The impostion of Structural Adjustment Programmes on sovereign African states is a form of neo-colon

Any discussion of the structural adjustment policies favoured by the International Monetary Fund (IMF) and the World Bank, pertaining specifically to African states, is sure to lead to heated debate. The Structural Adjustment Programmes (SAP's) which African states are required to accept before they qualify for finanacial aid have led to accusations of neo-colonialism in some quarters, while other commentators feel that these programmes are just the harsh economic discipline which is needed if African states are to stand on their own feet in the global economy. Thus, at the heart of the debate lies the controversy over pre-conditions or conditionality clauses. In this essay we will first of all study the conditions insisted on by the IMF, and to a lesser extent the World Bank, and then present a critique of the arguments both for and against the imposition of structural adjustment programmes on sovereign African states.

THE IMF AND ITS STRUCTURAL ADJUSTMENT POLICIES

The IMF was created as part of a network of interlocking international institutions which emerged from the Bretton Woods agreements in 1944, which also included the World Bank and the General Agreement of Tarriffs and Trade. These institutions were a direct response to the economic chaos which had affected the world trading system in the 1930s. Thus the Funds primary goal is the maintenance of an orderly international exchange system designed to promote monetary cooperation, expand international trade, encourge exchange-rate stability, and, most important, assist countries to deal with short-run balance of payments problems through the provision of scarce foreign-exchange resources.

Although the IMF now has over eighty five members the voting rights and structure still reflects the power of the USA and the Europeans; who were its first members and still the largest contributors of funds for disbursement. The IMF does not disburse outright 'grants' of money and it is by no means the largest distributor of loans, however, its aid is usually concessionary and it has come to signify the seal of approval for other lending institutions: if the IMF lends a country money, and it adheres to the conditions, then other agencies, governments, and banks will follow suit. This has given the IMF a source of leverage quite out of proportion to its actual financial clout. Therefore, the IMF is viewed as a creature of the industrialised West; its function is to assist in the smooth running of the international economy by supplying short-term loans to enable governments to adjust to temporary balance of payments problems. It became heavily involved in Africa towards the end of the 1970s, mainly as a response to the increasing likelihood of many states in Africa not being able to meet their heavy debt requirements. The structure of the international financial and trading economy came under strain and the IMF began to impose strict fiscal guidelines for states wishing to borrow from the 'lender of last resort'. These became known as Structural Adjustment Programmes and will be detailed below:

`1) Trade Liberalisation: abolition of foreign exchange controls and import restrictions

2) Devaluation: of the exhange rate, this raises the prices of imports in domestic currency and lowers the prices of exports in terms of foreign currency

3) Monetary Anti-inflationary Measures: including control of bank lending (credit) and higher interest rates

4) Fiscal Anti-inflationary Programmes: such as control or elimination of government's budget deficits, reduced spending, increases in taxes, higher prices to be charged by public enterprises, and withdrawal of subsidies in such areas as: health, education, petrol, and food products.

5) Anti-inflationary Control of wage Increases

6) Anti-inflationary Dismantling of Price Controls and minimun wages

7) Open Door Policy on Foreign Investments and Multinational Corporations: including free repatriation of profits

8) Reduction of Spending on Social Services

9) Privatisation or Sale of Public Enterprises (parastatals): to local and foreign entrepreneurs (Source:Onimode,p.284)

The introduction of these comprehensive and intrusive policies have led to widespread civil disobedience among urban populations and friction among the governing elites. Many African leaders, such as President Kuanda of Zambia, have repudiated the structural adjustment programmes and sought to pursue a policy of national sel-sufficiency. However, due to their precarious economic position, and dependence on western imports to keep their fledgling industrial sectors and state apparatus functioning, african leaders, sooner or later, have to bargain once again with the IMF in order to get debts re-scheduled; credits for vital imports; and the seal of approval to attract foreign private investment and loans. It is this scenario that has led to accusations against the IMF of neo-colonialism and the subsequent counter-charges that it is the corrupt and avaricious state sectors which keep Africa underdeveloped.

ARGUMENTS FOR THE IMPOSITION OF SAPs

The structure of the Sub-Saharan African states which emerged after independence has been identified by the IMF as the main obstacle which inhibits productivity and economic change in Africa. As independence came to Africa, beginning in the late 1950s, political rather than economic logic prevailed. The new ruling elites primary concern was how to stay in power and how to build effective platforms of support for themselves and their allies. Thus the state became the arena in which status, power, and wealth became determined.

Initially, all groups concentrated on the weak, but newly ...

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ARGUMENTS FOR THE IMPOSITION OF SAPs

Initially, all groups concentrated on the weak, but newly autonomous, state as the major avenue to power and wealth; other avenues of social mobility, such as private capitalist activity, were extremely hazardous, uncertain, or regarded as ideologically incorrect. The new ruling elites frowned on any form of private economic activity outside of their control which could ultimately threaten their tenuous hold on power. Therefore, as political rather than economic logics prevailed, the dominant form of political economy became a crony statism consisting of three interrelated characteristics:

" 1) clientilist networks used to build support through the extraction and distribution of rents.

2) expansion of state size including the creation of an extensive parastatal sector.

3) purchase of primarily urban support via state welfare services and subsidies." (Callaghy:p.258)

Thus the form of statism practised by many African governments was pervasive and, as it followed political logic rather than rational economic decisions, was inimical to sustained, developmental growth. These lame Leviathans excluded and inhibited the indiginous entrepreneurial class; liberal democratic structures quickly became more authoritarian, but not necessarily more secure, and military and single-party regimes came to predominate.

The new political syndrome had a clear welfare or distributional orientation. The major arena for political combat was control of the urban areas springing up all over Africa, and in an attempt to maintain political control and satisfy the most urgent demands upon them, the new rulers created a system of food, transport, fuel, health, and education subsidies and services, paid for out of state revenue. To pay for this political largesse the new elites began to extract a surplus from their peasant producers and/or their country's mineral wealth. Marketing boards were introduced to buy cash-crops at artificially low prices and the mineral sectors nationalised or ran under close state scrutiny. The outcome was what economic historian Douglass North has called a predatory state, as opposed to a contract state. " A predatory state concentrates on maximising rents accruing to the rulers; it would specify a set of property rights that maximised revenue of the group in power, regardless of its impact on the wealth of society as a whole." (Callaghy:p.260) Inefficient import-substitution sectors emerged, which because of the lack of an intermediate sector were still heavily dependent on imports from the west; marketing boards discouraged small farmers; and entrepreneurial activity became diverted to the informal sector or the black market attempting to subvert the strict foreign exchange controls. The IMFs structural adjustment programmes sought to change these lame Leviathans and change the whole social milieu in which economic and political activity merged.

However, if one studies the success rate of the policy based lending pursued throughout the 1980s the results are extremely disheartening. Of the 92 programmes introduced on the continent between the beginning of 1980 and the end of 1986, 40 were suspended and another 43 would have been suspended if the Fund and the debtor government had not agreed on a new interpretation of the prescribed policies and performance targets. (source:Kronsten,p.149) Overall, income perhead continued to decline in Africa during the 1980s and the food deficit continued to grow: Africa was still becoming poorer and the situation was gradually spinning out of control. Faced with these disappointing results the IMF, and the World Bank in its 1989 report 'From Crisis to Sustainable to Growth', insisted that the economic formulas would work - eventually. The reason for the lacklustre performance of SAP's in altering the fundamental economic structure of the African states was the lack of political commitment of the majority of African governments who participated. Therefore, as well as economic conditionality for further export credits, debt rescheduling, and development assistance, political conditionality rapidly became a favourable response to the deteriorating situation. The end of superpower rivalry in Africa facilitated the belief that favourable economic conditions could only be created by sweeping changes in the political structure. The twin pillars of post-colonial Africa- the command economy and the one-party state- came under close scrutiny. In the view of the World Bank 'good governance' would create an enabling environment where private enterprise, through free market mechanisms, would flourish. The informal economy was proof that widespread entrepreneurship existed in Africa and, in league with the emerging class of technocrats, could create the favourable conditions for sustained economic growth.

In essence this is an argument for multi-party democracy and an unfettered market economy. However, as President Kaunda argued, the adoption of multi-party democracy in Zambia would not increase the price of copper or cocoa. A change of government in Zambia will help the economy only if Mr Kaunda's successor is more committed to economic reform and more competent to carry it through. Might not a democratic government be more likely to reflate the economy in an attemt to win voter support? The partially successful SAP's in Ghana and Nigeria have been imposed by military regimes precisely because they are largely insulated from the unpopular results of their policies. This is not an argument for the suppression of democracy, rather that the IMF and its sister institutions recognise the difficulties any government would face imposing such harsh economic policies. Implementing harsh and complicated economic proceedures is difficult enough in a wealthy modern state but when the arena is Africa, with its rapidly collapsing administrative infrastructure and its large, entrenched parastatal sector hostile to any change which threatens its interests, the problems become formidable. In addition, the much vaunted private sector is a strange amalgam of disparate unrelated parts: consisting of large multinationals - medium sized local firms usually run by Asians - and a huge informal sector largely comprising peasant farmers. Thus the private sector is unbalanced and isolated. Considering these factors there should be no rush towards imposing, even if it were possible, multi-party democracies and an unfettered market economy. The approach should be one of gradual change and long-term strategy, working within and slowly changing the present system.

To sum up, the arguments for the structural adjustment policies of the IMF and, increasingly the World Bank, focus on the microeconomic structures of the individual African countries. While recognising the part played by the recession in the West, following the second oil-shock and the declining terms of trade for primary products, the adherents of structural adjustment believe that the majority of African states share a common state corporatism that is unproductive and economically corrosive. The initial stages of structural adjustment in the 1980s sought to liberalise trade, reduce the role of government and parastatals in the economy, and end subsidies to various sections of the population. These structural adjustments, they thought, would end the balance of payments crises and promote economic growth. At the end of the eighties, however, policy-based lending had not achieved its goals. A new policy was needed for the nineties: in essence the IMF now wishes to create a series of rational law-based societies throughout sub-Saharan Africa were investment decisions are made on economic grounds rather politically motivated. Thus, the advocates of structural adjustment policies implicitly believe that the African economic crisis is largely a creation of the African states themselves, and only radical internal change allied to continued Western assistance can hope to bring about a solution.

ARGUMENTS AGAINST THE IMPOSITION OF SAP's

The arguments against the imposition of structural adjustment policies tend to shy away from any problems within the African state system itself and concentrate soley on the iniquities inherent in the international trading system. In this respect the IMF and the World Bank become the instruments for a recolonisation of the African continent by economic means. This is a conspiracy theory on a grand scale and involves the 'driving down of African export prices, the hardening of terms of borrowing, and the draining of African financial resources by the governments of capitalist countries, multinational corporations and international banks, as weapons in a silent and undeclared economic war for the recolonisation of Africa' (Rimmer:p.286) Structural adjustment programmes then fall into place as a means of connecting the African countries more firmly with the international capitalist system; preventing the industrialisation of Africa and keeping the continent as a source of cheap primary products and an outlet for manufactures. Because these policy-based programmes are being imposed by an international agency, that is perceived by many within the dependency school of thought to be merely an arm of the rich capitalist nations, stabilisation policies are often viewed as measures primarily designed to maintain the poverty and dependency of African nations while preserving the global market structure for the industrialised nations. For example, in a critique of IMF adjustment programmes Cheryl Payer argues that the IMF functions within a first-world dominated trading system 'as the chosen instrument for imposing imperialist financial discipline upon poor countries' and thus creates a form of...'international debt peonage or debt slavery, in which the balance of payments problems of African states are not resolved but rather perpetuated.'

Payer argues further that the IMF encourages Third World states to incur additional debt from international financial institutions while it 'blackmails them through loan rejection into anti-developmental stabilisation programmes.' (Todaro:p.421) This added debt burden thus becomes a source of future balance of payments problems so that a vicious circle sets in- one in which the African countries have to run faster in order to stay still. Thus the dependency theorists regard the international capitalist system as the basic generating cause of the balance of payments and debt crises of the African countries. The structural adjustment policies of the IMF merely serve to reinforce and exacerbate this situation: the combined effects of massive currency devaluation, liberalised imports and withdrawal of exchange controls serve to undermine local industries and strengthen unequal exchange and its exploitative transfer of national surplus abroad. The only benefits from these programmes accrue to the industrialised countries and the domestic oligarchies who shape the African state structures. Professor Onimode believes this to be a class struggle as the bulk of SAP's adverse effects fall on the poor working people; he goes on to accuse the class strata; such as domestic bankers, exporters, and the technocrats who support and defend IMF policies, as traitors or fifth columnists. Therefore, the imposition of SAP's are not simply economic but politically motivated and can irreparably damage national development. Thus, African countries must urgently organise their national political force and link it with a collective continental effort through such international bodies as the OAU. "No country can be simultaneously faithful to the IMF/World Bank and to its national population and development. So the IMF and World Bank must be resisted - politically and collectively - and African scholars must expose the bankruptcy of the Fund's and Bank's theoretical positions." (Onimode:p.293)

However, it is extremely difficult to equate the rather inept and ill-advised structural and stabilisation policies, which the IMF and the World Bank enforced in the 1980s, with the sinister motives outlined above. To accept the above hypothesis we would have to discount the massive funds directed towards African modernisation, unsuccessful though it was, for the last 35 years: absolve the foolish African goverments and western bankers, flush with petrodollars, for creating the debt crisis; and believe that a world recession was engineered to cut commodity prices and subjugate sub-Saharan Africa to Western control. In fact much of the African debt is public debt: and the Paris Club group of countries are more than likely reconciled to its loss. One would suspect that the original stabilisation and structural policies of the IMF were a product of ignorance by the industrialised nations in an attempt to enforce the only system they understand, a market economy, into a structure and culture totally unprepared and ill-equipped to receive it. The adoption of othodox economic policies in pursuit of orthodox balance of payments objectives jeopordised the very system that the IMF was set up to preserve.

However, the scholars who reject the structural adjustment policies of the IMF are quite right in criticising their consequences and harsh economic conditions. But to recommend a return to a command economy or national isolation is to return to systems which have failed in the past; in such countries as Mozambique, Somalia and Ethiopia, to name but a few. The dependency theorists are also right in advocating an African response to the African problem, but it is a fact of life in the world today that the Western industrialised nations are the only entities capable of providing the funds, expertise, and investment to fuel this African response. Therefore African elites will have to work-through, counsel, and guide international institutions towards the most beneficial policies for Africa. It goes without saying that this would necessitate a greater willingness and flexibility on behalf of these institutions to modify their previously unsuccessful programmes and co-operate on equal terms with African elites. Indications of this greater flexibility are already apparent in recent stabilisation and structural programmes for the 1990s. This is a more logical, humane, and, in the long run, more developmental course of action than the harsh prescriptions of the earlier stabilisation packages which antagonised African governments, punished large sections of their populations, and led to the dismal failure and bad press of many Structural Adjustment Programmes

CONCLUSIONS

In Africa today the problems are obvious enough: the population is growing too fast; the foreign debt burden is unmanageable; exports, investment and employment have stagnated or fallen and agriculture has under-performed. Many commentators attribute this to the iniquities of the international economy and, more specifically, to the neo-imperialistic designs of the IMF and the World Bank. Others subscribe to the theory that it's the corrupt, inefficient, and patrimonial nature of the corporatist African state which lies at the heart of Black Africa's plunge into bankruptcy and economic collapse. Mundane as it may seem, the answer lies somewhere in between these polarised positions. There are long-term imbalances in the international system of exchange which, at some point, will have to be addressed if the system is to survive. And if any benefit from these reappraisals and changes in the international economy are to accrue to Africa, the continent has to be in a position to take advantage. The first step must be political reform followed by agricultural reform. Now that superpower rivalry, and the concomitant clash between opposing social systems, is at an end; corrupt dictators and repressive regimes need no longer be supported for purely political/strategic reasons. The IMF and its structural adjustment policies can help (but not impose) foster the conditions for real change in sub-Saharan Africa.

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