether the World Bank and IMF have promoted long-term development, and recent adjustments have done neither. The World Bank and IMF were overly aggressive in encouraging poor countries to open their markets to foreign trade, arguing that this would create a level playing field.
Many of these structural adjustment policies have had a disastrous impact on social policy and poverty levels. Many countries were forced to introduce privatisation policies, increase interest rates, and reduce domestic protection. These measures led to a high level of unemployment and a highly unequal income distribution. UNICEF published a report called “Adjustment with a Human Face” which recommended protection programs for the poorest citizens.
It has adverse consequences for social cohesion
Structural adjustment and conflict are both associated with group cohesion. Human beings are far from naturally harmonious and social cohesion depends on the institutionalization of conflict. While shared cultural values are important, they do not explain why human groups can cooperate. Institutions offer people a predictable way to pursue their interests, and a lower level of destructive risk is associated with conflict resolution. Therefore, institutions create greater social cohesion than other conflict channels.
Tolerance, on the other hand, is essential for social cohesion. People must be tolerant of people from different backgrounds, and fights over exclusion and marginalization can occur even within local ethnic groups. Moreover, the term “reciprocity” is used without stressing the personal motivation of individuals to belong to a community and act accordingly. Further, no mention is made of voluntary social participation.
It undermines democratic accountability
While most Western countries are proud of their growth, structural adjustment has many negative consequences, especially for developing countries. It not only makes governments less accountable, but also reduces their capacity to make important decisions. Moreover, it enables corrupt governments to use structural adjustment as an excuse to ignore their people’s needs. This article focuses on some of these effects and examines whether or not structural adjustment programs are appropriate for developing countries.
While many economists support the idea of structural adjustment, there are also critics. Some say that the programs are responsible for stagnant economies in borrowing countries. Another problem is that SAPs force governments to adopt austerity measures that often compromise social programs. As a result, many countries suffer from economic stagnation. Despite these challenges, structural adjustment programs are necessary for growth. But, they also undermine democratic accountability.
In conclusion, structural adjustment is a process that is used by creditors to help indebted countries repay their debts. It is often associated with harsh austerity measures, which can have a negative impact on the people of those countries. However, there are some who believe that structural adjustment is necessary in order to revive economies that are in crisis.