Economic Challenges in the Twenty‑First Century 341In the 1970s, realizing that not all groups were benefiting from such investments, the
aid agencies began to fund proj ects in health, education, and housing, designed to
improve the economic life of the poor. The 1980s saw a shift toward reliance on private-
sector participation to meet the task of restructuring economies and reconstructing
states torn apart by ethnic conflict. When areas of the economy are privatized, the gov-
ernment’s fiscal burden is reduced, and state spending in education and health can then
increase. This approach to economic growth has become known as the Washington
Consensus, a version of liberal economic ideology. Its adherents hold that only with
certain economic policies— including privatization, liberalization of trade and foreign
direct investment, government deregulation in favor of open competition, and broad
tax reform— will development occur. The World Bank and its sister institution, the
International Monetary Fund, have been the leaders in advocating these policies.
Although the IMF was not originally charged with development, it realized very
quickly that many countries’ seemingly temporary balance- of- payments prob lems were
actually long- term structural prob lems that prevented those countries from develop-
ing, and the IMF’s short- term loans could not address these prob lems. Thus, during
the early 1980s, the IMF began to provide longer- term loans if states adopted struc-
tural adjustment programs consistent with the Washington Consensus. If a state
adopted those policies— economic reforms (limiting money and credit growth, forc-
ing currency devaluation, reforming the financial sector, introducing user fees, elimi-
nating subsidies), trade liberalization reforms (removing tariffs, rehabilitating export
infrastructure), government reforms (privatizing public enterprises), and private- sector
policies (ending government monopolies)— then the IMF gave its stamp of approval,
leading other multilateral lenders and bilateral and international private banks to lend
as well.
In the 1990s, sustainable development, an approach to economic development
that incorporates concern for renewable resources and the environment, became part
of the bank’s rhe toric, although that rhe toric did not always translate into its practices.
During the 1990s, however, it became apparent that even under structural adjustment,
some countries could not get out from under the weight of their debt and begin to
develop. That debt had been escalating; developing countries owed $2.2 trillion in 2000;
20 years earlier, it had been $577 billion. There was also mounting pressure to adopt
a more systematic approach to debt. Buoyed by Jubilee 2000, a social movement that
promoted changes in the name of social justice and supported by radicals who
thought debt doomed states to permanent underdevelopment, a major policy shift
occurred. Sponsored by the IMF, the World Bank, and the G7 economic powers, the
Heavi ly Indebted Poor Countries (HIPC) Initiative was a historic one, for never before
had foreign national debt been canceled or substantially rescheduled. While implemen-
tation of the plan and its attendant conditions has been slow and controversial, by mid-
2015, 36 countries had received debt relief, 30 of them in Africa. Countries receiving