[Structural] Adjustment: the Costs

by Walden Bello

Though poverty and inequality were certainly widespread in the Third World before the 1980s, the evidence shows that they escalated sharply during that decade. While the adjustment policies of the [International Monetary] Fund and the [World] Bank were not the only cause of deepening poverty and growing inequality, they were a central link in a vicious circle whose other key elements were the cutting off of credit flows brought on by the debt crisis, increasing marginalization from flows of foreign direct investment, and deteriorating terms of trade owing to the sharply falling international price of the Third World's primary commodity exports and the inexorably rising price of its manufactured imports.


Misery: a Global Survey

Apart from East Asia and some areas in South Asia, most parts of the South experienced stagnation or sharp reversals in growth, escalating poverty, and increasing inequality both within and between countries.

With per capita income stagnant in the South and rising by 2.4 per cent a year in the North during the 1980s, the gap between living standards in North and South widened, with the average income in the North reaching US $12,510, or 10 times the average in the South, which was $710. 'The global distribution of income still has the power to shock, ' notes the United Nations Development Program; ' 77 per cent of the world's people earn 15 per cent of its income.'

Especially ravaged during the decade were the regions that were most severely subjected to structural adjustment: Latin America and Africa. In Latin America, the force of adjustment programs struck with special fury, 'largely canceling out the progress of the 1960s and 1970s.' The numbers of people living in poverty rose from 130 million in 1980 to 180 million at the beginning of the 1990s. In a decade of negative growth, income inequalities - already among the worst in the world - worsened. As Enrique Iglesias, president of the Inter-American Development Bank (IDB), reports, 'the bulk of the costs of adjustment fell disproportionately on the middle and low-income groups, while the top five per cent of the population retained or, in some cases, even increased its standard of living.' The top 20 per cent of the continent's population today earn 20 times that earned by the poorest 20 per cent. In Brazil, a major victim of the debt crisis and a major target of adjustment, the top fifth earn 26 times more than the bottom fifth.

With hunger and malnutrition on the rise, tuberculosis and cholera - diseases that had been thought to be banished by modern medicine - have returned with a vengeance throughout the continent, with cholera claiming at least 1300 in Peru alone in 1991.

Among the more tragic consequences of widespread economic distress has been the wearing down of the social fabric. The renewed bout of la violencia in Colombia, for instance, cannot be divorced from the fact that during the late 1980s the country was transferring some 10 per cent of its GNP to its foreign creditors in the form of debt service. One can understand the attractions of the drug trade if one considers that, owing to harsh adjustment policies, per capita income in Colombia has been stagnant since the early 1980s. The poorest 40 per cent of households now have only 12.7 per cent of the national income, while unemployment in the poorest neighborhood of Medellin, from which most gangs emerge, is as high as 50 per cent.

Similarly, the rising levels of violence in Peru, where the government and Shining Path guerrillas are engaged in bloody combat, cannot be divorced from the drastic social impact of disastrous depressive adjustment policies imposed by the IMF in the early 1980s. These measures claims Richard Webb, former president of Peru's Central Bank, pushed the economy into 'a series of vicious circles in which further adjustment efforts had both positive and negative effects, exacting a high price in both inflation and recession, and in political erosion, for marginal fiscal and balance-of-payments improvements.

But perhaps no event better exemplifies the link between adjustment policies and rising lawlessness than one which occurred in Brazil, the South's biggest debtor:

In 1991, the kidnappers of Francisco Jose Coeho Vieira, a Brazilian businessman, demanded a ransom of thirty-two thousand dollars - in food. When twenty tons of meat, sugar, pasta, beans, rice and milk were left near a Rio shantytown, a line of slum dwellers half a mile long battled for the goods. After fifteen minutes, everything was gone; five people were injured in the melee.

Sub-Saharan Africa has been even more devastated than Latin America. So massive is the region's reversal of fortune that MlT's Lester Thurow has commented, with cynical humor tinged with racism: 'If God gave it [Africa] to you and made you its economic dictator, the only smart move would be to give it back to him.'

Total debt for sub-Saharan Africa now amounts to 110 per cent of GNP, compared to 35 per cent for all developing countries. Cut off from significant capital flows except aid, battered by plunging commodity prices, wracked by famine and civil war, and squeezed by structural adjustment programs, Africa's per capita income declined by 2.2 per cent per annum in the 1980s. By the end of the decade it had plunged to its level at the time of independence in the early 1960s. Some 200 million of the region's 690 million people are now classified as poor, and even the least pessimistic projection of the World Bank sees the number of poor rising by 50 per cent to reach 300 million by the year 2000. If current trends continue, the United Nations Development Program estimates that the continent's share of the world's poor, now 30 per cent, will rise to 40 per cent by the year 2000.

Impoverishment raised the incidence of under nutrition in the region from 22 per cent in the 1979-81 period to 26 per cent in 1983-85. One study found that in Zambia adjustment reduced food consumption, with some families reducing the number of meals per day from an average of two to one. As Eva Jespersen points out, women have been especially hard hit, since the higher physical demands on them, relative to men, necessitate calorie requirements that are often not met, especially for women engaged in producing cash crops. This deficiency could lead to 'low birthweight babies and a subsequent higher risk of infant morbidity and mortality.'

Public health-care systems throughout the continent are 'collapsing from lack of medicines,' according to a United Nations advisory group, and Africans are increasingly forced either to do without medical care or to obtain it from essentially private systems. In Zaire, this trend toward privatization has forced 'women with few skills [to] resort to petty trade, food preparation, illegal beer and alcohol production, market gardening, sewing, smuggling, and prostitution.'

With radical retrenchment of public health-care, owing to World Bank- and IMF-imposed budget cuts, Africa is very vulnerable to resurgent cholera, which is now spreading at what the World Health Organization has characterized as a 'catastrophic pace,' owing to the breakdown of water and sewage systems triggered by the economic crisis. And the continent lies practically defenseless against the AIDS epidemic, which now threatens to decimate the most productive stratum of the population - those aged between 20 and 45 years old. The statistics are chilling: surveys have found that in Zimbabwe some 50 per cent of the armed forces carry the AIDS virus; in Kampala, Uganda, more than 25 per cent of women seen in maternity clinics are HIV-positive; and in Zambia 20 to 25 per cent of various groups in the capital, Lusaka, are infected.

Yet the resources which are badly needed to combat AIDS are going elsewhere, with a significant portion earmarked for debt servicing: 24 per cent of foreign exchange earnings in the case of Zimbabwe, 13 per cent in that of Zambia, and 71 per cent in Uganda. So evident is the role of structural adjustment programs in the creation of this devastated landscape that the World Bank chief economist for Africa has admitted: 'We did not think that the human costs of these programs could be so great, and the economic gains so slow in coming.'


from the book
Dark Victory by Walden Bello

published by
Institute for Food and Development Policy (Food First)
398 60th Street, Oakland, CA 94618

50 Years Is Enough

IMF, World Bank, Structural Adjustment

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