One Size Doesn’t Fit All — The Reality Behind Structural Adjustment

For many years, structural adjustment programs (SAPs) have been criticized for resulting in, or increasing the level of poverty in developing countries as opposed to increasing economic development. SAPs were developed in the 1980s when more and more countries were in favour of limiting the amount of state or government intervention to allow for economic development to occur through free markets: economic systems where prices are decided on by unrestricted competition between businesses in the private sector. Structural adjustment is a set of economic changes and policy adjustments that a country must abide by so that they may receive a loan from the International Monetary Fund (IMF) and/or the World Bank (WB).

The main focus of the policies are to increase economic stability and development by reducing government spending in certain areas, and encouraging more free trade and business involvement. More and more international financial institutions began to promote the idea of SAPs in order to reduce inflation and create their own economic booms. The program follows a neoliberalism ideology where SAPs are implemented to ensure that national debts are repaid and there is economic restructuring support available for the countries that need it.

Neoliberalism is a model used in policy that combines the study of economics with politics with the intent to shift the control of economic factors from the public sector to the private sector. Society is thought to shift towards a free market system or a capitalistic society, and further away from government control- relying heavily on the principle of supply and demand. Neoliberalism and its related policies support fiscal austerity (the decisions that governments make to limit the amount of borrowing over a period of years), deregulation (the lack of regulations or restrictions), free trade, heavily reduced government spending, and privatization of institutions.

Focusing so much on economic growth leaves little room for the development of other sectors such as health, development or transportation, as well as the development of the workers within these sectors. In reality however, SAPs have forced less economically developed nations to reduce their government spending in different sectors such as health, development, and education as economic policies were adapted to make debt repayments more of a priority.

In a way, SAPs have set development in less wealthy nations further behind by sacrificing these necessary human rights and services in order to save money and come out of debt. Governments fail to understand that by limiting their investments into health and education sectors, they have unknowingly allowed their poverty rates to go up. In order to eradicate poverty, countries must have an adequate amount of resources available for economic development, a high literacy rate in order for their citizens to be able to take on high level jobs in the tertiary and quaternary sectors, and healthy citizens with long life expectancies and low child mortality rates.

When economic efficiency is prioritized, workers’ rights are forced to take a back seat, and furthermore the amount of self-determination the citizens of a sovereign nation state have. In order to increase economic productivity, businesses have sought out growth and globalization which can limit the amount of power a country has over a sovereign economy, and its power to support itself without the involvement of other states and third-parties to support it financially. Due to the growth of companies, large corporations find themselves at the top of the food chain in both economics and politics and compete with one another through mergers and acquisitions of smaller companies resulting in increased global unemployment rates.

International financial institutions have gone as far as asking these less wealthy nations to lower the standards of living in order to reduce the effects of poverty on their citizens. Developing nations frequently find themselves in this twisted game where they are both unable to cut ties with wealthier nations despite how much it causes their own economies and resources to bleed out, but also unable to support themselves solely through the assistance of organizations whose secret formula to economic stability is to limit education and health investments.

SAPs have great potential to alleviate the effects of poverty and increase economic stability in countries where economic restructuring is desperately needed- but only if a country’s needs and financial strengths and weaknesses are taken into consideration. Policies must include approaches tailored to the country in which they are being implemented, and must address how limited government spending can be invested in the right sectors and organizations using the resources that they do have. When considering a country’s economic prospects, its people are the most important assets available, and their rights and needs are not factors that should be overlooked when implementing policies that are meant to increase their standard of living. In structural adjustment economics, ‘one size fits all’ policies simply do not fit all of a country’s needs.

Written by Naoshin Fariha, Writer for the Junior Economist

Originally published on December 18th, 2019