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Abstract
In our essay we discuss on the highly criticized structural adjustment loans (SALs)
provided by the World Bank and IMF to the developing and least developed countries
especially focusing on the period after 1970s and early 1980s. We mention academic
discussion about the weaknesses and responsibilities of both borrower nations and the
multilateral institutions after providing an introduction with the historical chronology of
transformation especially in adjusted regions. We try to look through the subject from
various angles although they are all the proves of the failure. however the criticized points and
responsible side at each –or the weak points- is different from the rest. Besides discussing on
the reasons of the failure we try to focus on to different basic region that were distinguished in
applications –Asia and Latin America- as well as discussing the situation Africa in minor in
order to see the consequences from to opposite angles in order to mace a decision on the
responsibility issue.
Introduction:
‘Stabilize, privatize, and liberalize’ quotes a an international political economy professor
and mentions that those ‘became mantra of a generation of technocrats…’ talking about the
economic executives in 1990s who ambitiously imposed Washington Consensus ideas to
developing world.1 In fact, the aggressive liberalization had started at early 1980s –even
1970s- in a transition process from Keynesian interventionist approach through a ‘market
fundamentalist’ movement that aims the exploitation of or minimizing the restrictions on the
free movement of the market itself. However through the 1980s –accelerated and enhanced by
debt crisis- and early 1990s liberalization and privatization started to be regarded as the
unique way for development and the only measure of development was the economic growth
(GDP).
Furthermore the Bank and IMF were highly politicized and associated with western ‘core’
policies.2 By the way they aimed to converge ‘west &east’ or ‘north & south’ life style
politically and economically, in other words, they targeted the modernization of developing
country in terms of economic policies and especially imposing U.S. government type. They
thought that by the help of liberalization the overall welfare would converge and the measures
would equalize. Fed by the ‘consensus’ rules the structural adjustment programs asked states
to provide stabilization by strict fiscal policies and to shift through a more open market
especially by liberalizing the trade and capital flow. Forcing them to reduce public investment
–and even trying to democratize them or interfering other sovereign issues- those international
monetary institutions prevented autonomous development programs.
More interestingly some of the –maybe the most of- developing countries were willing to
implement those adjustment programs. ‘such was the enthusiasm for reform in many of these
countries that Williamson’s original list of do’s and don’ts came to look remarkably tame and
innocuous…’ as an impressive statement especially to describe the moods of transition
economies and Latin Americas.3 Most of the developing economies liberalized their financial
markets and reduced trade barriers more than needed; some of them even signed free trade
agreements.
However some events through and after mid 1990s created confidence crisis in World
Bank conditional loans. One of the most important one is the unexpected success of ‘Asian
Miracle’ which were not, by many means, ‘good boys’ for institutions that they did not
implemented the adjustment programs and succeeded though. The other examples from the
top can be listed as the ‘African failure’ and more significantly ‘Mexican Crisis’ in 1994
which was the only complete success of World Bank SALs. That leads some scholars to claim
that ‘‘empirical evidence for huge gains from free market policies is, at best, fuzzy’’4.
However we will discuss the regional consequence on detail especially for Asia and Americas
later in this paper. Thus we will first focus on the reasons why the SALs failed?, what were
the consequences on social and economic issues? And who were to blame for the failure? in
the next section.