MARCH 16 , 2012:
o Political consequences of SAPs (continued)
The change in policy will always create winners and losers.
IMF riots- often associated with cutting food subsidies or heating
Shift in political coalitions- this can happen if the government
decides to change economic policies (gains new allies, loses old
supporters), or if a new government is brought it.
Weakening of neo-patrimonialism because there are fewer state
resources to spend. You can use the sell off of state assets as a type
of neopatrimonialism and use economic liberalization to hand out
the benefits of economic liberalization. (ex. Egypt)
o How to implement?
Gradual (less likely to cause political opposition, but does not send
signals about your determination to shift economic direction) vs.
short, sharp shock (better economically, but not politically)
Egypt is an example of the gradual implementation. Bread is Egypt
is very cheap because it is subsidized, which was a heavy drain on
resources. To prevent the riots of the past, the Egyptian
government made improved and slightly less subsidized break and
made them both available. Slowly over six months they made less of
the cheap, subsidized bread available until only the new, more
expensive bread was available and everyone had switched over to
the less subsidized bread.
“The IMF made me do it….”
Part of the structural adjustment is its theatre- it enables you as a
domestic political actor to blame someone else. It is often the case
that the technocrats believe that they need to do it, but they can
shift blame to save their political supporters even if they agree with
Changing approaches? Over the last decade, change can be seen in the approach of
the World Bank (less so the IMF) and others:
o Debt relief for HIPCs- the debt burden is declining for developing countries
o Increasing acceptance of the role of the state- in the past they often adhered
to neo-classical or neo-conservative methods, so it is a significant change
that there is an acceptance of the importance of more institutions and
o Importance of rule of law and institutions, good governance (emphasis on
lower levels of corruption)
o Great attention to poverty alleviation
This results in debates on the pros and cons of targeting directly at
poor populations vs. overall subsidies. When you target directly at
the poor, no one supports it but the poor whom it benefits, so it is
difficult politically, whereas overall subsidies may be less effective
but benefit all.
o Role of civil society, “stakeholder consultation” o Attention to gender, environmental, and conflict issues (these changes are
much more substantial at the World Bank, a development agency that
provides advice and money at concessional rates and provides resources,
than at the IMF, which is about fiscal balance and wanting countries to stay
within their budget).
The World Bank is more unpopular in Western countries than in it is in the
developing countries who actually deal with it. In sub-Saharan Africa, the World
Bank is as popular as NGOs.
2008- Global Recession:
Generally a recession in the industrialized world leads to reduced industrial
production, which leads to less demand for raw materials, which is detrimental to
the developing world. In 2008, this was not the case. The developing countries
were not necessarily doing worse. This is because there are such rapid demands
from the BRICs that it doesn’t matter which countries are in the recession, because
they are selling everyone. If the United States is buying less, they can compensate
by selling more to China. This highlights how the global political economy is
changing. Even sub Saharan Africa had positive growth rates.
What is the relationship between the nature of the economy and the nature of the
Economic Reform and Political Liberalization:
o Market enhances democracy?
There is a clear connection between the emergence of a capitalist market
and democracy (except in China, because their shift to a capitalist economy
from a command economy did not lead to political liberalization or
Economic pluralism, role of middle and business classes
(historically important in the emergence of the, economic growth
creates conditions that are more hospitable to democracy.
o Democracy enhances the market?
A more open political environment allows people to develop new ideas that
could be capitalized on in the economy.
Innovation and freedom (the freer the political environment, the
more likely you are to have entrepreneurs and market success).
o Market economies may weaken democracy?
Because they create winners and losers and some benefits from the
economy at the expense of the others.
It is undeniable that huge inequalities have implications for the political
Economic inequality, marginalization of the poor
Latin America: even though we have political democracy and
elections, the level of inequality that the economy sustains means
that some people in the population have less of a voice. The rich