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close this bookThe Courier N° 143 - Jan - Feb 1994 Dossier: Fighting Poverty - Country Report : Niger (EC Courier, 1994, 96 p.)
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View the documentFighting poverty and exclusion
View the documentFrom poverty to exclusion
View the documentPoverty in the developing world: 'The main trends'
View the documentThe fundamentals of poverty in the developing world
View the documentMeasuring poverty
View the documentAn interview with Gerry Rodgers of the International Institute for Labour Studies
View the documentClear the streets and start again ?
View the documentPoverty and official development assistance
View the documentPoverty control policies in the developing world
View the documentCoordinated European action
View the documentStructural adjustment and poverty
View the documentATD Fourth World Movement - A record of poverty
View the documentWomen and banking - a case study from southern Mali
View the documentExclusion in North and South
View the documentWorking to prevent exclusion
View the documentSocial exclusion and Community action in Europe
View the documentWorld social development summit

Structural adjustment and poverty

'The important thing is not how much we don't know as how wrong we are in what we think we know' (Mark Twain)

If there is any one inexhaustible controversial subject in the literature of development, it is the impact of structural adjustment on the poor.

For example, in a recent issue of the FAO journal (Ceres, No 143, September-October 1993), John Weeks, Professor of Development Economics at the University of London, said that structural adjustment had failed in most of the low-income countries and, where it had succeeded, it had done so in spite of the World Bank's policies.

Macroeconomic models and structural models

In 1989, Philippe Hugon, a French university lecturer, contributed an important article on the social effects of adjustment policies to the 'third World' journal (vol. XXX, No 117, January-March 1989).

His basic argument was that the adjustment model implicitly hinged on the deterioration of subsidised groups which were protected from the market and on the improvement of operators linked to the market. Urban poor and landless peasants lost out here, of course, but it was assumed that compensatory measures could be taken in the short term and that the dynamics of accumulation would reintegrate these people in the long term.

Notwithstanding this view that the poor would ultimately 'catch-up', Philippe Hugon said, austerity programmes put into effect in the developing countries had, in fact, penalised the poorest members of society.

He suggested that structural models which combined economic behaviour, social structures and power relations were more likely to cater for the plurality of systems than macroeconomic models. So it would be wise to integrate asymmetrical international relations, temporal powers, the heterogeneity of the productive sectors and the social structures.

He gave devaluation as an example. Devaluation in theory had re-distributive powers which affected the consumers of imported products - this, on the face of it, meant the privileged, although in some countries, the rural population and the poor were relative consumers of essential imports.

He also said that loss of income had very different effects on different people, according to their status. Reducing the parallel circuits could affect operators at the bottom of the scale, while operators with a inroad financial basis could move and raise their income elsewhere, transferring the cost of that adjustment to other groups.

Another remark was that adjustment led to transfers from one generation to another, with the burden of the debt, in particular, being passed on to generations which had to pay it back.

All effects were specific to economic and social structures. Countries with diversified production and diversified social and technical systems seemed to be able to manage a positive reallocation of resources which encouraged growth. The poorest countries, however, experienced regressive adjustment, which ultimately excluded the most vulnerable groups from the market and interfered with the satisfaction of their basic needs.

Philippe Hugon concluded by saying that, from a developmental point of view, it was less a question of bringing social considerations into the balance or offsetting the cost of adjustment with social measures than of reversing the social-economic-financial sequences.

The EC Commission - adjustment and fair distribution of public spending

Jùrgen Zattler (European Commission) has contrasted the short and long term aims of structural adjustment. Adjustment is supposed to boost growth in the long term, but it has often been associated with economic recession in the short term - a contradiction which could have highly detrimental effects on both the productive capacity and the situation of the poor.

The European Commission has always pleaded for the social dimension of structural adjustment to be taken into account, not just before the process starts, but actually at the macroeconomic level. Social aspects must not just be catered for afterwards, with schemes to compensate for structural adjustment. They must be dealt with by the adjustment projects themselves - and not just at macroeconomic level either.

Jurgen Zattler believes that fairer sharing of public spending is one of the best ways of improving the situation of the poor.

The World Bank - disease confused with the cure

In 1990, the authors of Making Adjustment Work for the Poor. A Frame work for Policy Reform in Africa; a World Bank study, claimed that obtaining a proper grasp of the social effects of adjustment meant analysing the links between the macro-economy and the micro economy of companies and households. The key problem here was how to assist the target groups without distorting the economic machinery.

In 1993, Michael Lipton and Martin Ravallion (Poverty and Policy, Working Papers, World Bank) said that mass poverty existed long before adjustment and all the imbalances and distortions which it sought to reduce. So it was wrong to say that adjustment or the absence of adjustment worsened or improved the poverty situation. There was no significant evidence of the effect of adjustment on the poor in either theory or practice.

As Lipton and Ravallion said, the lot of the poor has improved sometimes, where adjustment neither worked nor was needed. But it has deteriorated sometimes too, right where adjustment was in fact needed but never introduced, or at any rate was introduced and failed

Edward V.K. Jaycox, IBRD Vice-President for Africa, reported on the benefits of adjustment in the FAO's Ceres mentioned earlier (No 143, September-October 1993), maintaining that structural adjustment had raised the standard of living of a large majority of poor Africans. The continual decline in the situation of the poor in some countries was the result of crises indicating that some policies needed to be changed, he said, rather than of the structural adjustment policies used to deal with the underlying problems. Disease and remedy had often been confused.

There is no doubt that, given time, reform will contrive to stimulate economic growth and the poor will have better opportunities in a more mobile economy.

Even in the short term, most of Africa's poor have seen reform, for 80% or 90% of them are smallholders and net producers of marketables, whose income has had a boost from structural adjustment. The urban poor, representing between 4% and 20% of the total, have suffered on occasion, particularly when the prices paid to the farmers have gone up, but all this should change in the medium term, as the example of Ghana shows.

Countries undergoing structural adjustment have seen their real levels of public health and education spending go up.

The basic question is whether the countries carrying out reforms and the poor themselves would have had a better deal without structural adjustment. The answer has to be no, as a look at Ghana or Tanzania makes clear

At the Conference on World Hunger on 30 November 1993, World Bank President Lewis Preston backed self-help credit programmes for the poorest countries.

The poor should be helped to help themselves through income generating programmes, which do more than just distribute income to the recipients, but enable them to become independent and productive in their own right.