142/YOUR MONEY OR YOUR LIFE!
As for spending on social programmes, the international financial
institutions have made a principle of recovering operating costs from
users (patients in healthcare and the parents of children in the
education system), and of gradually withdrawing the state from basic
healthcare and education services. In the area of social spending, the
concept of 'loans granted to meet an imposed objective' is applied to
what are known as 'vulnerable groups'.
Austerity measures in the social sectors have meant a shift from
funding for regular programmes towards programmes with imposed
objectives. This has been the main reason for the collapse of the
education sector, health clinics and hospitals. The process has
enabled the Washington-based institutions to step in and don the
mantle of saviours.
The Budget Deficit: A Moving Target
The IMF sees the budget deficit as a moving target. First it fixes a
budget deficit target of 5 per cent of GNP. The government meets this
objective. In subsequent negotiations - or within the same loan
agreement - the IMF reduces the target to 3.5 per cent of GNP,
arguing that the government's spending plans are inflationary. Once
the 3.5 per cent goal is reached, the IMF wants the deficit reduced to
1.5 per cent of GNP, and so on. The rationale behind this whole
exercise is obvious: ensuring that state revenues go towards servicing
the foreign debt (Chossudovksy, 1997).
Price Liberalisation
This measure aims at eliminating subsidies and/or price controls. It
has an immediate impact on real earnings, whether in the formal or
informal sector. The deregulation of prices on grains for household
use, and import liberalisation on food reserves from the North, are
key components of this process. Subsidised European and North
American agricultural products (Common Agricultural Policy
subsidies in the case of the European Union) invade local markets.
This reduces the earnings of local farmers, driving many of them to
bankruptcy. In fact, it is not rare for the North's agricultural
surpluses to be sold to the South at cut-rate prices.
Liberalisation programmes also have an effect on the prices of
imported goods and raw materials. When combined with currency