Structural Adjustment

G. Mohan, The Open University, Milton Keynes, UK

& 2009 Elsevier Ltd. All rights reserved.

International Monetary Fund (IMF) and World Bank – in

Glossary which policy conditions are attached to loans to indebted
Balance of Payments The difference between total and impoverished countries. In this way the financial
payments to foreign nations arising from imports of power of these institutions is central to policy making
finance, goods, etc. and total receipts from foreign in developing countries and continues a long history of
nations from exports of finance, goods, etc. external interventions in the developing world, which
Civil Society Those organizations that form part of the raises vital questions about sovereignty in a globalizing
political sphere, but which lie outside the state and world.
market. Understanding the dynamics of structural adjustment
Cold War The period between the end of World War II reveals two important geographical themes. The first
and the late 1980s when the world was divided between concerns long-standing interdependencies across space.
the two superpowers of the US and USSR. A persistent feature of the international system has been
Conditionality The practice by the major international the way in which capitalist expansion and political
lenders of attaching policy conditions to loans. intervention have generated uneven development.
Governance A way of organizing policy making and Within this system, through both formal colonization and
rule through networks of actors rather than simply by the less-obvious neocolonialism, countries in the global
institutions of state. South have been subject to unequal terms of trade and
Informal Sector The area of economic activity which political interference in their affairs of state. While not
lies outside of the state-regulated system and is exonerating these countries’ leaders, they have in effect
characterized by self-employment and small scale. been ‘hemmed in’ within the global economy, leaving
Keynesian(ism) Economic policy named after the little space for maneuver. Structural adjustment, there-
economist John Maynard Keynes, which favors state fore, reflects the latest phase in this unequal relationship.
intervention in correcting market failures and was The second issue concerns the uneven geographical
practiced in the immediate post-World War II period. expression of neoliberalism. Although neoliberalism is
Neocolonialism The persistence of external control in based on a set of universal principles and is a term
the formerly colonized world by foreign governments bandied around as if the neoliberal condition were uni-
and transnational corporations. form, the realization of neoliberalism is shaped by dif-
Privatization The sale of once state-owned ferences within and between states and societies. So,
enterprises to capitalist firms. while it is possible to discern general trends, the real
world geography of neoliberalization is uneven and
deeply political. The key, and crudely stated, difference
between the neoliberalization occurring in the global
Introduction North and that in the South is that in the former it has
been driven by domestic political elites within nominally
Structural adjustment sounds like a highly technical idea, democratic systems, whereas in the latter it has been
which appears benign, even boring. However, it is a forced on impoverished populations by the same political
generic term that refers to a set of programs that seek to elites acting through multilateral organizations alongside
restructure the economies of countries in the developing their cronies in these developing countries.
world or in transition; literally ‘adjusting’ the ‘structure’ of The article begins by tracing the emergence of
national economic life. These programs are comprehen- structural adjustment before outlining what makes up a
sive and affect everything from government economic typical SAP. From here we disaggregate the major effects
policy to ownership of firms and the price of essential of SAPs and then examine how the politics of the policies
services. They are based on a set of neoliberal economic operate and are contested.
principles that were first practiced from the 1970s to 1980s
in a number of ‘developed’ economies before being ex-
ported to the developing world. For these reasons, this The Neoliberal Turn and the Underlying
apparently unassuming concept affects us all, but has its Principles of SAPs
greatest impact on the poorer sections of society across
the world. Structural adjustment programs, or SAPs, are SAPs are based on a neoliberal set of assumptions. In this
orchestrated by the major international lenders – the subsection the genesis of SAPs from the 1970s right up to

1
2 Structural Adjustment

the current period is examined, where, despite changes in looked for other avenues for profitable investment. These
name and emphasis, SAPs are still very much in so-called petrodollars were lent to developing countries
evidence. at relatively low interest rates. In the late 1970s, as one of
SAPs are based on a belief that free markets can the earliest neoliberal attacks on inflation in the core
deliver the best route to prosperity and development. In economies, interest rates were raised rapidly. For those
terms of economic policy the post-war period up to the developing countries with loans from Northern banks
early 1970s was broadly characterized as one of Key- this created a massive and unsustainable debt problem
nesianism, which saw a role for the state to balance with Mexico famously declaring itself bankrupt and un-
out economic cycles and protect the marginalized. able to repay in 1982. For the banks this was a huge (and
By contrast, neoliberalism believes in a minimalist state embarrassing) issue that could threaten the legitimacy of
and a faith that open and unfettered economies can the international financial system and the privileges of
generate growth, which will eventually trickle down to wealth it secured. Hence, a mechanism was needed to
the poorest. repay the debt, which ensured that these economies did
While Keynesian policy was focused on national not decline further so that funds were available for debt
economies, international economic regulation in the post- servicing. It is at this critical point that structural ad-
war period was through a system called the ‘gold stand- justment first appears.
ard’, which pegged currencies to the value of gold and Given that state financing was available commercially,
prevented wild speculation. Additionally, a system of the Bretton Woods Institutions had to ‘reinvent’ them-
international economic institutions was created to avoid selves as development agencies whose main work was in
volatility. The architecture of this was laid down at a the developing world, and from the late 1980s the former
conference in 1944 at the Bretton Woods ski resort in the Soviet Bloc as well. Their role became that of ensuring
USA, so that this complex of regulatory bodies became the steady repayment of debt and the inculcation of
known as the Bretton Woods Institutions and included neoliberal economic ‘openness’, which they did by at-
the IMF, the International Bank for Reconstruction and taching policy conditions to the concessional loans they
Development (more usually called the World Bank), and granted to developing countries. It was following the
the General Agreement on Tariffs and Trade (GATT), neoliberal turns in the USA under President Ronald
which later became the World Trade Organization Reagan, in the UK under Prime Minister Margaret
(WTO). In different ways these institutions sought to Thatcher, and in Germany under Chancellor Helmut
regulate international economic flows and were governed Kohl that the Bretton Woods Institutions formally
by representatives of the countries that contributed introduced SAPs in the early 1980s.
finances. Although set up in Bretton Woods, these institutions
By the early 1970s pressures had mounted which saw a are all based in Washington, DC. The orthodoxy that
gradual dismantling of the Keynesian regulatory system. came to dominate their relationships with the developing
The gold standard was abandoned and currency move- world became known as the Washington Consensus and
ment became easier, in many developed economies in- enforced a dogmatic reading of neoliberal policy as part
flation and labor unrest were distressing governments, of their conditions. This started in the early 1980s and
and an oil crisis forced an international recession. This was in full flow by the middle of that decade. These
was set against Cold War polarities, which saw aid and controversial policies had mixed impacts that are dis-
(often covert) military support for regimes that professed cussed below, but in the subsequent quarter of a century
support for one of the superpowers. they became, and remain, a major feature of international
In September 1973, a US-backed coup d’etat in Chile development despite undergoing some changes in
ousted the left-leaning Salvador Allende and replaced emphasis.
him with General Pinochet. Pinochet and his allies in As a result of limited impacts, theoretical critique, and
the US put in place an economic model that removed active resistance, the 1990s saw a softening on the hard
labor regulations and brutally suppressed dissent. The neoliberal line. The discourse shifted away from growth-
intellectual support came from a group of economists at-any-costs liberalization to poverty eradication by a
based in the University of Chicago and led by Milton more diverse set of means, although never displacing the
Friedman. These ‘Chicago Boys’ were the architects centrality of the market mechanism. This saw structural
of the neoliberal policies in Chile, which acted as a adjustment programs falling out of circulation as a term
test bed for ideas that would soon come to dominate to describe neoliberal policies and being replaced by a
policy. new, but very similar, initiative called Poverty Reduction
Internationally the oil crisis of the early 1970s gen- Strategies (PRSs). In order to fully appreciate how
erated a recession but also huge profits for oil producers. structural adjustment operates and the difference that
With vast amounts of money in the banks, but geographical context makes, it is necessary to understand
fewer productive outlets in the capitalist core, bankers what constitutes a typical SAP.
 Structural Adjustment 3

What Is Structural Adjustment? In terms of implementing a SAP there was a division

of labor between the IMF and World Bank, with the
At the heart of SAPs is liberalization of the economy. It is former following its historical remit of macroeconomic
based on the persuasive discourse of freedom and self- stabilization and adjustment and the latter focusing
sufficiency, that human beings are by nature driven by more on sectoral problems, such as industrial strategy,
self-interest, and that anything which prevents the real- and supply-side bottlenecks, like poor infrastructure. In
ization of this potential is wrong. For the neoliberals the practice, the two institutions worked together closely.
main target was the state, which they believed impeded What is crucial about IMF agreements is that they sig-
national and international markets and created depend- naled to other lenders that a particular country was loan
ency among the poor on state welfare. worthy. While total IMF lending to a country may not
The 1970s saw the intellectual refinement of this at- have been huge, it was necessary in order to access other
tack on the state with full-blown SAPs emerging in the concessional lending.
early 1980s. A typical SAP contains the following The high point of SAPs was the mid–late 1980s
elements: whereby 64 countries had an SAP in place. Ongoing
resistance within recipient governments to SAPs saw
• local
Tariff barriers, which had been set high to protect
production, are removed to promote competition
the addition of a political dimension to these economic
programs in the shape of ‘good governance’ initiatives.
from imports with a view to kick-starting local pro- As corruption and mismanagement were seen to be im-
ducers into efficient production. peding SAPs, attention turned in the early 1990s to re-
• Export promotion is also encouraged by pushing for
key commodities, especially agricultural goods, to be
forming the bureaucracy and giving greater voice to
potentially pro-market elements within ‘civil society’. At
produced, which diverts efforts away from production the same time, changes in government in the UK and
for local consumption. USA ushered in a social democratic model, which was
• Devaluation of the national currency, which is often
overvalued, to make exports cheaper on the global
still very much pro-market but conceded that for those
excluded from the benefits of markets so some form of
market and imports more expensive, which en- market-based support was needed to protect them.
courages exports over imports to correct the balance A further development was around debt. After over a
of payments deficit. decade of SAPs it became apparent that most countries
• Financial liberalization to allow freer inward and
outward flows of international capital, as well as a
were still mired in debt and barely keeping up with
repayments. Concerted international lobbying forced a
removal of restrictions on what foreign businesses and move toward debt reduction and further concessions to
banks can own or operate. indebted countries, which became tied into the adjust-
• Subsidies are removed in order to remove market
distortions and overcome the dependency of the poor
ment agenda. The Heavily Indebted Poor Countries
(HIPC) initiative started in the mid-1990s and was aimed
on state welfare. at those countries in severe debt, but who also showed
• User fees are levied on key services as a way of ‘re-
covering’ the costs and reducing the burden on tax
the necessary commitment to neoliberal reforms. Once
these countries demonstrated a ‘rational’ plan for im-
revenue. On the other side of the fiscal equation ser- plementing neoliberal policies and made the necessary
vices are cut back to reduce government spending. moves toward ‘good governance’, they passed the HIPC
• Bureaucracies are trimmed down and other state
workers laid off to reduce the government’s wage bill.
‘decision point’ when further concessions would be made.
In terms of international policy all this produced the
Bureaucracies are also to be made more efficient and ‘post-Washington Consensus’ with a shift away from
less corrupt under the ‘good governance’ initiatives hard-line conditionality and an exclusive growth orien-
that followed SAPs. tation toward greater ‘participation’ in policy making by
• Privatization is introduced as a way of enhancing
competitiveness and efficiency, and reducing the
both recipient governments and their people. The re-
sponse was PRSs that were introduced in the late 1990s.
burden on the state of sapping and corrupt state- According to their initiators in the Bretton Woods
owned industries (SOIs). With liberalization, heavily Institutions, PRSs are country-driven, results-oriented,
defended national economies are now open to possible comprehensive, partnership-oriented, and long-term.
inward investment to buy up these SOIs. They are seen to reverse the draconian conditionality of
SAPs, which made a set of policies conditional on taking
Ideally, the upshot of stabilization and liberalization is a loan. By contrast, PRSs favor ‘smart’ conditionality,
that the economy opens up and the state reduces which assesses each country’s institutional and financial
spending, which provides a conducive environment for worthiness and then awards a loan accordingly. One
foreign firms and releases finances for debt repayment. important change is that rather than giving funds for
4 Structural Adjustment

specific projects, such as the revamping of a port facility, Table 1 Performance indicators for a sample of adjusting
they are given directly to the national treasury to be countries
spent in accordance with the home-grown adjustment Country Average annual per capita growth rate
program set out in the Poverty Reduction Strategy Paper (%), from first SAP to 1999
(PRSP). This so-called ‘direct budget support’ appears to Africa
give greater control to recipient governments, but despite Niger 2.3
this rhetoric of ownership all PRSs contain the same Zambia 2.1
Madagascar 1.8
elements as SAPs in terms of liberalization and cost Togo 1.6
recovery. Cote d’Ivoire 1.4
Malawi 0.2
Mali 0.1
Impacts and Effects Mauritania 0.1
Senegal 0.1
Kenya 0.1
Although neoliberalism is usually talked about in uni- Ghana 1.2
versal terms, its elaboration and effects are locally spe- Uganda 2.3
cific. In this subsection we review some of the key Other developing
impacts of SAPs, while trying to capture these complex countries
geographical patterns. Analysis is difficult for various Bolivia 0.4
reasons. First is the counterfactual problem, because it Philippines 0.0
Jamaica 0.4
can never be known what would have happened to the
Mexico 0.4
economy had SAPs never been implemented. The usual Argentina 1.0
approach is simply to take ‘before’ and ‘after’ snapshots of Morocco 1.1
key indicators to try and capture what impacts SAPs have Bangladesh 2.4
had. Second, SAPs focused on domestic conditions and Pakistan 2.7
constraints, whereas economic performance is also af- Minimum in the top 2.3
fected by global conditions so it is hard to separate out 20
which effects were produced by what factors. Third, data Average top 20 0.1
Maximum in the top 2.7
for many developing countries are poor so calculating 20
impacts is always difficult. However, qualitative data is Average all 0.3
often used to get behind the aggregate trends. We begin developing
with aggregate trends before disaggregating the impacts countries
of major reform areas. Transition countries
Table 1 shows the performance of countries classified Ukraine 8.4
as ‘strong adjustors’ meaning a commitment to SAPs Russian Federation 5.7
and receiving many loans. It shows that contrary to the Kyrgyz Republic 4.4
Kazakhstan 3.1
objective of ‘adjustment with growth’, the recipients of Bulgaria 2.2
adjustment loans had the same near-zero per capita Romania 1.2
growth rates as the overall developing country sample. Hungary 1.0
In the worst cases, there were very poor macroeconomic Poland 3.4
outcomes, although the best cases showed that growth Albania 4.4
Georgia 6.4
was possible. The best performers tended to stabilize
their economies, which could have gone further Minimum 8.4
Median 1.7
awry with SAPs, but then failed to kick-start growth.
Maximum 6.4
However, there were no cases where growth was rea-
From Easterly, W. (2002). What did structural adjustment adjust? The
sonable and all macroeconomic imbalances were under
association of policies and growth with repeated IMF and World Bank
control for the adjustment lending period. For example, adjustment loans, Center for Global Development, Institute for
by 1992 Uganda had shown good growth, but erratic and International Economics, August 2002, [Link]/content/
high inflation, despite having received 14 adjustment publicatons/detail/2779.
loans.
This strong adjustment lending group includes some
notable disasters. Zambia received 18 adjustment loans initiation of adjustment lending, Bolivia had hyper-
but had sharp negative growth, large current account and inflation, negative real interest rates, and overvaluation.
budget deficits, high inflation, massive overvaluation of Even when Bolivia stabilized inflation in 1987, growth
the currency, and a negative real interest rate. In other was poor, interest rates swung from excessively negative
regions, there were also problem cases. After the to excessively positive, and overvaluation remained.
 Structural Adjustment 5

The ex-communist ‘transition’ countries only received survival strategies. So, those worse affected by trade
adjustment loans in the 1990s after the fall of the Berlin liberalization are smallholder farmers who cannot pro-
Wall and the breakup of the USSR. Their average growth duce for export, very small manufacturing enterprises,
was –1.7% per annum, showing an overall decline, but and semiskilled labor.
there were more successes than in Africa. Six of the In terms of financial liberalization the SAPs aimed to
countries had negative per capita growth and four had reform interest rates, ease the flow of funds in and out of
positive growth after the initiation of SAP lending. Only countries, and make credit easier to access. These are
Albania, Georgia, Poland, and Hungary are clear success basically about de-regulating the financial sector. A key
stories. outcome is that while these regulations have been re-
It would be wrong to argue that SAPs have had no laxed, only those people and businesses with a sound
benefits, but what is crucial is the distribution of these financial footing have been able to capitalize on these
benefits between and within countries, which brings the opportunities, leading to concentration of ownership and
logical rider of the distribution of their costs. At one level the further enrichment of the already rich at the expense
SAPs have been successful in ensuring debts are repaid. of the poorer section of society. Particularly badly hit
This net transfer of finance from the poor to rich coun- have been small- and medium-sized enterprises that
tries can be viewed as a form of tribute, not dissimilar lacked sufficient collateral for loans. Many of these are
to the actions of colonial governments in the nineteenth women run, so the effects of financial liberalization were
and twentieth centuries. In development speak adjusting felt worse by them. The wealthiest who could gain credit
countries service their debt, which when measured often used a portion of this on nonproductive con-
against economic activity (GDP) gives a ‘debt–service sumption, which raised demand for foreign imports over
ratio’. The higher the ratio, the greater percentage of a local goods, thereby exacerbating the effects of trade
country’s income goes on paying off loans. An example of liberalization.
the typical impacts of SAPs is Ghana. In 1983, at the start While competition from imports, among other things,
of the first SAP, its debt–service ratio was 0.81% but undermined local producers, other changes such as pri-
jumped to 10.82% in 1987 meaning that one dollar in vatization and labor market reforms have also impacted
nine went on repayments to the lenders. It was the on the poorest in adjusting countries. In countries with a
recognition of this crippling debt servicing that forced well-established manufacturing base, jobs that were cre-
HIPC and related moves. ated were often in ‘flexible’ and semiskilled industries,
Trade liberalization aims to enhance exports and which meant that labor has low pay, few rights, and little
encourage competition from imports to promote do- job security. Again, this changed labor market was gen-
mestic industries. All countries with an SAP put such dered with women usually taking the jobs in manu-
provisions in place and, in general, their exports did facturing and subject to harsh labor conditions. The
rise. In keeping with theories of comparative advantage export drive of SAPs also pushes the economy into
countries were encouraged to produce in sectors where specialization, which renders some sectors unviable. For
they had an advantage, which often meant relying on a example, where agricultural production is not for export,
narrow range of products, such as one or two commodity it becomes obsolete and generates rural unemployment
crops. As a result, adjusting economies rarely diversified and a concomitant rise in rural–urban migration, which
to develop intersectoral linkages or a more robust port- undermines rural communities. And as unemployment
folio of different activities. The rise in exports was set rises, households are forced into securing income and
against a rise in imports, which meant that the overall resources from wherever they can, which can mean for-
balance of payments position did not improve. Many of cing children into informal and risky jobs (Figure 1).
these imports are finished consumer goods rather than Privatization was intended to enhance the com-
intermediate capital goods that would be used in do- petitiveness of the economy and reduce the liability on
mestic manufacturing, which means they usually dis- the state of inefficient enterprises. SAP countries tended
placed comparable local products that may be more to produce an audit of their SOIs, get them into rea-
expensive or poorer quality. The net effect of this is de- sonable financial shape, and then offer them for sale on
industrialization where the number of firms declines, international markets. Typically these included hotels,
production falls away even more, unemployment rises, heavy industry and commodity processing plants, and
and purchasing power in the local economy is reduced. infrastructures like telecommunications, water, and
Sectorally there has been a shift away from manu- electricity. Privatization has had mixed results, with ef-
facturing to services, but local firms often lack the ex- ficiency rising in some and a reduction in the state’s
pertise, which opens the market up to foreign firms. In obligations coupled with a rise in taxable income. In
addition, as larger and more formal firms close, this re- general, the best SOIs were cherry picked by foreign
leases labor, which cannot be absorbed and is forced to investors which meant that profits leave the country.
enter the informal sector and rely on a range of risky Socially, the move toward efficiency resulted in
6 Structural Adjustment

Figure 1 A cartoon showing the limited impacts of SAPs. [Link]

Figure 2 A cartoon showing the social impacts of SAPs. [Link]

streamlining practices and getting rid of unwanted labor, effects for society and economy. The introduction of user
which adds to unemployment levels. Additionally, in fees for these basic services puts them out of reach of the
most cases, the prices for privatized services like phones poorest in society, which further deepens their exclusion
rose after privatization pushing them further out of reach and poverty. These effects were so visible in the early
of the poor. In this respect, water has been the most days of adjustment that a landmark publication called
difficult and contested as it is obviously vital to life and ‘Adjustment with a human face’ was published by the United
costing it out of reach of the poor makes humane living Nations Children’s Fund (UNICEF) in 1987, which
near impossible (Figure 2). highlighted the impacts on the poor and vulnerable and
Cutbacks in social spending and the repricing of called for the introduction of social safety nets to protect
government services are designed to balance the gov- people during the harsh, but supposedly temporary, ad-
ernment’s books and free up funds for debt repayment. In justment process. The social protection schemes were
practice, this means reduced funding for education and rolled out with much fanfare, but donor funding was
health in particular, which clearly has major knock-on quite limited and by making access conditional upon
 Structural Adjustment 7

certain workfare practices they also served to reinforce a the donors despite a countervailing rhetoric of de-
pro-market logic. mocratization and self-determination.
Agricultural promotion was also geared to exporting A key paradox of structural adjustment is that the
cash crops at the expense of locally consumed food crops. creation of ‘free’ markets unencumbered by state regu-
Additionally, to enhance the market competitiveness of lation requires a great deal of state-based politicking,
the sector subsidies on key inputs such as fertilizer were encompassing both the use of raw power and the less
cut. This has major livelihood and environmental con- obvious deployment of theoretical discourses. The
sequences. Poorer farmers who could no longer afford Bretton Woods Institutions are bound, in theory, to
inputs saw yields decline, which reduced income and noninterference in the politics of sovereign countries, yet
food security. It also meant that larger farmers who had conditionality shows that they are central to the decision
the initial capital or could access credit were able to making of many countries. At the national level we see
consolidate their position and expand at the expense of the state heavily involved in the withdrawal of the state
smaller farmers. This often meant taking over the best from regulation and service delivery. Rather than dis-
land and forcing the poorest onto even more marginal appearing, the state is restructured to form a parallel
land, which was more prone to environmental degrada- government run by insulated and unaccountable tech-
tion, thereby fuelling a vicious cycle of poverty and nocrats, most often located in the finance ministries. On
degradation. The focus on cash crops also encouraged the other hand, much is made in the neoliberal armory of
mono-cropping, that reduced biodiversity and with it an devolution to enhance ‘choice’ at the local level which
increase in the susceptibility of crops to disease. Similar runs counter to the massive centralization of power that
trends were seen in mineral extraction as mining enter- the implementation of SAPs requires.
prises expanded operations at the expense of agricultural This polemic of devolution within SAPs suggests that
land, not to mention the pollution problems associated local governance is to be a key arena for enhancing
with under-regulated heavy industry. Overall, food pro- political choice. This localism has seen a whole host of
duction for local consumption was negatively affected political experiments centered on ‘civil society’, ‘par-
by these reforms, which saw a consolidation and spe- ticipation’, and ‘empowerment’. These positive and rad-
cialization of production. ical sounding concepts promise local self-determination,
While it is difficult to generalize about the aggregate but prove to be about marketizing services such as edu-
impacts of SAPs, compared to their stated aims there was cation, bypassing the central state which has in many
limited or negative economic growth, increased social cases proven obstructive to liberalization, and as a vehicle
polarization, and enhanced foreign ownership. However, for promoting certain civil society organizations that are
debt had been serviced. Within these general impacts known to be pro-market. As a result, ‘choice’ through
women and children were the worst affected. So the devolution is part of the wider move to create markets
economic pie did not increase much in size, but the and weaken opposition to SAPs, while all the time
richest peoples’ share of the pie got bigger. couching it in a language of empowerment.
As we have seen, the PRSs promise a big change from This localism has proven to be one of the mainstays of
the SAPs of the 1980s and 1990s. While it is a little early the ‘good governance’ programs already mentioned. After
to say with any precision what the effects have been, nearly a decade of SAPs it was realized that the economic
there is a lack of clarity over how they will contribute to impacts were limited, which donors put down to political
poverty reduction as opposed simply to stabilization and and bureaucratic bottlenecks. In many cases well-placed
growth. By and large, the strategies still focus on eco- political elites were able to benefit from the new inflows
nomic growth without really addressing how any growth of money, often through corrupt re-routing of funds for
is to be redistributed to the poor. At their heart are the personal or party gain, and so needed to be stopped or
same macroeconomic prescriptions of the old SAPs with bypassed. This led to a whole raft of political reforms
a continued emphasis on privatization, liberalization, and such as downsizing bureaucracies, removing key indi-
a reduced role for the state. viduals, insulating decision making, and using external
consultants to provide ‘objective’ analysis of what needed
to be changed. These programs were always couched in
terms of accountability and transparency, and were tied
The Politics of Sovereignty and to democratization agendas that also promised account-
Accountability ability. Such attempts to remove blockages to the reforms
were not only a donor-driven agenda, but were supported
The economic effects of SAPs are clearly far reaching, by domestic citizens keen to see an end to corruption.
but so too are their political impacts. In this subsection Where the tension arose was the sometimes untran-
we examine the politics of SAP intervention, which af- sparent and heavy-handed way in which good governance
fects national sovereignty and promotes accountability to reforms were implemented. People noted the irony of
8 Structural Adjustment

recently fed into the worldwide ‘antiglobalization’

movements (Figure 3).

Conclusion

Structural adjustment is a critical issue for the lives of

many in the developing world. It is a process linked to
older trajectories within the international political
economy, which are about uneven interdependencies
across space. The developing world is further hemmed in
by SAPs and complex multileveled governance sees na-
tional sovereignty being usurped by international or-
Figure 3 A protestor in South Korea in 1997. Mark Henley ganizations acting in the name of the poor. They also
[Link]. espouse localism as a way of enhancing choice and
freedom, but this proves to be a smokescreen for de-
statization. By understanding this complex economic and
these moves toward good governance being forced on political geography we get an insight into how neoli-
countries as part of the loan conditionality, which runs beralization operates so that it appears everywhere and
against any definition of democratic politics, and can only nowhere at the same time.
ever be justified through an assertion of the moral su- Since the so-called ‘war on terror’ began, the economic
periority of Western political models and a concomitant well-being of the global poor has taken on a new signifi-
demonization of developing countries as unilaterally ir- cance since poverty is believed to breed grievances, as the
rational and corrupt. poor in the South witness with growing envy the lifestyle
This tension around excessive conditionality has been of the North. Hence, the poverty focus of adjustment
addressed in rhetoric at least with the PRSs, in which this programs is now also about maintaining the security of the
upward accountability to donors is supposedly reversed, North by preventing these grievances building up. Under
as recipient countries now ‘own’ their own adjustment this war footing the neoliberal governance prerequisites
programs. As we have seen, despite the promise of local become even more important, because they signal a
input to program design, which should produce different commitment to like-minded (read US administration)
policy mixes, all PRSs look stunningly similar. The shift values. Muddying the waters further is China’s rise in
to supposedly smart conditionality and direct budget global economics and politics, which potentially provides
support has not reversed the accountability to donors an alternative to structural adjustment. The Chinese
who still pull the strings and undermine the domestic government is ready to lend to developing countries and
democratization they work so hard to champion. Rather enter partnerships and joint ventures unencumbered by
than brutal conditionality the language has shifted to the same ideological baggage and the burden of debt re-
compliance, yet a whole system of checks are in place – payment. All this means that structural adjustment is set to
most notably Country Policy Institutional Assessments – continue, but is likely to change yet further.
to ensure that recipient countries are trustworthy before
loans are approved and that annual approvals are made in See also: Africa; Civil Society; Cold War; Communist and
order for funds to be released. While this makes much Post-Communist Geographies; Debt; De-Industrialization;
sense and ensures the funds supplied by taxpayers of the Dependency; Governance; Governance, Good; Informal
North are not misspent, it is still not a process in which Sector; International Organizations; Neocolonialism;
free rein is given to countries to determine their own Neoliberalism; Neoliberalism and Development;
development pathways. Privatization; Sovereignty; Third World; Transnational
However, these harsh economic conditions and pol- Corporations in Developing Countries; Uneven
itical meddling have not gone unopposed. As the neo- Development.
liberal model creates authoritarian, centralized, and
unaccountable politics, ordinary people are often forced
into direct action. Dubbed ‘IMF riots’ these protests Further Reading
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