What is a Structural Adjustment?
News author: Ms. Ann McLaughlin
Source of news: nGoAbroad
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2006-09-01 13:52:05 / News read 2850 reading
Response given by Ms. Ann McLaughlin, Director of nGoAbroad - nGoAbroad is a service that matches your skills to international humanitarian needs -
A Structural Adjustment LOAN (SAL) is a loan made by the International Monetary Fund (IMF) to a nation. A Structural Adjustment PROGRAM (SAP) is the agreement made about how that loan will be paid back.
Most SA loans have a 15% interest rate attached to them. It is difficult for a person or a nation to pay back a loan that grows bigger and bigger, because there is 15% interest attached.
SA programs are usually determined by the Finance Minister, the Prime Minister/President of the receiving nation and a representative of the IMF. The major objection to this? The conditions of the SA program dramatically impact the people of the receiving country but there is no mechanism for public input. SAP conditions are very undemocratic.
These are usually the conditions that the IMF insists on when they make a loan to a country:
Discourage or outlaw unions.
Privitize the costs of health, transportation, and education.
That is, these services will no longer be provided by the government;
citizens must pay out of their own pocket for these services. Devalue your currency,
so that your exports are at a more competitive price.
(This means inflation will go up; and the price of imports will increase.)
Remove tariffs and trade barriers,
read: open your country to imports from foreign nations.
Shift the economy to emphasize exports
so that you can make some money on the international market.
Invite foreign investment and development.
Make government lean.
Save money by trimming the bureaucracy.
Sell state enterprises to the private sector
to make government more efficient.
These IMF conditions assume that if a country becomes more competitive in the “free market” that they will then have an easier time paying off their loan. This is a huge global debate; it is behind the movement “Make Poverty History”. It is important that citizens learn about Structural Adjustments because, from behind the scenes, they have such dramatic impact on peoples’ lives.
International Forum on Globalization
Jubilee movement—branches all over the world.
The London website is rich in reading and information
I recommend reading these authors:
Susan George:The Debt Boomerang;A Fate Worse than Debtand any of her other books.
John Perkins:Confessions of an Economic Hit Man
John Lear and Joseph Campbell:Chile: A Free Market Miracle: A Second Look
Article: ”Russia’s Tumultuous Decade” by Jeffrey Sachs,the man who engineered “shock therapy”
Lecture written up: ”Poland’s Jump to the Market Economy” Jeffrey Sachs; Lionel Robbins Lectures; The MIT Press Many of these books can be order online at powells.com.
Summary: Economics policies are complex and I have presented only one perspective. I simply wanted to alert my friends and colleagues in Eastern Europe that Structural Adjustments are very important to learn more about and to monitor as citizens. I apologize that I do not know any Slavic authors or books on this subject. Cpacybo.
>From Alternet about Jeffrey Sachs:
After Bolivia, the summer of 1989 found Sachs in post-communist Poland, urging a crash course in market transformation. Heeding a Solidarity leader's request, he and colleague David Lipton held an all-night drafting session that produced a specific timeline of policy reforms, including the immediate removal of price controls and privatization of state enterprises. This tactic of rapidly injecting free-market reforms into stagnant economies came to be known as "shock therapy" (a label Sachs rejects).
Despite warnings from Polish economists who feared that their country lacked the experience to absorb such quick, radical change, the Sachs-Lipton brief became the nation's official economic policy on Jan. 1, 1990 -- and to disastrous effect, at least in the short run. In the absence of government controls, unemployment rates spiked, prices skyrocketed, and thousands lost their personal savings. Poland's woes inspired a firestorm of criticism that Sachs later dismissed, arguing that his strategy did in fact work in the long run. He pointed to the dramatic increase in per capita income by 2002 in Poland, which also enjoyed the highest rate of economic growth among post-communist nations during the same period.
Sachs' defense of his prescription, however, rings less convincing in the case of Russia. When Boris Yeltsin rose to power in the autumn of 1991, Sachs prescribed a similar dose of shock therapy to revive the moribund economy. However, not only did Russia endure economic disruption and unrest like Poland, the reforms also enabled the rise to power of a Mafia-like oligarchy who seized control of much of the country's newly privatized resources.
[Zofia Lapniewska]: As a member of NEWW-Poland team I would like to thank Ms. Ann McLaughlin for above article and kind explanations.