Re-examining Structural Adjustment Programs
-Theoretical Reflections-
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14 August, 2011 | Fekadu Bekele, PhD
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Introduction
governments were unable to finance existing projects, and were confronted
by budget deficits. Before the introduction of SAPs, many African countries
had practiced various economic policies which were not formulated
internally as a result of lengthy debates by experts of the concerned
countries, but all the policies were imposed by experts either from the IMF
or the World Bank. All previous economic policies could not help many
African countries to develop a strong home market based on manufactured
activities. Since many African governments had followed the advices of
foreign experts, and were not in a position to formulate their own policies
which were congruent to the needs of their own societies, and which could
reflect their own internal human and material resources, the heavy reliance
on foreign experts had at the end disastrous consequences on their
economies.
The changing political landscape in England in 1979, which brought Margret
Thatcher in power, and in 1980 Ronald Regan in America had inevitably
ended the Keynesian revolution of the previous 30 or more years after the
second world war, which helped many Western economies to successfully
reorganize their economies on “new foundations.” Governments of many
Western countries had massively intervened in the economies of their
countries, and did everything to develop strong, and in all spheres
interconnected economic and social structures from within. The upgrading
of manufactured activities, and the reorganization of science and technology,
and heavy investments in education which could support basic researches to
develop new technologies, were not possible without massive state
intervention. The economic crisis at the beginning and end of the 70s which
were interpreted by the neo-liberals as a crisis which resulted out of
massive state intervention, and not a crisis which was internally produced
within the system, gave way to the neo-liberal paradigm and policy
formulation. Neoclassical economists believe that economic crisis in such
highly developed economies could only occurred as a result of exogenous
factors, which jeopardize the performance of the system. For example
wage increases can be one of the factors which reduce the profitability of
the capitalist class. On the other hand for Keynes and Marx, though both
interpret the causes of the crisis differently; economic crisis in a capitalist
economy is an inevitable process which cannot be only caused by
exogenous factors. If exogenous factors play a role to cause crisis, the
entire system cannot be put into question, unless the causes are drastic. The
neo-liberals believe that the crisis within the capitalist economy can regain
its equilibrium when state intervention is massively reduced, and other
exogenous factors are minimized at a lower level.
The belief in market fundamentalism and self-correcting of the system gave
way to the neo-liberal ideology. The Chicago boys have won the upper
hand, and could easily impose their ideology on the state. Free market
ideology became the only accepted doctrine which must be implemented
not only in America and England, but also in many other countries across
the globe. The imposition of such ideologically motivated economic policy
had and still has wide range consequences for those weaker economies
which were not internally strengthened and connected like those of the
capitalist economies by multiple factors and instruments. As studies show,
the introduction of neo-liberal oriented economic policy in the African soil,
where economic structures were not developed like those of the capitalist
economies means that instead of creating a well structured and self
reproductive economy, the creation of an economic system which is
venerable to any kind of shock, is inevitable. In order to understand the
consequences of this counterrevolutionary ideology, which has deepened
the structural weakness of many Sub-Saharan African countries, and
strengthened their dependence on foreign resources to survive, let’s try to
examine the policy itself whether it is based on solid methodological
foundation, which could reflect the socio-economic structures of the various
countries that apply the program.
Interpreting the program
In order to understand SAPs, we must analyze the word structure. If we
take Wikipedia as a help, the word structure means an orderly organized
system, in which all the elements fit properly together so that the system as a
whole functions properly. In the natural science, structure implies the logical
order of the different parts of a system so as to perform certain function
according to that specified logic. Again in physic, structure means the
interconnection of different tiny particles and their relationships within a
particular material which enable them to operate smoothly. Likewise, in
sociology structure means the logical order of the different parts and their
relationships within a given social system to coordinate and perform certain
works. Interpreted this in any given society, any society must be organized
according to a certain and scientifically validated logical order so that the
system as a whole functions properly and smoothly. The organizational
structure within a given social system must be a conscious act so that the
system as a whole functions according to certain principles. If any society is
not organized according to certain harmonious principles which could hold
the society together, the society loses its compass, and the political,
economic and social parameters will not have any clear direction. Let’s
also analyze the concept ‘adjustment’. Two things can be adjusted together
if they fit to one another. A totally different material which has a different
logical structure cannot fit to another material which is structured differently.
If one tries to fit two different structures by force or by any kind of
manipulation the consequences are unforeseen, and in the worst case one
can experience the production of very chaotic and not manageable situation
which cannot be easily corrected.
When we analyze both the concepts, “structure “ and “adjustment, which
are developed by the IMF and the World Bank as policy
recommendations, it is not clear from the outset whether the two concepts
are developed by considering the specific conditions of the different
countries which apply them. For example it is not clear how they define
the term structure. Since different societies have different structures, one
cannot generalize such a scientific terminology as if it is valid for all societies
across the globe. As a matter of fact, all societies of the earth had different
experiences in the past; and they have different cultural and social
constructions which shape their attitudes and handlings. To assume that all
societies of this globe have the same structure, the same thinking and
handlings is to make the greatest blunder one can make against humanity in
general. It is just a war which is being waged against certain groups to
dismantle the entire social and cultural setup which have been experienced
and accumulated for generations.
If somebody applies the concept structure to any society, he must analyze
the system of each individual country and how that country is organized.
Since the degree of social structures vary from society to society, the
position of different classes within a given socioeconomic formation also
vary. In any society there are social hierarchies with various roles to play,
which are reflections of the social relationship which prevail in a given
society. Only under certain political systems, social systems can be
consciously organized. Before any system reaches a certain mature stage
the society in question undergoes ups and downs. It is therefore very
important to study the nature of the social structures at various levels, and
the degree of social consciousness, and the role of those political actors
which control the system. And at the same time, it is paramount importance
to examine and study the degree of technological development, and its role
in creating general social wealth. Without studying the socioeconomic
structures in-depth, and the cultural setup of the system to rush in order to
formulate certain policies, and try to practicing them, is equal to social
raping. This is what the IMF and the World Bank have been doing with
many African countries over the last 30 or more years. Western
governments are behind such kinds of crucial policies which have
destructed the social and cultural structures of many African countries. As
we have seen above, the name structure implies a well organized and
logically ordered relationship and interconnection of the different parts
within a given system so that the different parts perform their works without
any damaging interruption from outside which jeopardizes the performance
of the entire system. In this case, and respectively, each element within a
given structure plays a unique role and performs a certain function. On the
other side, certain parts or one part of a given structure could negatively
affect the entire performance of a given structure, if it does not function
properly. For example, within a given socio-economic structure, if the
political part is suppressive and decision makers take arbitrary measures
rather than well studied policies, the development of productive forces will
be hampered, and thereby social and cultural transformation will be
blocked. To overlook this and unnecessarily manipulate a given social
structure from pure ideological motivation disturbs the entire setup of the
system and the people of that system as a whole lose their orientation.
By developing `new concepts` and sell them as policies, organizations like
the IMF and the World Bank, which have clothed the name international,
misuse their omnipotent position and deceive the political elites in Africa and
elsewhere, and apply economic policies which practically create disorder.
Instead of studying the structure of the system thoroughly and scientifically,
they choose some concepts and parameters which do not have scientific
foundations, and try to manipulate the system via these instruments which
are alien to African societies. From the outset it is not clear how the
structure of a given society can be adjusted, and nobody knows to which
system that given structure is being adjusted. Here again, there is confusion
between structural change and structural adjustment; and structural change
needs a holistic approach and touches every part of a given society and
ultimately has a well defined goal. In this case a holistic model is intrinsically
dynamic, whereas structural adjustment does not have a well defined aim,
and therefore it is static by nature.
If we come to the general concept structural adjustment, it intuitively means
the adjusting of a given economy to highly advanced economy. In other
words, those countries which apply SAPs must adjust their economies to
the needs of the international capitalist system. All the instruments of SAPs
will inevitably compel those countries that apply the program to either
neglect or suppress the needs of their societies and create favorable
situations to the capitalist system of the west. In such a way the entire policy
package blocks the development of a market economy on the basis of clear
cut division of labor in the various countries which practice the program.
Without clear definition and without a thorough scientific study of the nature
of the supposed structure, one cannot formulate a policy. Otherwise it will
have incalculable consequences for the society which applies SAPs. The
program overlooks so many things which exist on the ground and which
must be either changed or transformed by other means. In this case SAPs
have worked and will work to make existing conditions more complicated
and worsen them so that one loses the sight of how the problems can be
solved. As experiences from different countries prove, SAPs will have
devastating effects not only on one generation, but also on many successive
generations to come. This is because the program is devised through and
through from empiricist point of view and it is aggressive by its nature. The
so-called shock therapy implies the aggressive character of the policy, and
when the policy is put into practice those weak forces of a given social
system will be negatively affected, and will become permanently jobless and
disillusioned.
The macroeconomic policy, and its different instruments which are devised
to implement SAPs will automatically compel governments to be more
outward looking, and those scare resources will be allocated in sectors
which generate enough hard currency to pay back the debt. That means
scarce resources, and the money that is absorbed from other sectors will
not be allocated in areas which could generate new wealth. Such a program
which is more outward looking, will automatically suppress the systematic
industrialization of the countries in question, and the development of a home
market will be practically impossible. That means the program by itself has
built-in mechanisms which create imbalances in all areas and instead of
creating a well structured economy, the economy of a given country
becomes de-structured.
Methodological problems of SAPs
Initially macroeconomic policy dealt with unemployment issues and it was a
combination of fiscal and monetary policies. It was developed as a policy
after the great depression at the beginning of the 1930s of the last century.
Since neo-classical theory and policy has discredited itself and could not
explain the causes of the economic crisis of the 1930s and could not deliver
a workable solution to overcome the crisis, Keynes thought that only
government’s direct intervention will alleviate the crisis. However, if one
looks at the interventionist policy of the capitalist state and especially from
the experience of the German state, before the First World War, and after
the Second World War, the intervention was not purely a fiscal and
monetary policy alone. It was an active interventionist policy through direct
instruments, such as easy credits, and actively supporting to organize the
entire economy on firmer foundations. Prior to the formation of national
state, and after, direct state intervention was the most essential instrument in
creating favorable environments for small and medium size industries. Major
infrastructure activities and well designed city buildings could not have been
possible without the conscious support of the state. This has been the case
in all middle European countries. On the other hand the neo-classical or
neo-liberal macroeconomic policy is purely a monetarist policy, and is
against any kind of fiscal policy and direct state intervention. And yet fiscal
and monetary policies were developed from the perspective of highly
developed capitalist economies, and could not reflect the socioeconomic
formations and real situations on the ground of many undeveloped
countries. If we again examine macroeconomic policy in general, its
theoretical foundation is empiricism, and does not have a transformative
power. In other words, the policy is designed to `stabilize` existing social
relationships by correcting certain imbalances which occur from time to
time. On the other side the capitalist economic system is dynamic by nature,
and is being manifested by destructing old technologies and creating new
ones.
The entire concept SAPs was developed by assuming that all societies have
the same economic features, or are governed by the same logic, and as
such they are all alike. What does this imply when we properly interpret this
assumption? All societies on this earth, though there are certain variations,
all in all, are governed by the same economic logic. All human beings on this
earth have the same rationality and the same taste, and as such all must
pursue the same economic policies in order to be adjusted to one another.
However, the economic and social realities in many countries contradict the
view of the IMF and the World Bank. The economies of the capitalist
countries are governed by different logics and laws. The sphere of the
politics and the economic structures are separated entities. Competition
and technological innovation are embedded within the system, and as such
determine the entire economic, social and cultural dynamism of the entire
system. On the other side, the economies of Third World countries are
characterized by the absence of innovation, very law technological
development and competition. Likewise, the degree of individualization and
sprit of entrepreneurship in all societies are not the same. The process of
individualization in many African countries is not as old as those of the
Western European countries, and as such it is entirely different in its
application in comparison to that of the capitalist west. The individualization
process in Europe was backed by real material and spiritual transformation
which has been going since the Renaissance. Only through protracted
transformation of the material conditions and uplifting the power of thinking
through proper education and intellectual activities, the people of Europe
could alleviate their power of thinking. This enables them to freely think and
become the master of their destiny. In Africa where material conditions and
spiritual activities were hampered by slave trade, colonization, neocolonial
policy and destabilization policy by the West, was not possible to induce
individualization which helps to free the mind from traditional values. Though
every human being is capable of becoming creative and ready for individual
action to improve his/her livelihood, conditions on the ground must be
improved through proper education. On the other side mere
individualization brings alienation in all spheres, and this in turn will have
negative social and psychological impacts. In this case one should
differentiate between the empiricist view and the essentialist view of
individualization. The first form focuses on a single individual alone and
drives him to be self-centered, while the second one takes into account the
individual and the social aspects together. Accordingly, individualization
should not lead somebody to non-awareness towards a given society.
Again the concept of time in many so-called traditional societies has a
different connotation. Whereas the concept of time in many capitalist
countries is understood in linear forms, and time plays one of the greatest
roles in organizing, planning and executing a certain program, in
underdeveloped economies time is understood in circular forms. Likewise,
the concept of money has a different meaning, and earning a certain amount
of money, allocating the money for different purposes, and saving a part of
it for different purposes in the future is not the same in all countries.
Neglecting all these crucial aspects and to insist on certain macroeconomic
instruments leads inevitably to gross errors. Why do the IMF and the
World Bank omit all these aspects? It is because they have an empiricist
world view and are not interested in going beyond the conventional
wisdom. They only look at all societies through one prism. From the
perspective of the IMF and the World Bank, and all neo-liberal
economists, one should not try to study the complex structure of a given
society; but solely look at certain parameters. What all societies need in
order to correct some kinds of imbalances of the system is to apply the
same kinds of economic instruments which ultimately create equilibrium
situation in all sectors of the economy of all countries.
In the neo-classical/neo-liberal paradigm every society is the sum of its
individuals. There are no social relationships, and it is assumed that every
individual has equal access to scarce resources. Irrespective of its role
within a given society, every individual lives for its own sake, and strives to
get the maximum utility/ profit. Accordingly, the human being is egoistic by
nature, and egoism is the driving motive which governs its thinking and
handlings. This is what the neo-liberals are preaching across the globe; and
Leibniz, one of the greatest scientists of the 17th century had warned
against such kind of ideological preaching, which cannot take into account
the rational part of the human mind. If we look at social history, and all the
scientific investigations of the 16th, 17th and 18th centuries, and all literary
works of those genius people, we understand that all these works were
made not out of egoistic motives, but to save humanity from the vagaries of
nature, and to understand the secret of nature, so that human beings
become the master of their destiny.
As we observe from the experiences of many countries, societies which
have applied this simplistic macroeconomic model, which does not
acknowledge space and time, have lost their inner compass. The
macroeconomic model of the IMF and the World bank, instead of bringing
individuals together and make them a force so that they could build their
societies on a firmer basis, has disbursed and weakened their energy. Many
Third World countries which have applied SAPs, and are forcibly
integrated into the global economy without being competent in all areas,
have lost their valuable resources and the thinking capacity which would
otherwise enable them to build a well organized society. After three or more
decades of macroeconomic policy practices in many African countries, one
should realize that such a model is against nature and humanity in general.
An economic model which cannot put human beings and nature at the
centre of its analysis cannot be called science.
First of all, as I said before, all societies have undergone certain kinds of
transformational processes, which are unique in every society. While most
societies could not develop further, due to various factors, some could build
sophisticated social, economic and cultural foundations which could hold
their societies together. What the capitalist west has experienced in its entire
history is completely different form that of the African societies. Let alone,
within one continent, even within a given country, there are variations in
thinking and degree of development. To assume that all societies have the
same kinds of rationality or behavior, and the same tastes is sheer nonsense.
Since different societies have experienced certain kinds of social
transformations, the ways they think, abstract and solve certain problems
vary from country to country. Accordingly, existing social and political
relationships determine how a given society would be able to solve its own
problems. To be engaged in economic activities, and for the management of
economic policy, the political structure and the power relationship which
exist in a given society play decisive roles. In this case any economic policy
cannot be practiced beyond time and space. Any economic policy cannot
be practiced for its own sake, but to solve either existing problems, or it will
benefit a tiny part of a given people. When the IMF and the World Bank
formulate their macro-economic policies, and impose them on African
governments, they firmly believe that only through the market, and only
indirectly could existing problems will be solved. Not through direct
observation, understanding the problems, and direct participation of the
masses existing economic problems could be solved, but only through the
allocation of scarce resources. This is only possible if all economic activities
are left to the supposed market forces which are not developed as those of
the capitalist countries.
This kind of methodological error that all economic problems can be solved
via individual action leads to chaotic conditions rather than to a well
structured and ordered economic activities. Instead of allocating the given
scarce resources in a planned manner, resources are being shifted to the
areas where economic performances are very weak. The fact that
privatization is introduced as part and parcel of SAPs, as experiences prove
that privatization does not lead to efficient allocation of resources. Those
forces which have the chance to get access easily to wealth without hard
work are not interested to widen their scope of economic activities which
could create real wealth. The experience of SAPs proves that, instead of
efficiently allocating scarce resources, resource plundering by the few
becomes the rule of the system. That is why we witness that after the
applications of SAPs in many African countries the situations become
worse and more chaotic than before. Today the social conditions in many
African countries are more polarized, and we witness that the political
structure in many African countries is more aggressive and more militarized
than before. This is because many African governments must keep the
status quo, and are not ready or capable to create new wealth, so that they
could raise the living standards of their citizens. School systems,
kindergartens, sanitations, medical facilities and other social systems are not
well financed and are not well organized in every community across many
countries.
When we come to the general concept of private property, the IMF and the
World Bank believe that mere privatization of certain targeted economic
activities will induce the development of free market economy. The problem
is that those factories which were installed in the 50s and 60s were not
suitable for innovation and further investments. As many industries are
dependent on outside resources and are not designed to become the basis
of further investment activities, mere privatization only works to the
contrary. That means those who allegedly bought the industries do not have
the necessary managerial know-how to widen their industrial activities by
studying the market situation at home. Secondly, most import-substitution-
industries are not backed by another technology, which supplies all the
necessary spare parts and other installments. Thirdly, as the industries were
installed during the 50s and the 60s, the main aim of the planners was not to
build a broad industrial structure on the basis of science and ever developed
technology. The aim of such industrial activity was to satisfy the need of the
new emerging petit-bourgeoisie which slowly adopts the European way of
life. Brewery, Coca-Cola, meat fabrics, cigarettes and other industries
which are not suitable for further industrialization become a model in many
African countries. As such mere privatization of these kinds of industries
could not create new wealth, and cannot be the basis of a genuine home
market, which is again based on manufactured activities. Such a wrong and
very mischievous policy of the IMF and the World Bank automatically
leads to resource plundering and misallocation of the given resources.
Instead of creating a new capitalist spirit, the expansion of the service sector
in which one gains quick money and profit, becomes the rule of such a
policy.
This is what happened in Ethiopia after the introduction of SAPs in 1993.
In an atmosphere where the new political elite does not understand what
market capitalism is, in a country where it has experienced one of the
bloodiest revolution under a military dictatorship, in a country where clear
cut social relations have not developed, due to the revolutionary process,
the privatization policy has enriched the few and dispossessed the masses.
Those forces which have good connections with the ruling elite, and the
organization it has created during its war against the Military regime, could
easily appropriate the wealth of the masses. In order to get access to the
industries, the new `economic elite` could get easily credit from the banks
with the backing of the regime, and this has enabled the new emerging
economic elite to systematically infiltrate in all economic activities where
quick profits are promising. These new elite with the backing of the regime
fought at the same time against those forces which it believes could compete
against the government and its affiliate economic corporations.
When one looks at the devaluation policy of the IMF, they derive their
policy from a pure technical perspective, and not from the conditions that
are existing on the ground in the various countries that apply the program.
First of all, money in such a backward and not commodity oriented
economy like that of Ethiopia has not the same inner dynamism as that of
the capitalist economy. Due to the non-connected nature of many economic
activities, and due to the overwhelming nature of the so-called informal
sector and subsistence economy, money cannot circulate as quickly as
possible to become a social power. In such an economy, money cannot
easily be transformed into money capital. Secondly, devaluation has the
reverse consequence, and instead of generating new demands on the world
market, the outcome will be the opposite. The country that has devalued its
currency must export more to get the same hard currency as before. Since
many countries export the same products, the country that has devalued its
currency cannot export more. For such a non competitive economy like
that of Ethiopia, and for such a country which exports mainly agricultural
products whose prices are not determined by the direct producers,
devaluation will have negative impacts on the entire economy. At the same
time importers will be compelled to pay more in order to buy one dollar,
and likewise their import bills will increase. This in turn has inflationary
impacts, especially in those sectors which are dependent on the importation
of spare parts and machines. As a matter of fact, those who could not
afford to buy more hard currencies will be compelled to lower their
production activities; and in the worst case they will expel a part of the
work force.
Negative impacts of SAPs
1. Economic Consequences
If we look at the industrial policies of many African countries, one observes
that SAPs could not bring systematic industrialization. While existing
industrial installments were privatized in areas where new investment has
taken place, the new industries could not be the basis of further
industrialization. It seems that it is a mere repetition of the old industrial
policy of the 1950s and 1960s. Foreign companies and private investors at
home are engaged in expanding and installing brewery factory, food
processing industries and the like. As a matter of fact such kinds of
industries are heavily dependent on foreign raw materials, and have very
low linkages to the various sectors in the countries concerned. And yet
many engaged in flower plantation and other agricultural activities whose
economic effects are very negligible. Ethiopia now produces vegetables,
fruits of all types to feed the Arabs and Europeans, while the food sector
for home need is highly neglected. Such kinds of economic activities which
are not planned for home market have undoubtedly produced a unique
social relationship between the so-called foreign investors and those who
work at low wages in those farmlands which are controlled by foreign
companies. Since many governments in Africa and especially in Ethiopia, do
not have social, ecological and other standards, so-called foreign investors
can do everything they want.
The macroeconomic model of the IMF and the World Bank could not
produce a new entrepreneurial spirit which can take risks, and plans from a
longer perspective and become competitive in all areas at home. There is no
research which enables many to be engaged in new and not yet exploited
areas. In the absence of basic researches, and without constant efforts to
innovate new technologies, the production of both durable and non-durable
products is practically impossible. Since many African economies do not
have a planned character, and the economies are characterized by the
absence of a manufactured base which produces machines for further
installments, the creation of true wealth is not possible. The creation of true
wealth is only possible when the economy is organized on the basis of
expanded accumulation. That means to build a strong home market and to
create interconnected economic activities in all areas, the economy must be
organized on the basis of planned accumulation. Only so, new investments
and the production of new products are possible. In the absence of machine
tool industries, any country cannot produce other tools and machines which
are strategically important to protect the country from natural calamities.
The fact that the IMF and the World Bank with their market economic
policy have manipulated the African political elite to focus on few
macroeconomic instruments, it is no more possible for African governments
to look at other alternatives which will enable them to build their economies
on wider and firmer bases. By applying a pure monetarist policy, African
governments are brought up to a position not to think in terms of nation-
building, and widens the sphere of activities so that the entire society can be
interconnected via multiple mechanisms.
By and in large, SAPs could not foster industrialization in many African
countries a process which is based on science and technology. Instead,
Africa is turned again into a battle ground of European, Chinese, Indian
companies to robe the natural wealth of the continent. After 60 years of so-
called political independence, Western European countries and America,
which proclaim to be promoting democratic values and the rule of law, are
making non-transparent deals with African dictators to robe the continents
precious minerals, and other resources. Many small farmers and small
fishermen have lost their rights and are driven from their natural habitats.
This is because international companies supported by their governments
could easily get contractual agreements to fish in the waters of Africa.
2. Social Consequences of SAPs
As SAPs were promoted in many Sub-Saharan African countries, one
thought that through the market miracle and through the instruments what
the IMF and the World Bank have drawn as viable ways of bringing a
dynamic economy in many African countries, social problems could also be
tackled. However, before tackling existing problems, the program itself
produces new social problems. Since governments must cut budgets for
non-economic activities and since privatized industries fire what they believe
to be a redundant labor force, this inevitably causes a new social situation.
This is what happened in many countries, especially in Ethiopia after the
massive privatization of many companies which were once run by the
government. As a matter of fact, and due to the nature of the non-dynamic
character of both the new investors and the industries themselves, new job
opportunities could not be created. Those who could not find permanent
job opportunities and those who were pushed from the rural areas to the
cities in order to seek new opportunities, are compelled to engage
themselves in the so-called informal sector. Others, who could not be part
of the informal sector, must find other means to survive. As a result of the
weak absorption capacity of the so-called modern economic sector, and
because the informal sector is so saturated, those who could not find jobs
must engage themselves in criminal activities, and other activities like
prostitution.
Added to the effects of privatization, due to the liberalization of foreign
trade, the Ethiopian market is overwhelmed by Chinese, Indian, South
Korean, etc, products which undermine the existing industries. Many
companies, because they could not withstand the competition from abroad,
must reduce their capacity and expel the work force. This situation has
inevitably swollen the reserve army, and compels many to live in very ugly
conditions. Since the Ethiopian government does not have any social
program, and since many institutions are very weak to allocate this reserve
army for various purposes, millions are compelled to live in an abject
poverty. In addition to this, since government affiliated companies become
so aggressive in their attitudes, since they are eager to control all the main
economic activities, they began pushing all those weak people from their
traditional living areas. Building new hotels, sky-scrapers, shopping centers,
villas and swimming pools inevitably produce slum buildings in other areas.
Such kinds of uncontrolled and chaotic activities have inevitably become
breeding grounds for all types of diseases, especially Aids, and other sexual
dieses. All in all, the experimentation of a market oriented economic policy
under the auspicious of the IMF and the World Bank, which is backed by
the international financial oligarchy and Western governments, has produced
a new social situation which cannot be tackled within the coming 50 years.
After 30 years of practices of the so-called structural adjustment programs,
many Sub-Saharan African countries could not build a well structured
economy which could mitigate social problems. Instead of a structured and
self-reproductive economy many Sub-Saharan African countries have to
experience chaotic economic activities, in which social problems are more
visible and cannot be solved any more by simple market economic
instruments. The gap between the artificially created rich and the masses is
alarming; and the new rich class does not feel any more that it belongs to its
society. Its consumption appetite has developed to an extent that this new
emerging economic elite has become one of the causes of rising inflation
which has burdened the lives of the masses. As one Indian sociologist
observed such kind of phenomena in the case of India, in Ethiopia too the
so-called market economy which was imposed by the IMF and the World
Bank and generally by the so-called international community has produced
an omnivorous class. This class consumes most of the water resources,
electrical energy, lives in sophisticated apartments which consume too much
energy, drives high powered cars which swallow too much benzene, and at
the same time spoils the environment, eat too much meat and butter, and
imports very expensive clothes to wear, all in all to alleviate itself from the
impoverished masses. This new omnivorous class cannot create wealth or
bring new knowledge to the society. It has only a parasitical effect and
drives the society to an unknown destiny. Because of its luxurious lifestyle, it
can be easily bought and manipulated by outside forces, to sell the
sovereignty of the country. Because it is intellectually very weak, and does
not have time to articulate, it can engage itself in contractual and trade deals
which bring damages to our country. The so-called international experts use
the weak position of this class and do everything to culturally and
economically destroy our country. If we see today a very weak Ethiopia
and downtrodden people, this is because the so-called international
community and its experts have done everything to exploit the weak
position of our country. During the 18th and 19th century, direct military
aggression was the method to directly colonize weak nations, in today’s
highly globalized and sophisticated world, one does not need direct
aggression, expect in few cases. Globalization has enabled those smart
experts to easily manipulate the Ethiopian elite and control is mind.
In addition to this, those aid organizations which have offices in many
African capital cities and which earn enormous amounts of money are
heavily sharing what many African societies produce; and again they are
one of the causes of inflation, especially in Ethiopia. After 20 years of
massive involvement in the economic affairs of Ethiopia, the so-called
international community and aid organizations have worsened the social,
economic, ecological and cultural conditions of Ethiopia. Instead of teaching
the masses how to become creative and innovative to develop new
technologies, so-called aid organizations of all types misuse their privileged
positions and are marginalizing the society. Due to the omnipresence of aid
organizations, and their negligible contribution to the economy, the Ethiopian
masses have lost self-confidence in themselves.
3. Ecological Consequences of SAPs
SAPs and the massive pressure of globalization have narrowed the attitude
of the political and the economic elite in Ethiopia and in other African
countries. In countries where economic, social and ecological standards
are not the rule, where social and ecological awareness are not well
developed, it is easy to turn such countries into dumping grounds of all non-
recyclable products. Over the last 30 years many African countries have
unconsciously imported second hand cars of all types, refrigerators which
consume too much energy and produce too much CO2, electronic products
of all types which entail poison and other second hand products become
common in many African countries. With this the low income base of the
society, has compelled many to buy second hand clothes which might have
negative health consequences to the people.
SAPs and globalization have also compelled millions of Africans to
change their food habits. The importation of processed and packaged foods
will inevitably push traditional food habits. Especially, the new elite is eager
to consume imported foods, since these have snob effects. The change in
food habits has automatically brought new food related diseases, such as
diabetes and others. In countries where specialized doctors and clinics are
short, it is difficult for many to get proper medical treatments.
Globalization has also compelled many African countries to change their
farming practices, not in a way to be more self-sufficient and ecologically
aware, but to adapt their practices to the need of global capitalism. In
many African countries the application of high breed seeds has become
common. It is also reported that genetically modified seeds is holding foot in
some countries. The wide spread of genetically modified and hybrid seeds
has wiped the traditional seeds in many African countries. The
consequences of the expansion of genetically modified seeds are yet to be
evaluated. Experiences from Argentina and other countries show, the wide
spread application of genetically modified seeds have wide range
consequences on the environment and on health. The application of
insecticide and unstudied chemical fertilizers will inevitably destroy the flora
and fauna of the landscape. Since genetically modified and high breed seeds
consume too much water, this will inevitably reduce the water table from the
ground and causes dryness of the earth. In the long run this reduces rain
falls.
4. Political Consequences of SAPs
One may think and believe that the main mission of SAPs is the introduction
of new economic reforms. The introduction of such kinds of reforms in
countries where clear-cut social relations are not developed, where
economic class consciousness has not yet developed, and where an
aggressive political class tries to control everything, such a program will
inevitably produce a new political situation which is against genuine
economic development. As SAPs do not have a mission of political
enlightenment in a country where the state apparatus is very strong, and civil
institutions are very weak, it is easy for the ruling class to strengthen itself,
and thereby suppress political freedom. As SAPs have undermined existing
social relationships and favored the production of a new consumer class, it
is easy for the `ruling elite` to make this new omnivorous class as its social
base so that it can govern for a long time.
Especially, in today`s Ethiopia where SAPs have been forcibly practiced
there is no demarcation line between the political elite and the economic
elite. The government, which is supposed to preserve the interests of all the
people, vehemently defends its own interests by all means. In order to do
this it must militarize the state apparatus, and build a huge security apparatus
to control the movements of opponent forces. It fabricates everything to
destroy independent newspapers and accuses some of the journalists that
they are involved in terrorist actions. Critical journalists are being
permanently intimidated, and if they dare to report about corruption and the
social conditions of the country, they inevitably risk jail. Foreign forces team
up with regimes like that of the Ethiopian government, as if the government
is exercising democratic rights and guarantees press freedom. Without the
support of the West, and without their military engagement, the regime
could not have been strengthened.
Concluding remarks
The main aim of SAPs was not and is not to bring about real economic and
social transformations in many African countries. Its aim is to create a new
economic order so that Africa becomes more dependent and outward
looking. SAPs are based on a neo-liberal ideology, and by its nature the
ideology has a disharmonious character and inevitably creates a
disarticulated economy. In a non-articulated economy, the creation of new
and vitally important wealth is not possible. Such an economic setup does
not have an inner dynamism, and innovation of new technologies, and
expansion of new investments in all areas is practically impossible. In such
an economy, the creation of job opportunities for job seekers is not
possible. The narrowness of the system will again create new social
conditions, which cannot be easily tackled by simple macroeconomic
models.
SAPs are generally designed and must be implemented from above and not
the other way around. That means the policy does not have any organic
character and it automatically excludes the masses. It is not a system which
slowly grows and expands from the bottom upwards and in every direction
so that it ultimately encompasses the entire society. Any economic policy
must be seen as a biological process, which must be consciously designed,
and systematically cultivated so that growth in all direction will become
possible. SAPs negate such kind of organic growth, which paves the way
for complete mental praxis, which is the foundation of true human freedom
and civilization.
As such the policy does not address basic human needs, such as proper
diet, the supply of clean water, the organization of good sanitation systems
and the establishment of a well studied school system which supports
economic, cultural and social development. SAPs are not suitable for the
organization of a given social system on new scientific spirits to promote
social well being. SAPs are against aesthetics of all kinds and consciously
or unconsciously create new social conditions that are chaotic and
uncontrollable. That means, it violets basic human characters which
inherently exist in all human beings, such as beauty, ethics and morality.
Since the policy is limited in scope and has a strong utilitarian appeal, it is
against all harmonious structures, such as beautiful buildings of all types,
cities and gardens, etc. The policy is intrinsically a source of social conflict
and permanent war. That means SAPs inevitably produce a new barbarian
ethos, in which the political and the economic elite become very aggressive
and lose any kind of social awareness towards the entire society.
It must be clear that the originators of SAPs, the IMF and the World Bank
are working in the service of international financial oligarchy, and as such
they are trying to integrate the political and economic elite of African
countries within the international hierarchical system so that genuine
economic development which benefits the majority of the people becomes
impossible.
Last but not least, from a cultured economic perspective, SAPs suppress
the development and expansion of diversified economic activities and their
relationships with each other. By focusing on free trade at its core economic
activity, and putting trade before production, it destroys human imagination
and fantasy which are vital for practicing the free will of people in a given
society.
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The author can be reached at fekadubekele@gmx.de
-Theoretical Reflections-
.
14 August, 2011 | Fekadu Bekele, PhD
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Introduction
- It is now almost 30 years that the
structural adjustment programs (SAPs)
were introduced, and implemented as a
new approach to deal with the economic
crises of many Sub-Saharan African
countries. Especially after the second oil
crisis in 1979, many African countries
were severely affected by balance
payments of deficits, increasing external
debts, and internal economic crises as a
result of huge trade deficits. Because of
governments were unable to finance existing projects, and were confronted
by budget deficits. Before the introduction of SAPs, many African countries
had practiced various economic policies which were not formulated
internally as a result of lengthy debates by experts of the concerned
countries, but all the policies were imposed by experts either from the IMF
or the World Bank. All previous economic policies could not help many
African countries to develop a strong home market based on manufactured
activities. Since many African governments had followed the advices of
foreign experts, and were not in a position to formulate their own policies
which were congruent to the needs of their own societies, and which could
reflect their own internal human and material resources, the heavy reliance
on foreign experts had at the end disastrous consequences on their
economies.
The changing political landscape in England in 1979, which brought Margret
Thatcher in power, and in 1980 Ronald Regan in America had inevitably
ended the Keynesian revolution of the previous 30 or more years after the
second world war, which helped many Western economies to successfully
reorganize their economies on “new foundations.” Governments of many
Western countries had massively intervened in the economies of their
countries, and did everything to develop strong, and in all spheres
interconnected economic and social structures from within. The upgrading
of manufactured activities, and the reorganization of science and technology,
and heavy investments in education which could support basic researches to
develop new technologies, were not possible without massive state
intervention. The economic crisis at the beginning and end of the 70s which
were interpreted by the neo-liberals as a crisis which resulted out of
massive state intervention, and not a crisis which was internally produced
within the system, gave way to the neo-liberal paradigm and policy
formulation. Neoclassical economists believe that economic crisis in such
highly developed economies could only occurred as a result of exogenous
factors, which jeopardize the performance of the system. For example
wage increases can be one of the factors which reduce the profitability of
the capitalist class. On the other hand for Keynes and Marx, though both
interpret the causes of the crisis differently; economic crisis in a capitalist
economy is an inevitable process which cannot be only caused by
exogenous factors. If exogenous factors play a role to cause crisis, the
entire system cannot be put into question, unless the causes are drastic. The
neo-liberals believe that the crisis within the capitalist economy can regain
its equilibrium when state intervention is massively reduced, and other
exogenous factors are minimized at a lower level.
The belief in market fundamentalism and self-correcting of the system gave
way to the neo-liberal ideology. The Chicago boys have won the upper
hand, and could easily impose their ideology on the state. Free market
ideology became the only accepted doctrine which must be implemented
not only in America and England, but also in many other countries across
the globe. The imposition of such ideologically motivated economic policy
had and still has wide range consequences for those weaker economies
which were not internally strengthened and connected like those of the
capitalist economies by multiple factors and instruments. As studies show,
the introduction of neo-liberal oriented economic policy in the African soil,
where economic structures were not developed like those of the capitalist
economies means that instead of creating a well structured and self
reproductive economy, the creation of an economic system which is
venerable to any kind of shock, is inevitable. In order to understand the
consequences of this counterrevolutionary ideology, which has deepened
the structural weakness of many Sub-Saharan African countries, and
strengthened their dependence on foreign resources to survive, let’s try to
examine the policy itself whether it is based on solid methodological
foundation, which could reflect the socio-economic structures of the various
countries that apply the program.
Interpreting the program
In order to understand SAPs, we must analyze the word structure. If we
take Wikipedia as a help, the word structure means an orderly organized
system, in which all the elements fit properly together so that the system as a
whole functions properly. In the natural science, structure implies the logical
order of the different parts of a system so as to perform certain function
according to that specified logic. Again in physic, structure means the
interconnection of different tiny particles and their relationships within a
particular material which enable them to operate smoothly. Likewise, in
sociology structure means the logical order of the different parts and their
relationships within a given social system to coordinate and perform certain
works. Interpreted this in any given society, any society must be organized
according to a certain and scientifically validated logical order so that the
system as a whole functions properly and smoothly. The organizational
structure within a given social system must be a conscious act so that the
system as a whole functions according to certain principles. If any society is
not organized according to certain harmonious principles which could hold
the society together, the society loses its compass, and the political,
economic and social parameters will not have any clear direction. Let’s
also analyze the concept ‘adjustment’. Two things can be adjusted together
if they fit to one another. A totally different material which has a different
logical structure cannot fit to another material which is structured differently.
If one tries to fit two different structures by force or by any kind of
manipulation the consequences are unforeseen, and in the worst case one
can experience the production of very chaotic and not manageable situation
which cannot be easily corrected.
When we analyze both the concepts, “structure “ and “adjustment, which
are developed by the IMF and the World Bank as policy
recommendations, it is not clear from the outset whether the two concepts
are developed by considering the specific conditions of the different
countries which apply them. For example it is not clear how they define
the term structure. Since different societies have different structures, one
cannot generalize such a scientific terminology as if it is valid for all societies
across the globe. As a matter of fact, all societies of the earth had different
experiences in the past; and they have different cultural and social
constructions which shape their attitudes and handlings. To assume that all
societies of this globe have the same structure, the same thinking and
handlings is to make the greatest blunder one can make against humanity in
general. It is just a war which is being waged against certain groups to
dismantle the entire social and cultural setup which have been experienced
and accumulated for generations.
If somebody applies the concept structure to any society, he must analyze
the system of each individual country and how that country is organized.
Since the degree of social structures vary from society to society, the
position of different classes within a given socioeconomic formation also
vary. In any society there are social hierarchies with various roles to play,
which are reflections of the social relationship which prevail in a given
society. Only under certain political systems, social systems can be
consciously organized. Before any system reaches a certain mature stage
the society in question undergoes ups and downs. It is therefore very
important to study the nature of the social structures at various levels, and
the degree of social consciousness, and the role of those political actors
which control the system. And at the same time, it is paramount importance
to examine and study the degree of technological development, and its role
in creating general social wealth. Without studying the socioeconomic
structures in-depth, and the cultural setup of the system to rush in order to
formulate certain policies, and try to practicing them, is equal to social
raping. This is what the IMF and the World Bank have been doing with
many African countries over the last 30 or more years. Western
governments are behind such kinds of crucial policies which have
destructed the social and cultural structures of many African countries. As
we have seen above, the name structure implies a well organized and
logically ordered relationship and interconnection of the different parts
within a given system so that the different parts perform their works without
any damaging interruption from outside which jeopardizes the performance
of the entire system. In this case, and respectively, each element within a
given structure plays a unique role and performs a certain function. On the
other side, certain parts or one part of a given structure could negatively
affect the entire performance of a given structure, if it does not function
properly. For example, within a given socio-economic structure, if the
political part is suppressive and decision makers take arbitrary measures
rather than well studied policies, the development of productive forces will
be hampered, and thereby social and cultural transformation will be
blocked. To overlook this and unnecessarily manipulate a given social
structure from pure ideological motivation disturbs the entire setup of the
system and the people of that system as a whole lose their orientation.
By developing `new concepts` and sell them as policies, organizations like
the IMF and the World Bank, which have clothed the name international,
misuse their omnipotent position and deceive the political elites in Africa and
elsewhere, and apply economic policies which practically create disorder.
Instead of studying the structure of the system thoroughly and scientifically,
they choose some concepts and parameters which do not have scientific
foundations, and try to manipulate the system via these instruments which
are alien to African societies. From the outset it is not clear how the
structure of a given society can be adjusted, and nobody knows to which
system that given structure is being adjusted. Here again, there is confusion
between structural change and structural adjustment; and structural change
needs a holistic approach and touches every part of a given society and
ultimately has a well defined goal. In this case a holistic model is intrinsically
dynamic, whereas structural adjustment does not have a well defined aim,
and therefore it is static by nature.
If we come to the general concept structural adjustment, it intuitively means
the adjusting of a given economy to highly advanced economy. In other
words, those countries which apply SAPs must adjust their economies to
the needs of the international capitalist system. All the instruments of SAPs
will inevitably compel those countries that apply the program to either
neglect or suppress the needs of their societies and create favorable
situations to the capitalist system of the west. In such a way the entire policy
package blocks the development of a market economy on the basis of clear
cut division of labor in the various countries which practice the program.
Without clear definition and without a thorough scientific study of the nature
of the supposed structure, one cannot formulate a policy. Otherwise it will
have incalculable consequences for the society which applies SAPs. The
program overlooks so many things which exist on the ground and which
must be either changed or transformed by other means. In this case SAPs
have worked and will work to make existing conditions more complicated
and worsen them so that one loses the sight of how the problems can be
solved. As experiences from different countries prove, SAPs will have
devastating effects not only on one generation, but also on many successive
generations to come. This is because the program is devised through and
through from empiricist point of view and it is aggressive by its nature. The
so-called shock therapy implies the aggressive character of the policy, and
when the policy is put into practice those weak forces of a given social
system will be negatively affected, and will become permanently jobless and
disillusioned.
The macroeconomic policy, and its different instruments which are devised
to implement SAPs will automatically compel governments to be more
outward looking, and those scare resources will be allocated in sectors
which generate enough hard currency to pay back the debt. That means
scarce resources, and the money that is absorbed from other sectors will
not be allocated in areas which could generate new wealth. Such a program
which is more outward looking, will automatically suppress the systematic
industrialization of the countries in question, and the development of a home
market will be practically impossible. That means the program by itself has
built-in mechanisms which create imbalances in all areas and instead of
creating a well structured economy, the economy of a given country
becomes de-structured.
Methodological problems of SAPs
Initially macroeconomic policy dealt with unemployment issues and it was a
combination of fiscal and monetary policies. It was developed as a policy
after the great depression at the beginning of the 1930s of the last century.
Since neo-classical theory and policy has discredited itself and could not
explain the causes of the economic crisis of the 1930s and could not deliver
a workable solution to overcome the crisis, Keynes thought that only
government’s direct intervention will alleviate the crisis. However, if one
looks at the interventionist policy of the capitalist state and especially from
the experience of the German state, before the First World War, and after
the Second World War, the intervention was not purely a fiscal and
monetary policy alone. It was an active interventionist policy through direct
instruments, such as easy credits, and actively supporting to organize the
entire economy on firmer foundations. Prior to the formation of national
state, and after, direct state intervention was the most essential instrument in
creating favorable environments for small and medium size industries. Major
infrastructure activities and well designed city buildings could not have been
possible without the conscious support of the state. This has been the case
in all middle European countries. On the other hand the neo-classical or
neo-liberal macroeconomic policy is purely a monetarist policy, and is
against any kind of fiscal policy and direct state intervention. And yet fiscal
and monetary policies were developed from the perspective of highly
developed capitalist economies, and could not reflect the socioeconomic
formations and real situations on the ground of many undeveloped
countries. If we again examine macroeconomic policy in general, its
theoretical foundation is empiricism, and does not have a transformative
power. In other words, the policy is designed to `stabilize` existing social
relationships by correcting certain imbalances which occur from time to
time. On the other side the capitalist economic system is dynamic by nature,
and is being manifested by destructing old technologies and creating new
ones.
The entire concept SAPs was developed by assuming that all societies have
the same economic features, or are governed by the same logic, and as
such they are all alike. What does this imply when we properly interpret this
assumption? All societies on this earth, though there are certain variations,
all in all, are governed by the same economic logic. All human beings on this
earth have the same rationality and the same taste, and as such all must
pursue the same economic policies in order to be adjusted to one another.
However, the economic and social realities in many countries contradict the
view of the IMF and the World Bank. The economies of the capitalist
countries are governed by different logics and laws. The sphere of the
politics and the economic structures are separated entities. Competition
and technological innovation are embedded within the system, and as such
determine the entire economic, social and cultural dynamism of the entire
system. On the other side, the economies of Third World countries are
characterized by the absence of innovation, very law technological
development and competition. Likewise, the degree of individualization and
sprit of entrepreneurship in all societies are not the same. The process of
individualization in many African countries is not as old as those of the
Western European countries, and as such it is entirely different in its
application in comparison to that of the capitalist west. The individualization
process in Europe was backed by real material and spiritual transformation
which has been going since the Renaissance. Only through protracted
transformation of the material conditions and uplifting the power of thinking
through proper education and intellectual activities, the people of Europe
could alleviate their power of thinking. This enables them to freely think and
become the master of their destiny. In Africa where material conditions and
spiritual activities were hampered by slave trade, colonization, neocolonial
policy and destabilization policy by the West, was not possible to induce
individualization which helps to free the mind from traditional values. Though
every human being is capable of becoming creative and ready for individual
action to improve his/her livelihood, conditions on the ground must be
improved through proper education. On the other side mere
individualization brings alienation in all spheres, and this in turn will have
negative social and psychological impacts. In this case one should
differentiate between the empiricist view and the essentialist view of
individualization. The first form focuses on a single individual alone and
drives him to be self-centered, while the second one takes into account the
individual and the social aspects together. Accordingly, individualization
should not lead somebody to non-awareness towards a given society.
Again the concept of time in many so-called traditional societies has a
different connotation. Whereas the concept of time in many capitalist
countries is understood in linear forms, and time plays one of the greatest
roles in organizing, planning and executing a certain program, in
underdeveloped economies time is understood in circular forms. Likewise,
the concept of money has a different meaning, and earning a certain amount
of money, allocating the money for different purposes, and saving a part of
it for different purposes in the future is not the same in all countries.
Neglecting all these crucial aspects and to insist on certain macroeconomic
instruments leads inevitably to gross errors. Why do the IMF and the
World Bank omit all these aspects? It is because they have an empiricist
world view and are not interested in going beyond the conventional
wisdom. They only look at all societies through one prism. From the
perspective of the IMF and the World Bank, and all neo-liberal
economists, one should not try to study the complex structure of a given
society; but solely look at certain parameters. What all societies need in
order to correct some kinds of imbalances of the system is to apply the
same kinds of economic instruments which ultimately create equilibrium
situation in all sectors of the economy of all countries.
In the neo-classical/neo-liberal paradigm every society is the sum of its
individuals. There are no social relationships, and it is assumed that every
individual has equal access to scarce resources. Irrespective of its role
within a given society, every individual lives for its own sake, and strives to
get the maximum utility/ profit. Accordingly, the human being is egoistic by
nature, and egoism is the driving motive which governs its thinking and
handlings. This is what the neo-liberals are preaching across the globe; and
Leibniz, one of the greatest scientists of the 17th century had warned
against such kind of ideological preaching, which cannot take into account
the rational part of the human mind. If we look at social history, and all the
scientific investigations of the 16th, 17th and 18th centuries, and all literary
works of those genius people, we understand that all these works were
made not out of egoistic motives, but to save humanity from the vagaries of
nature, and to understand the secret of nature, so that human beings
become the master of their destiny.
As we observe from the experiences of many countries, societies which
have applied this simplistic macroeconomic model, which does not
acknowledge space and time, have lost their inner compass. The
macroeconomic model of the IMF and the World bank, instead of bringing
individuals together and make them a force so that they could build their
societies on a firmer basis, has disbursed and weakened their energy. Many
Third World countries which have applied SAPs, and are forcibly
integrated into the global economy without being competent in all areas,
have lost their valuable resources and the thinking capacity which would
otherwise enable them to build a well organized society. After three or more
decades of macroeconomic policy practices in many African countries, one
should realize that such a model is against nature and humanity in general.
An economic model which cannot put human beings and nature at the
centre of its analysis cannot be called science.
First of all, as I said before, all societies have undergone certain kinds of
transformational processes, which are unique in every society. While most
societies could not develop further, due to various factors, some could build
sophisticated social, economic and cultural foundations which could hold
their societies together. What the capitalist west has experienced in its entire
history is completely different form that of the African societies. Let alone,
within one continent, even within a given country, there are variations in
thinking and degree of development. To assume that all societies have the
same kinds of rationality or behavior, and the same tastes is sheer nonsense.
Since different societies have experienced certain kinds of social
transformations, the ways they think, abstract and solve certain problems
vary from country to country. Accordingly, existing social and political
relationships determine how a given society would be able to solve its own
problems. To be engaged in economic activities, and for the management of
economic policy, the political structure and the power relationship which
exist in a given society play decisive roles. In this case any economic policy
cannot be practiced beyond time and space. Any economic policy cannot
be practiced for its own sake, but to solve either existing problems, or it will
benefit a tiny part of a given people. When the IMF and the World Bank
formulate their macro-economic policies, and impose them on African
governments, they firmly believe that only through the market, and only
indirectly could existing problems will be solved. Not through direct
observation, understanding the problems, and direct participation of the
masses existing economic problems could be solved, but only through the
allocation of scarce resources. This is only possible if all economic activities
are left to the supposed market forces which are not developed as those of
the capitalist countries.
This kind of methodological error that all economic problems can be solved
via individual action leads to chaotic conditions rather than to a well
structured and ordered economic activities. Instead of allocating the given
scarce resources in a planned manner, resources are being shifted to the
areas where economic performances are very weak. The fact that
privatization is introduced as part and parcel of SAPs, as experiences prove
that privatization does not lead to efficient allocation of resources. Those
forces which have the chance to get access easily to wealth without hard
work are not interested to widen their scope of economic activities which
could create real wealth. The experience of SAPs proves that, instead of
efficiently allocating scarce resources, resource plundering by the few
becomes the rule of the system. That is why we witness that after the
applications of SAPs in many African countries the situations become
worse and more chaotic than before. Today the social conditions in many
African countries are more polarized, and we witness that the political
structure in many African countries is more aggressive and more militarized
than before. This is because many African governments must keep the
status quo, and are not ready or capable to create new wealth, so that they
could raise the living standards of their citizens. School systems,
kindergartens, sanitations, medical facilities and other social systems are not
well financed and are not well organized in every community across many
countries.
When we come to the general concept of private property, the IMF and the
World Bank believe that mere privatization of certain targeted economic
activities will induce the development of free market economy. The problem
is that those factories which were installed in the 50s and 60s were not
suitable for innovation and further investments. As many industries are
dependent on outside resources and are not designed to become the basis
of further investment activities, mere privatization only works to the
contrary. That means those who allegedly bought the industries do not have
the necessary managerial know-how to widen their industrial activities by
studying the market situation at home. Secondly, most import-substitution-
industries are not backed by another technology, which supplies all the
necessary spare parts and other installments. Thirdly, as the industries were
installed during the 50s and the 60s, the main aim of the planners was not to
build a broad industrial structure on the basis of science and ever developed
technology. The aim of such industrial activity was to satisfy the need of the
new emerging petit-bourgeoisie which slowly adopts the European way of
life. Brewery, Coca-Cola, meat fabrics, cigarettes and other industries
which are not suitable for further industrialization become a model in many
African countries. As such mere privatization of these kinds of industries
could not create new wealth, and cannot be the basis of a genuine home
market, which is again based on manufactured activities. Such a wrong and
very mischievous policy of the IMF and the World Bank automatically
leads to resource plundering and misallocation of the given resources.
Instead of creating a new capitalist spirit, the expansion of the service sector
in which one gains quick money and profit, becomes the rule of such a
policy.
This is what happened in Ethiopia after the introduction of SAPs in 1993.
In an atmosphere where the new political elite does not understand what
market capitalism is, in a country where it has experienced one of the
bloodiest revolution under a military dictatorship, in a country where clear
cut social relations have not developed, due to the revolutionary process,
the privatization policy has enriched the few and dispossessed the masses.
Those forces which have good connections with the ruling elite, and the
organization it has created during its war against the Military regime, could
easily appropriate the wealth of the masses. In order to get access to the
industries, the new `economic elite` could get easily credit from the banks
with the backing of the regime, and this has enabled the new emerging
economic elite to systematically infiltrate in all economic activities where
quick profits are promising. These new elite with the backing of the regime
fought at the same time against those forces which it believes could compete
against the government and its affiliate economic corporations.
When one looks at the devaluation policy of the IMF, they derive their
policy from a pure technical perspective, and not from the conditions that
are existing on the ground in the various countries that apply the program.
First of all, money in such a backward and not commodity oriented
economy like that of Ethiopia has not the same inner dynamism as that of
the capitalist economy. Due to the non-connected nature of many economic
activities, and due to the overwhelming nature of the so-called informal
sector and subsistence economy, money cannot circulate as quickly as
possible to become a social power. In such an economy, money cannot
easily be transformed into money capital. Secondly, devaluation has the
reverse consequence, and instead of generating new demands on the world
market, the outcome will be the opposite. The country that has devalued its
currency must export more to get the same hard currency as before. Since
many countries export the same products, the country that has devalued its
currency cannot export more. For such a non competitive economy like
that of Ethiopia, and for such a country which exports mainly agricultural
products whose prices are not determined by the direct producers,
devaluation will have negative impacts on the entire economy. At the same
time importers will be compelled to pay more in order to buy one dollar,
and likewise their import bills will increase. This in turn has inflationary
impacts, especially in those sectors which are dependent on the importation
of spare parts and machines. As a matter of fact, those who could not
afford to buy more hard currencies will be compelled to lower their
production activities; and in the worst case they will expel a part of the
work force.
Negative impacts of SAPs
1. Economic Consequences
If we look at the industrial policies of many African countries, one observes
that SAPs could not bring systematic industrialization. While existing
industrial installments were privatized in areas where new investment has
taken place, the new industries could not be the basis of further
industrialization. It seems that it is a mere repetition of the old industrial
policy of the 1950s and 1960s. Foreign companies and private investors at
home are engaged in expanding and installing brewery factory, food
processing industries and the like. As a matter of fact such kinds of
industries are heavily dependent on foreign raw materials, and have very
low linkages to the various sectors in the countries concerned. And yet
many engaged in flower plantation and other agricultural activities whose
economic effects are very negligible. Ethiopia now produces vegetables,
fruits of all types to feed the Arabs and Europeans, while the food sector
for home need is highly neglected. Such kinds of economic activities which
are not planned for home market have undoubtedly produced a unique
social relationship between the so-called foreign investors and those who
work at low wages in those farmlands which are controlled by foreign
companies. Since many governments in Africa and especially in Ethiopia, do
not have social, ecological and other standards, so-called foreign investors
can do everything they want.
The macroeconomic model of the IMF and the World Bank could not
produce a new entrepreneurial spirit which can take risks, and plans from a
longer perspective and become competitive in all areas at home. There is no
research which enables many to be engaged in new and not yet exploited
areas. In the absence of basic researches, and without constant efforts to
innovate new technologies, the production of both durable and non-durable
products is practically impossible. Since many African economies do not
have a planned character, and the economies are characterized by the
absence of a manufactured base which produces machines for further
installments, the creation of true wealth is not possible. The creation of true
wealth is only possible when the economy is organized on the basis of
expanded accumulation. That means to build a strong home market and to
create interconnected economic activities in all areas, the economy must be
organized on the basis of planned accumulation. Only so, new investments
and the production of new products are possible. In the absence of machine
tool industries, any country cannot produce other tools and machines which
are strategically important to protect the country from natural calamities.
The fact that the IMF and the World Bank with their market economic
policy have manipulated the African political elite to focus on few
macroeconomic instruments, it is no more possible for African governments
to look at other alternatives which will enable them to build their economies
on wider and firmer bases. By applying a pure monetarist policy, African
governments are brought up to a position not to think in terms of nation-
building, and widens the sphere of activities so that the entire society can be
interconnected via multiple mechanisms.
By and in large, SAPs could not foster industrialization in many African
countries a process which is based on science and technology. Instead,
Africa is turned again into a battle ground of European, Chinese, Indian
companies to robe the natural wealth of the continent. After 60 years of so-
called political independence, Western European countries and America,
which proclaim to be promoting democratic values and the rule of law, are
making non-transparent deals with African dictators to robe the continents
precious minerals, and other resources. Many small farmers and small
fishermen have lost their rights and are driven from their natural habitats.
This is because international companies supported by their governments
could easily get contractual agreements to fish in the waters of Africa.
2. Social Consequences of SAPs
As SAPs were promoted in many Sub-Saharan African countries, one
thought that through the market miracle and through the instruments what
the IMF and the World Bank have drawn as viable ways of bringing a
dynamic economy in many African countries, social problems could also be
tackled. However, before tackling existing problems, the program itself
produces new social problems. Since governments must cut budgets for
non-economic activities and since privatized industries fire what they believe
to be a redundant labor force, this inevitably causes a new social situation.
This is what happened in many countries, especially in Ethiopia after the
massive privatization of many companies which were once run by the
government. As a matter of fact, and due to the nature of the non-dynamic
character of both the new investors and the industries themselves, new job
opportunities could not be created. Those who could not find permanent
job opportunities and those who were pushed from the rural areas to the
cities in order to seek new opportunities, are compelled to engage
themselves in the so-called informal sector. Others, who could not be part
of the informal sector, must find other means to survive. As a result of the
weak absorption capacity of the so-called modern economic sector, and
because the informal sector is so saturated, those who could not find jobs
must engage themselves in criminal activities, and other activities like
prostitution.
Added to the effects of privatization, due to the liberalization of foreign
trade, the Ethiopian market is overwhelmed by Chinese, Indian, South
Korean, etc, products which undermine the existing industries. Many
companies, because they could not withstand the competition from abroad,
must reduce their capacity and expel the work force. This situation has
inevitably swollen the reserve army, and compels many to live in very ugly
conditions. Since the Ethiopian government does not have any social
program, and since many institutions are very weak to allocate this reserve
army for various purposes, millions are compelled to live in an abject
poverty. In addition to this, since government affiliated companies become
so aggressive in their attitudes, since they are eager to control all the main
economic activities, they began pushing all those weak people from their
traditional living areas. Building new hotels, sky-scrapers, shopping centers,
villas and swimming pools inevitably produce slum buildings in other areas.
Such kinds of uncontrolled and chaotic activities have inevitably become
breeding grounds for all types of diseases, especially Aids, and other sexual
dieses. All in all, the experimentation of a market oriented economic policy
under the auspicious of the IMF and the World Bank, which is backed by
the international financial oligarchy and Western governments, has produced
a new social situation which cannot be tackled within the coming 50 years.
After 30 years of practices of the so-called structural adjustment programs,
many Sub-Saharan African countries could not build a well structured
economy which could mitigate social problems. Instead of a structured and
self-reproductive economy many Sub-Saharan African countries have to
experience chaotic economic activities, in which social problems are more
visible and cannot be solved any more by simple market economic
instruments. The gap between the artificially created rich and the masses is
alarming; and the new rich class does not feel any more that it belongs to its
society. Its consumption appetite has developed to an extent that this new
emerging economic elite has become one of the causes of rising inflation
which has burdened the lives of the masses. As one Indian sociologist
observed such kind of phenomena in the case of India, in Ethiopia too the
so-called market economy which was imposed by the IMF and the World
Bank and generally by the so-called international community has produced
an omnivorous class. This class consumes most of the water resources,
electrical energy, lives in sophisticated apartments which consume too much
energy, drives high powered cars which swallow too much benzene, and at
the same time spoils the environment, eat too much meat and butter, and
imports very expensive clothes to wear, all in all to alleviate itself from the
impoverished masses. This new omnivorous class cannot create wealth or
bring new knowledge to the society. It has only a parasitical effect and
drives the society to an unknown destiny. Because of its luxurious lifestyle, it
can be easily bought and manipulated by outside forces, to sell the
sovereignty of the country. Because it is intellectually very weak, and does
not have time to articulate, it can engage itself in contractual and trade deals
which bring damages to our country. The so-called international experts use
the weak position of this class and do everything to culturally and
economically destroy our country. If we see today a very weak Ethiopia
and downtrodden people, this is because the so-called international
community and its experts have done everything to exploit the weak
position of our country. During the 18th and 19th century, direct military
aggression was the method to directly colonize weak nations, in today’s
highly globalized and sophisticated world, one does not need direct
aggression, expect in few cases. Globalization has enabled those smart
experts to easily manipulate the Ethiopian elite and control is mind.
In addition to this, those aid organizations which have offices in many
African capital cities and which earn enormous amounts of money are
heavily sharing what many African societies produce; and again they are
one of the causes of inflation, especially in Ethiopia. After 20 years of
massive involvement in the economic affairs of Ethiopia, the so-called
international community and aid organizations have worsened the social,
economic, ecological and cultural conditions of Ethiopia. Instead of teaching
the masses how to become creative and innovative to develop new
technologies, so-called aid organizations of all types misuse their privileged
positions and are marginalizing the society. Due to the omnipresence of aid
organizations, and their negligible contribution to the economy, the Ethiopian
masses have lost self-confidence in themselves.
3. Ecological Consequences of SAPs
SAPs and the massive pressure of globalization have narrowed the attitude
of the political and the economic elite in Ethiopia and in other African
countries. In countries where economic, social and ecological standards
are not the rule, where social and ecological awareness are not well
developed, it is easy to turn such countries into dumping grounds of all non-
recyclable products. Over the last 30 years many African countries have
unconsciously imported second hand cars of all types, refrigerators which
consume too much energy and produce too much CO2, electronic products
of all types which entail poison and other second hand products become
common in many African countries. With this the low income base of the
society, has compelled many to buy second hand clothes which might have
negative health consequences to the people.
SAPs and globalization have also compelled millions of Africans to
change their food habits. The importation of processed and packaged foods
will inevitably push traditional food habits. Especially, the new elite is eager
to consume imported foods, since these have snob effects. The change in
food habits has automatically brought new food related diseases, such as
diabetes and others. In countries where specialized doctors and clinics are
short, it is difficult for many to get proper medical treatments.
Globalization has also compelled many African countries to change their
farming practices, not in a way to be more self-sufficient and ecologically
aware, but to adapt their practices to the need of global capitalism. In
many African countries the application of high breed seeds has become
common. It is also reported that genetically modified seeds is holding foot in
some countries. The wide spread of genetically modified and hybrid seeds
has wiped the traditional seeds in many African countries. The
consequences of the expansion of genetically modified seeds are yet to be
evaluated. Experiences from Argentina and other countries show, the wide
spread application of genetically modified seeds have wide range
consequences on the environment and on health. The application of
insecticide and unstudied chemical fertilizers will inevitably destroy the flora
and fauna of the landscape. Since genetically modified and high breed seeds
consume too much water, this will inevitably reduce the water table from the
ground and causes dryness of the earth. In the long run this reduces rain
falls.
4. Political Consequences of SAPs
One may think and believe that the main mission of SAPs is the introduction
of new economic reforms. The introduction of such kinds of reforms in
countries where clear-cut social relations are not developed, where
economic class consciousness has not yet developed, and where an
aggressive political class tries to control everything, such a program will
inevitably produce a new political situation which is against genuine
economic development. As SAPs do not have a mission of political
enlightenment in a country where the state apparatus is very strong, and civil
institutions are very weak, it is easy for the ruling class to strengthen itself,
and thereby suppress political freedom. As SAPs have undermined existing
social relationships and favored the production of a new consumer class, it
is easy for the `ruling elite` to make this new omnivorous class as its social
base so that it can govern for a long time.
Especially, in today`s Ethiopia where SAPs have been forcibly practiced
there is no demarcation line between the political elite and the economic
elite. The government, which is supposed to preserve the interests of all the
people, vehemently defends its own interests by all means. In order to do
this it must militarize the state apparatus, and build a huge security apparatus
to control the movements of opponent forces. It fabricates everything to
destroy independent newspapers and accuses some of the journalists that
they are involved in terrorist actions. Critical journalists are being
permanently intimidated, and if they dare to report about corruption and the
social conditions of the country, they inevitably risk jail. Foreign forces team
up with regimes like that of the Ethiopian government, as if the government
is exercising democratic rights and guarantees press freedom. Without the
support of the West, and without their military engagement, the regime
could not have been strengthened.
Concluding remarks
The main aim of SAPs was not and is not to bring about real economic and
social transformations in many African countries. Its aim is to create a new
economic order so that Africa becomes more dependent and outward
looking. SAPs are based on a neo-liberal ideology, and by its nature the
ideology has a disharmonious character and inevitably creates a
disarticulated economy. In a non-articulated economy, the creation of new
and vitally important wealth is not possible. Such an economic setup does
not have an inner dynamism, and innovation of new technologies, and
expansion of new investments in all areas is practically impossible. In such
an economy, the creation of job opportunities for job seekers is not
possible. The narrowness of the system will again create new social
conditions, which cannot be easily tackled by simple macroeconomic
models.
SAPs are generally designed and must be implemented from above and not
the other way around. That means the policy does not have any organic
character and it automatically excludes the masses. It is not a system which
slowly grows and expands from the bottom upwards and in every direction
so that it ultimately encompasses the entire society. Any economic policy
must be seen as a biological process, which must be consciously designed,
and systematically cultivated so that growth in all direction will become
possible. SAPs negate such kind of organic growth, which paves the way
for complete mental praxis, which is the foundation of true human freedom
and civilization.
As such the policy does not address basic human needs, such as proper
diet, the supply of clean water, the organization of good sanitation systems
and the establishment of a well studied school system which supports
economic, cultural and social development. SAPs are not suitable for the
organization of a given social system on new scientific spirits to promote
social well being. SAPs are against aesthetics of all kinds and consciously
or unconsciously create new social conditions that are chaotic and
uncontrollable. That means, it violets basic human characters which
inherently exist in all human beings, such as beauty, ethics and morality.
Since the policy is limited in scope and has a strong utilitarian appeal, it is
against all harmonious structures, such as beautiful buildings of all types,
cities and gardens, etc. The policy is intrinsically a source of social conflict
and permanent war. That means SAPs inevitably produce a new barbarian
ethos, in which the political and the economic elite become very aggressive
and lose any kind of social awareness towards the entire society.
It must be clear that the originators of SAPs, the IMF and the World Bank
are working in the service of international financial oligarchy, and as such
they are trying to integrate the political and economic elite of African
countries within the international hierarchical system so that genuine
economic development which benefits the majority of the people becomes
impossible.
Last but not least, from a cultured economic perspective, SAPs suppress
the development and expansion of diversified economic activities and their
relationships with each other. By focusing on free trade at its core economic
activity, and putting trade before production, it destroys human imagination
and fantasy which are vital for practicing the free will of people in a given
society.
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The author can be reached at fekadubekele@gmx.de
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