Well-managed economies and the lot of the teeming poor

Guyana Chronicle
May 3, 2000

ONE OF saddest parables of structural adjustment in the Third World is the situation in which a country passes its scheduled IMF tests with impressive achievements while its poor underclass plods through life barely eking out an existence.

In Jamaica in the 1980s, the proverbial `sufferers' could only eye goods on sale since their incomes would not permit them the luxury of purchasing anything but the barest necessities. In the late 1980s, while the international donors were gushing with praise about the economic turnaround in Ghana, the poorer members of society were finding it difficult to purchase enough kerosene to prepare their humble meals.

In an article captioned, "The IMF: Dr. Death?", [please note: link provided by LOSP web site] TIME magazine of April 24, 2000 presents a telling analysis of the way in which the programmes of the International Monetary Fund (IMF) restore order to a country's financial affairs while their effects reduce the lower-income working class to abject poverty.

"Using loans and the threat of default as levers, the IMF has pushed more than 90 countries to accept its brand of free-market shock therapy: lowering trade barriers, raising interest rates, devaluating currencies, privatising state-owned industries, eliminating subsidies and cutting health, education and welfare spending. These `structural adjustment programmes' - a chilly bureaucratic euphemism if there ever was one - attract foreign investment and stimulate the business climate (and the local elites).

"But the programmes also drive up the cost of living, rip holes in already tattered safety nets and help kill small farms and businesses. After Haiti lifted its trade barriers under IMF pressure in 1986, for instance, an imported mountain of cheap American rice - subsidised by the U.S. government - buried the island's rice industry."

Citing Tanzania as a case study, the TIME article said that in the 1980s, the economy of the African country was "flatlining" with hyperinflation, huge budget and trade deficits, and massive dependence on foreign goods. However, after 15 years of IMF-imposed structural adjustment, Tanzania was described by a World Bank official as having "made great progress in getting its macro-economic situation in order".

It is said that European sedans glide through the streets of Dar es Salaam, imported goods are in the shops, and the country now has a stock exchange. "It would all be rosy were it not for the 15 million to 18 million - more than half the population - living in dire poverty with 12.5 million of them unable to afford the most basic needs.... These men and women, almost all subsistence or small-plot cash-crop farmers, have been structurally adjusted half to death."

For decades, the people of the South have been complaining of the bitter medicine of the IMF, which potion, when administered to ailing and badly-managed economies, would have the most negative effects on the poor working class.

Sometimes, the medicine would be so shocking to the country that the poor would resort to riots. In the mid-90s, the late King Hussein had to move quickly to appease his subjects after rioting broke out in Jordan over an increase in the price of bread. And in Bolivia last month, eight people died in riots after rates for drinking water were raised.

To their credit, international financial institutions like the IMF and the World Bank are today much more sensitive to the views of the poor south. However, more effective ways must be found to reduce the grinding poverty that afflicts Third World countries and condemns millions to plod through their lives at sub-human levels of existence.