Imported Policies Must Be Scrutinised

Published on 18th December 2007

Market liberalization polices have led to a catastrophic fall in the prices of many of the agricultural products exported by Less Developed Countries (LDC). The plunge in prices has been caused by systemic over-production stimulated by the components of the Structural Adjustment Programmes (SAPs).LDCs are highly dependent on the production of cash-crop commodities for employment, economic growth and export revenue.


The major flaw in this strategy was that similar advice was given to almost all tropical countries in what Economists’ call the fallacy of composition. Coffee-producing countries were encouraged to boost coffee production; sugar producers to produce more sugar, and so on. This resulted in over-production of these commodities, which caused prices to plunge in the international markets.

 

In Mozambique, the removal of food subsidies as a result of SAPs meant diminished access to food. Urban workers and rural dwellers could no longer purchase the quota available per family. In South America, SAPs have rolled back the progress achieved in the 1960s and the 1970s. The number of people living in poverty rose from 130 million in 1980 to 180 million at the dawn of the 1990s. One decade of negative growth had worsened income inequalities. While the cost of adjustment fell on the middle and lower income groups, the top five percent retained and even increased their living standards. In Mexico, the richest 20 percent received more than 52 percent of the national income while the poorest 20 percent had less than five percent. Seventeen million people subsisted on less than $350 per person per year during the Salinas administration.

 

The shift from food production for domestic consumption to export needs under SAPs has affected nutritional levels in Brazil. Per capita production of foodstuffs like rice, black beans, manihoc and potatoes fell by 13 percent from 1977 to 1984. Per capita output of exports like soybeans, oranges, cotton, peanuts and tobacco shot up by 15 percent. As a result of these policies, 50 percent of Brazilians suffer malnutrition.

 

In Chile, between 1980 and 1990, the proportions of families below ‘the line of destitution’ rose from 12 to 15 percent while those below ‘the poverty line’ (but above the destitution line) rose from 24 to 26 percent. Some 40 percent or 5.2 million people were classified as poor in a country that once boasted of a large middle class. This has led to increased hunger and malnutrition; for some 40 percent of Chileans, the daily calorific intake dropped from 2,019 in 1970 to 1,751 in 1980 to 1,629 in 1990.

 

The SAPs reform to service Somalia’s debt led to a dramatic decline in purchasing power, and the deregulation of the grain market, as the influx of ‘food aid’ led to massive impoverishment of the farming communities. In June 1981, the devaluation of the Somali shilling led to hikes in the prices of fuel, fertilizer and farm inputs. This affected both the rainfed agriculturalists and irrigated farming communities. Fall in real earnings, massive unemployment and soaring food prices (due to the removal of food subsidies and price controls) affected the urban population with lower levels of food intake and a deterioration in the nutritional status of children. The deregulation of the grain market triggered famine and led to a high incidence of child malnutrition.

 

In Bolivia, SAPs eliminated its development banks. No subsidized credit is available to producers. Micro-credit for small-farmers is now provided by NGOs. Small farmers face unfair competition from food imports and unsubsidized exports. Bolivia considers that the negotiations in the WTO should eliminate such unfair practices, since they create dependency and condemn the net food importers to remain in that category. It is imperative that market access should be improved by attacking subsidies and high tariffs.

 

In such countries as Zambia and Ghana, the ruling parties have become unpopular. Retrenchments in the public sector for instance, have promoted animosity among the populace. In Zambia, the IMF and World Bank (WB) obliged the government to cut subsidies which directly benefited the poor. This meant, the WB policy asked the rural poor to ‘’enjoy’’ an even greater poverty and political destabilization.

 

Cuts in public health expenditure under SAPs have led to a drastic decline in disease control and prevention measures. As a result, diseases, once under control or eradicated have made a comeback. Sub-Saharan Africa records a resurgence of cholera, yellow fever and malaria.  In South America, the prevalence of malaria and dengue has worsened dramatically since the mid 80s. The outbreak of bubonic and pneumonic plague in India in 1994 was a direct consequence of a worsening urban sanitation and public health infrastructure which accompanied the compression of national and municipal budgets under the 1991 IMF-WB sponsored SAPs.

    

In Vietnam which had 90 percent literacy rates and highest school enrolments in Southeast Asia, economic reforms have shrunk the  educational budget, depressing teachers’ salaries, and commercialising secondary, vocational and higher education through the introduction of tuition fees. School enrolment has declined and a high dropout rate in the final years of primary school  recorded. The proportion of graduates from primary school who entered the four-year lower secondary education system declined from 92 percent in 1986 - 87 to 72 percent in 1989 - 90. Nearly three quarters of a million children were pushed out of the secondary school system during the first three years of the reforms.


Third World countries implementing SAPs have experienced a decline in the social sector performance. Although SAPs advocates argue that social costs are temporary and somewhat unavoidable,  SAPs-induced impoverishment among the lower social classes can last  beyond the life span of the programme. Social costs can be avoidable if SAPs were to reflect a balanced mix of social - economic variables of African economic crisis.


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