During 1970s, many neo-liberalists
argued the idea of state intervention in the economy, thereby re-introducing
the essence of classical economic theories in real practice. For neo-liberal
theorists, the route to greater economic growth, and therefore greater levels
of well being for all, was through reducing state intervention and letting the
market set prices and wages (Willis,
2005, p.47). This ideology became the most accepted view of the Global
North which came to Global South in the form of various means, one of which is
known as Structural Adjustment Policies
(SAPs).
Structural Adjustment Policies (SAPs) is
the policy response of the International Monetary Fund (IMF) to the debt crisis
of 1980s in the Global South, primarily started from Latin America-Brazil and
Mexico and later in other regions like Sub-Saharan Africa. These regions were
being unable to clear official debts to the Northern creditors for which the
IMF (the reflection of Northern hegemony) took the effort of SAPs claiming it
to be the savior of the entire international financial system. More precisely, SAPs includes policies that
promote liberalization by giving power to the market to determine its economy,
and thus by reducing the state intervention in economic activities. Moreover,
SAPs consists of two aspects of policies namely- Stabilization measures and
Adjustment measures.
Stabilization measures, as the immediate
step, include a public sector wage freeze; reduce government expenditures and
currency devaluation (make exports cheaper). The stabilized government then
must follow adjustment measure that includes export promotion, downsizing the
civil service, economic liberalization, privatization and tax reduction (Simon, 2011) . All in all, SAPs is
characterized as a policy which aims to establish the role of the market and to
encourage foreign investments and exports. Through these policies, it is supposed that
the government would be able to maximize its income and achieve economic growth
thorough free trade. Also, the debtor countries would meet its target to pay
the loans to the creditors which would bring economic relief.
Even though SAPs encompass the prospects
of high economic growth and other positive effects, yet, in many cases, it has
shown its social effects and consequences. Most importantly, the elimination of
state safety nets can be of no good to the vulnerable group of the society who
needs special assistance. In this regard, Simon (1995) argued though Economic
stabilization may have been achieved but the costs in terms of human welfare
have been severe. In Jamaica, reduction in government social spending caused
increased infant malnutrition, unemployment, poverty, child labor, etc. In case
of Nepal, after the SAPs agreement with IMF in 1986, the negative impacts so
far are increase in gap between rich and poor, no maintenance of quality of
goods, increase in trade imbalance, closure of small and cottage industry,
incompetency of national companies in the international market, etc (Aryal, Subedi, & Thapa, 2010) . Despite all the social effects, it is again not
easy to suggest alternative to SAPs as it has been backed up by the power of
liberalization and ultimately today’s globalization.
REFERENCES:
Aryal,
D., Subedi, R. P., & Thapa, S. (2010). Diplomatic Dealings.
Kathmandu: Variety Press.
Simon, D. (2011). Neoliberalism, structural adjustment and poverty
reduction strategies. In V. Desai, & R. B. Potter, The Companion to Development
Studies (p. 88). Chennai: Chennai Micro Print.
Willis, K. (2005). Theories and Practices of Development. New
York: Routledge.
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