Transcript Globalization III: Structural Adjustment Policies

Globalization III: Structural
Adjustment Policies
Western industrial economies –
• Deregulation and privatization
-post-Fordism; downsizing; restructuring
social spending along market lines;
financial liberalization
Post-communist societies –
• marketization and shock therapy
Crisis of development: 1970s
Neo-liberal explanation
extend role of the state economic arena
Expansion of Parastatals(state-owned
enterprises)
Decline of exports
High tariffs
Expansion of social spending
Reforms: Structural Adjustment
Polices
Privatization
Deregulation
-- smaller state (downsizing e.g, civil service)
-- lower social safety nets
-- remove subsidies (agriculture, education, health-introduction of User Fees)
Competition and comparative advantage
(Rational: enable international free trade;
foreign direct investment in developing
countries)
Competition - efficiency – productivity growth
Results: Limited economic gains (historical
dependencies--declining prices for primary
commodities)
Globalization III-political conditionally
Results: democratic transition in the
developing world
Economic development plus liberal
democracy leads to leads to modernity
Structural adjustment programs
SAPS -- Austerity measures
The pain of structural adjustment on the poor is
justified through the long-term gains to a
nation's economy.
These gains will benefit the poor in the future.
But, in country after country these gains have
failed to materialize
Example of Mexico in 1994
1994 Mexico declared it was going to default
on debt payments.
$50 billion rescue package (biggest in history
to that date).
IMF forced Mexico to repay debt before any
other national expenditures – ‘austerity’.
Mexico diverted energies to exports - to pay
creditors, the banks.
1995: GDP fell by 6.6% – bankruptcies –
over 2 million redundancies – 52% inflation.
Admitting failure
'IMF riots' over the past 15 years
-- Zambia, Venezuela, Jordan, the Philippines,
Jamaica, etc.
World Bank has accepted that SAPs have
failed the poor, with a special burden falling
on women and children.
Yet together with the IMF it still demands
developing countries persist with SAPs if they
wish to have access to future loans or debt
relief.
Why the support for SAPs?
Reproduction of local political power; (e.g.
Pakistan “The ruling elites found it
convenient to perpetuate low literacy rates.
The lower the proportion of lower and
literate people, the lower the probability that
the ruling elite could be displaced.”
Challenges to Nation-States
Demise of nation-states (deepening of
global interconnectedness)
Limits nation-states’ political and
economic power (expansive powerinternational institutions globalization
III-WTO, World Bank and IMF)
Developing countries (economic
stagnation)
Increased migration and movements of
peoples (refugees, etc)
Cultural level (global culture of
consumerism--music, consumerism,
cinema, etc).