Conditions (draft) edit
Stabilisation policies were originally summarised in 1989 by economist John Williamson, in what he called the Washington Consensus.[1]
Typical stabilisation policies include:[2][3]
- balance of payments deficits reduction through currency devaluation
- budget deficit reduction through higher taxes and lower government spending, also known as austerity
- restructuring foreign debts
- monetary policy to finance government deficits (usually in the form of loans from central banks)
- eliminating food subsidies
- raising the price of public services
- cutting wages
- decrementing domestic credit.
Long-term adjustment policies usually include:[2][3]
- liberalization of markets to guarantee a price mechanism
- privatization, or divestiture, of all or part of state-owned enterprises
- creating new financial institutions
- improving governance and fighting corruption (from the perspective of a neoliberal formulation of 'governance' and 'corruption')[citation needed]
- enhancing the rights of foreign investors vis-à-vis national laws[citation needed]
- focusing economic output on direct export and resource extraction[citation needed]
- increasing the stability of investment (by allowing foreign investors) with the opening of companies
- reducing government expenditure e.g. reducing government employment
Conditions (Structural adjustment) edit
Typical stabilisation policies include:[2][3]
- balance of payments deficits reduction through currency devaluation
- budget deficit reduction through higher taxes and lower government spending, also known as austerity
- restructuring foreign debts
- monetary policy to finance government deficits (usually in the form of loans from central banks)
- eliminating food subsidies
- raising the price of public services
- cutting wages
- decrementing domestic credit.
Long-term adjustment policies usually include:[2][3]
- liberalization of markets to guarantee a price mechanism
- privatization, or divestiture, of all or part of state-owned enterprises
- creating new financial institutions
- improving governance and fighting corruption (from the perspective of a neoliberal formulation of 'governance' and 'corruption')[citation needed]
- enhancing the rights of foreign investors vis-à-vis national laws[citation needed]
- focusing economic output on direct export and resource extraction[citation needed]
- increasing the stability of investment (by allowing foreign investors) with the opening of companies
- reducing government expenditure e.g. reducing government employment
Structural adjustment loan edit
Structural adjustment loan (SAL) is a type of loan to developing countries. It is the mechanism by which international financial institutions, such as the World Bank and International Monetary Fund, impose structural adjustment.[4] They carry (often controversial) policy conditions, which have included: (see Washington Consensus).[1]
- Fiscal policy discipline;
- Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
- Tax reforms which broaden the tax base and lower marginal tax rates, while minimizing dead weight loss and market distortions;
- Interest rates that are market determined and positive (but moderate) in real terms;
- Competitive exchange rates; devaluation of currency to stimulate exports;
- Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; the conversion of import quotas to import tariffs;
- Liberalization of inward foreign direct investment;
- Privatization of state enterprises;
- Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;
- Legal security for property rights.
Structural adjustment loans are very controversial. For criticisms, see structural adjustment.
Some studies suggest that they have been "weakly associated with growth and reform did seem to reduce inflation."[5] Others have argued, however, that "the outcomes associated with frequent structural adjustment lending are poor."[6] Critics (often from the left) accuse such policies to be "not-so-thinly-disguised wedge[s] for capitalist interests." [7]
References edit
- ^ a b Peter Burnell & Vicky Randall (2005). "Development (chapter 16)". Politics in the Developing World (2nd ed.). Oxford University Press, Inc. pp. 327–328. ISBN 0-19-929608-1.
- ^ a b c d Cite error: The named reference
Lensink 1996was invoked but never defined (see the help page). - ^ a b c d White, Howard (1996). "Adjustment in Africa". Development and Change. 27 (4): 785–815. doi:10.1111/j.1467-7660.1996.tb00611.x.
- ^ "Life and Debt" a film by Stephanie Black. See: http://www.lifeanddebt.org/
- ^ Crisp, Brian; Kelly, Michael. (1999) The Socioeconomic Impacts of Structural Adjustment. International Studies Quarterly. Vol. 43. No. 3 (Sept. 1999). 533-552. https://www.jstor.org/stable/2600942
- ^ Easterly, William. (2006) The White Man's Burden. Penguin Books. Pages 68-72.
- ^ Kapur, Davesh. (1998). The IMF: A Cure of Curse? Foreign Policy. No. 111. pp. 114-129. https://www.jstor.org/stable/1149382