What are Structural Adjustment Programmes (SAPs)?

"Structural adjustment" is the name given to a set of "free market" economic policy reforms imposed on developing countries by the Bretton Woods institutions (the World Bank and International Monetary Fund (IMF)) as a condition for receipt of loans.

SAPs were developed in the early 1980s as a means of gaining stronger influence over the economies of debt-strapped governments in the South. To ensure a continued inflow of funds, countries already devastated by debt obligations have little choice but to adhere to conditions mandated by the IMF and World Bank.

Most donor countries, including Canada, condition their bilateral assistance upon a country's adoption of structural adjustment programmes.

What are SAPs Designed to Do?

SAPs are designed to improve a country's foreign investment climate by eliminating trade and investment regulations, to boost foreign exchange earnings by promoting exports, and to reduce government deficits through cuts in spending.

What Measures are Imposed Under SAPs?

Although SAPs differ somewhat from country to country, they typically include:

a shift from growing diverse food crops for domestic consumption to specializing in the production of cash crops or other commodities (like rubber, cotton, coffee, copper, tin etc.) for export;
abolishing food and agricultural subsidies to reduce government expenditures;
deep cuts to social programmes usually in the areas of health, education and housng and massive layoffs in the civil service;
currency devaluation measures which increase import costs while reducing the value of domestically produced goods;
liberalization of trade and investment and high interest rates to attract foreign investment;
privatization of government-held enterprises.

Canadians can begin to identify with the citizens of developing nations when we experience similar SAP-like cutbacks to health, education and other basic social services.

Why the Need for SAPS?

The World Bank and the IMF argue that SAPs are necessary to bring a developing country from crisis to economic recovery and growth. Economic growth driven by private sector foreign investment is seen as the key to development. These agencies argue that the resulting national wealth will eventually "trickle down" or spread throughout the economy and eventually to the poor.

The achievement of social well-being is not an integral component of SAPs but a hoped-for result of applying free market principles to the economy. The process of adjustment, as described by many World Bank and IMF officials to developing countries, is one of "sacrifice," of "present pain for future hope."

What's Wrong with SAPs?

Many groups argue that SAPs impose harsh economic measures which deepen poverty, undermine food security, and self-reliance and lead to unsustainable resource exploitation, environmental destruction, and population dislocation and displacement. These groups, which include non-governmental organizations (NGOs), grassroots organizations, economists, social scientists and United Nations agencies have rejected the narrow conception of economic growth as the means to achieve social and environmental objectives. They believe SAP policies have increased the gap between rich and poor in both local and global terms.

Despite claims to the contrary, World Bank-imposed SAPs have paid little or no attention to their environmental impact. SAPs call for increased exports to generate foreign exchange to service debt. The most important exports of developing countries include timber, oil and natural gas, minerals, cash crops, and fisheries exports. The acceleration of resource extraction and commodity production that results as countries increase exports is not ecologically sustainable. Deforestation, land degradation, desertification, soil erosion and salinization, biodiversity loss, increased production of greenhouse gases, and air and water pollution are but among the long-term environmental impacts that can be traced to the imposition of SAPs.

Women are bearing a disproportionate share of the burdens imposed by SAPs. The macro-economic thinking on which SAPs are based, takes little account of the gender-based division of labour. For example, SAPs promote export- oriented crops, which tend to be grown by men. This eaves women with little support, marginal land, and fewer resources to grow food crops to feed their families. In addition, cutbacks to public services result in a greater workload for women as they struggle to pay extra fees to secure health care and education for the family. Often, these cutbacks simply place such services out of reach.

Are there Alternatives?

There have been a variety of alternatives that address both the economic model upon which SAPs are based, and the non-democratic and excessively harsh method by which SAPs are imposed. The UN Economic Commission for Africa provided a comprehensive and credible alternative to SAPs in 1989. The African Alternative Framework called for "adjustment with transformation" which called for a reduction in the continent's reliance on external trade and financing, the promotion of food self-sufficiency and greater popular participation in economic planning and decision-making.

The Third World Network and Freedom from Debt Coalition have proposed numerous alternative policies in the areas of international trade and sustainable development. Some specific alternatives for reform include:

promoting diversification in the products that Southern countries export and increase processing capacity. This would coincide with the recognition of providing some protection to infant industries and the promotion of greater regional trade;
recognizing the need for states to play a greater role in facilitating the diversification away from traditional commodities, determining and promoting investment priorities; economic policies and planning which include a gendered analysis of the various options;
policies that take into account environmental impacts and include sustainable natural resource use that benefits local communities;
an emphasis on non-price structural reforms such as land reform, institutional reforms to increase democratic practice and accountability;
at the international level, measures to reduce the debt problems of poorer countries, regulate capital markets and address unfair trading practises.

What is urgently required is to open up the debate to allow for serious consideration of alternative measures. What stands in the way is the total control over the development debate currently exercised by the Bank and the IMF with the blessing and support of Northern governments, including Canada.

In addition, fundamental reform of the Bretton Woods Institutionsto ensure greater transparency, accountability, and equitable participation in the development of any programmes that will directly affect communities is essential (see brief on "Reforming the Bretton Woods Institutions"). The Halifax G-7 Summit provides an important opportunity to alter the debate and begin the process of transformation.

Structural Adjustment Programmes:

over-emphasize the restoration of balance of payments instead of adopting a more just and equitable approach to resolving the debt crisis;
undermine the state's sovereignty and limit its role for socio-economic intervention through a fixation on deregulation, privatization and dismantling of the state in the name of unfettered "free markets";
exacerbate the disparities between rich and poor by facilitating income concentration by the wealthy and the exclusion of the poor from decisions and control over resources;
undermine democracies and democratic process. Southern governments must accept SAP measures imposed by non-democratically elected bank officals even if they conflict with government policy and the will of the people_the alternative is default and bankruptcy;
lack transparency, accountability and public participation in their design and implementation;
hurt the poor disproportionately through deep cutbacks in social programmes. User fees, privatization, massive layoffs and cutbacks of scial services have led to malnutrition, school and hospital closures, recurrence of previously eradicated disease, and deepening poverty;
undermine national food security through an over-reliance on investment that is short-term, concentrated in the export sector;
make many basic necessities inaccesible to local people as currency devaluations drastically reduce the buying power of local wages;
violate the UN Convention on the Rights of the Child, the UN Declaration on the Right to Development, and the Convention on the Elimination of Discrimination Against Women;
focus on domestic economic adjustment to the exclusion of the whole world economy, which includes Northern economies, to the priority goals of sustainable development, self-sufficiency and greater popular participation in economic planning and decision-making.

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