The policy roots of economic crisis and poverty: a multi-country participatory assessment of structural adjustment

The report documents a systematic weakening of the productive capacity of the countries implementing Bank policies and the inability of these countries to generate productive employment at a living wage. Poverty has been further deepened by the inability of the poor to access essential services at affordable rates.The findings indicate a number of major, critical problems caused or exacerbated by adjustment programs:Precipitous and indiscriminate trade liberalization, financial-sector liberalization policies, and the weakening of state support and of the demand for local goods and services have devastated local industries, particularly small and medium-sized enterprises that provide the bulk of national employment. Domestic businesses cannot compete with the flood of often subsidized foreign imports nor afford credit at high rates that are also redirecting capital from productive to speculative activities. Structural and sectoral policy reforms in the agricultural and mining sectors have undermined the viability of small farms, weakened food security and damaged the natural environment. Cheap food imports, the removal of subsidies from farm inputs, the withdrawal of the state from the provision of technical, financial and marketing assistance, and the emphasis placed on export production have further marginalized small farmers and forced them to overexploit natural resources. The liberalization, deregulation and privatization of the mining sector have further eroded the environment and the viability of the land of small farmers and indigenous people.A combination of labor-market reforms, lay-offs resulting from privatizations and civil-service reform, and the shrinking of labor-intensive productive sectors have severely undermined the position of workers. Employment levels have dropped, jobs have become more precarious, real wages have deteriorated, income distribution has become less equitable, and workers’ rights and unions have been weakened as reforms have allowed employers greater flexibility in establishing employment terms and conditions and public enterprises are privatized without subsequent adequate regulation.The privatization of public utilities, the application of user fees to health care and education, and cuts made in social spending in national budgets have reduced the poor’s access to affordable services. Rate increases often fall disproportionately on the poor, and increases in fees have driven up school dropout rates and dissuaded many from seeking medical care. Social-service infrastructure, availability of supplies, personnel training and wages have all suffered deterioration, particularly in rural areas and poorer regions of countries.<B>The increased impoverishment caused by structural adjustment has in many ways befallen women even more than it has men.</B> As small-scale businesspeople and food producers, they have been undermined by import liberalization, high credit rates and the withdrawal of the state from the provision of assistance. Their generally low skill level makes them particularly vulnerable to large numbers of lay-offs resulting from bankruptcies and privatizations. Labor “flexibilization” measures have often stripped women of their right to maternity leave and other special protections. The reduction in free public services, the high cost of private ones, and the damage done to the environment and communities by the deregulation of such activities as mining have placed extra burdens on women in their roles as homekeepers and caregivers.<B>Macro-level problems have accompanied many of the local-level failures of adjustment programs. </B>Many of the anticipated gains in efficiency, competitiveness, savings and revenues from the privatization of public enterprises, labor-market “flexibilization” and large-scale mining operations have not materialized. Trade liberalization has tended to increase rather than decrease current-account deficits and external debt due the high import content of the exports promoted under adjustment regimes. The growing presence and power of transnational companies, often the greatest beneficiaries of adjustment programs, have severely diminished the economic sovereignty of many countries and their governments’ capacity to respond first and foremost to the economic and social needs of their own people. And the freedom of these corporations and both foreign and domestic speculative capital to move from country to country creates constant instability on top of the destabilizing effects of the destruction of national economic activity.While the report and the process leading up to it involved a World Bank / Civil Society collaboration, SAPRIN feel that the the Bank have chosen to ignore its conclusions.