Public policy management

Amna Siddique
MPA-IAS11F18

Summary of the article; “SAP: Issues and Conditionalities- A Global Review”

written by Biplab Dasgupta

This article critically reviewed the structural adjustment programs introduced by Bretton woods
organizations in developing countries, global experience with structural adjustment over a period
of nearly 17 years by highlighting the conditionalities imposed by IMF and world bank. Firstly,
the article enlightens the readers about the “policy prescriptions” given by these institutions as an
instrumental approach to deal with the current and emerging issues of developing countries. The
approach is complimented with the loans and development programs. The author insisted that:

The two Bretton Woods institutions that have been instrumental in the formulation and
monitoring of implementation of this policy package at the global level (Dasgupta, 1997).

Secondly, these international institutions have three specific objectives; a central bank of central
banks, with its own currency (named bancor) to help ease the balance of payment difficulties of
the member countries; a fund for the economic reconstruction of war-devastated Europe; an
International Trade Organization (ITO), which would maintain and operate this buffer stock of
primary goods, in order to stabilize their prices.

From the early days conditionalities had been a part of IMF loans, but these were few and not
rigorously enforced. The conditionalities accompanying their loans now shape the ‘economic
policies’ of the recipient countries. At present the G-7 countries (the US, the UK, France, Germany,
Canada, Italy and Japan) account for roughly half the voting power and virtually control the
organization. Based on an informal arrangement, from which the less developed countries are
excluded, the presidentship of World Bank and the post of managing director are rotated between
the United States and Europe, we have two rich country-controlled institutions that are exclusively
operating in the poor countries.

The question. naturally, arises with what objectives these institutions operate in less developed
countries? To put it in another way, in the context of this study and also of The New Political
Economy (NPE), what is the political economy of structural adjustment? There can be three
possible answers to this: (a) in their operation they are inspired by the concern for the well-being
of the less developed countries, or by a strong ideological commitment to free market because of
their belief that it is good for the mankind; (b) their actions in the less developed countries,
motivated by rational self- interested behavior, further the economic (and may be also political)
interests of the rich countries; (c) the interests of the two - the rich and the poor countries -
converge, and, therefore, while acting in the interests of the rich countries, their policies also
benefit the poor ones. So, since their establishment the option-b is observed in each proceeding
year, all the programs are self-centered promoting the G-7 countries political and most importantly
economic interests.

A measure of the success. from the point of view of the economies of the United States and some
other western countries, is the fact that, despite lending by these two agencies, there has been a
consistent net outflow of financial resources from the countries operating under structural
adjustment programme since 1980. Between 1984 and 1991, “the net transfer out of the less
developed countries amounted to $20 billion per year. IMF net lending was negative during most
of the 80s [Development Committee 1992:39; Bird 1993: 71”.

The conditionalities accompanying the loans of these two organizations reflect their common
market-oriented approach. These conditionalities has three pillars on which they stand known as
LPG model: liberalization, privatization and globalization. These three philosophies actually
inter-linked with each-other. They promote capitalism and instrumentalism, focused on ‘means-
ends’ game. It is understood that if we introduce SAP on these agendas to under-developed
countries then definitely it will create massive destruction at individual, state and societal level.
One perennial problem with IMF or World Bank assistance is that once dependence on those
begins it seldom ends. One programme is followed by another and loans, in particular low-income
countries, find it difficult to disengage themselves from those funding bodies. Counting of figures
show that 21 countries had support for 14 years or more, and Mexico has continuously been on the
agenda, one programme succeeding another, from the beginning of structural adjustment in 1980.

The main sectors like agriculture, industry, labor, employment and social issues were the focus of
PFP- policy framework papers. Some low-income countries actually show resistance to these
programs but due to the SAP trap, they wanted to but never be able to escape from its cage. These
programs are exclusively based on the notion of development but it actually benefits to the
developed countries especially G-7. Author clearly states that;

“Dependence on structural adjustment tends to become never-ending, and more so for countries
that have been most faithful in implementing those, e g, countries in sub- Saharan Africa.
Seventeen years is a long time for testing a package of policies, and there can be no doubt that
structural adjustment has failed the test of time”

Reference

Dasgupta, B. (1997). SAP: Issues and Conditionalities: A Global Review. Economic and
Political Weekly, 1091-1104.