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Lecture 9

sosc1910 - Lecture 9

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York University
Social Science
SOSC 1910
Nadiah Habib

Lecture9 Structural Adjustment Programs SAPThe Conditionalities of AidStructural Adjustment and Conditionalities of AidBackground rdBy the 1980s Third World Debt had increased greatly3 world countries were having a very difficult time servicing their debtMeanwhile on the global landscape the Soviet Union was losing its hold on its position as a superpower and the world was changing from the bipolarization of global power to a single superpower US SAP structural adjustment programs were a response to the balance of payments problems that third world countries faced in late seventies and early eighties As we have discussed in the last lecture these balance of payment problems were brought about by the oil shocks of the 70s and the response of the developed countries to these oil shocksWhile initially heavy borrowing eased the impacts of these shocks on third world countries servicing the debt in a climate of dropping commodity prices and heavy increase in global interest rates placed an even greater burden on third world economiesThe IMF whose function it is to provide short term loans made loans designed to help countries meet their rdimport bills and stabilize their economies The IMF and World bank promoted SAPs to help 3 countries service their debts and stabilize their economies What are Structural Adjustment Programs A Definition of Structural Adjustmentin a general sense Structural Adjustment is a process of deliberately adjusting the structure of an economy to relieve the effects of negative shocks or to take advantage of new opportunitiesThese shocks or opportunities can be external or domestic in originThese typically involve a variety of economic reforms in monetary fiscal trade regulatory policies and public sector managementThese programmes are based on the assumption that if sufficient economic incentives are provided to producers they will expand existing production and invest in new productive activities thus providing the engine for sustained economic growth It is generally accepted that economies must adapt to change what is contentious is how they do so Here are some of the features of the WORLD BANK and the IMFs approach to structural adjustment rdDemand that 3 world countries implement Austerity Programs what we understand as restructuring which they argue help reduce demand and government expenditure as a wholeBy reducing domestic consumption more is available for export to pay for essential importsincreasing the amount of goods that can be exportedrelying on markets instead of governments to fix prices privatization in order thesy argue to achieve greater efficiencyso private sector begins to take over functions previously performed by the state transportation education infrastructure roads gas oil water etc health etc Some controversies over structural adjustment1 The broad assumptions underlying SAP2 The percentage of aid allocated to SAP3 some features of program implementations 1Broad assumptions athe most significant assumptions are with respect to the function of the State over private sector a belief that privatization will trim the fat public goods often receive insufficient private investments however
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