Your Money or Your Life!

THE TWO PHASES OF STRUCTURAL ADJUSTMENT/151

country samples in Latin America and Africa, it can be observed

that the political costs in terms of strikes, demonstrations and riots

are very different from one stabilisation measure to the next. Our

research has allowed us to define what a politically effective sta­

bilisation programme should look like. It is possible to obtain the

desired results while minimising political risks.

It is politically important to distinguish between stabilisation

and structural adjustment. Indeed, stabilisation programmes

involve a degree of urgency and therefore necessarily involve

many unpopular measures - such as sharp reductions in

household revenues and consumption through cuts in public-

sector wages, subsidies and employment in the construction

sector. On the other hand, structural adjustment measures can be

spread out over a number of years; each measure creates winners

and losers, in such a way that a government can easily obtain the

backing of a coalition of beneficiaries to defend its line of march.

In the case of an adjustment, a government can put down social

unrest to compensate for a drop in popularity stemming from

spending cuts. But this approach brings with it a number of costs

• increased dependence on the army and negative foreign reaction.

Timing

A clear three to six month time lag can be observed between the

announcement of stabilisation measures and the outbreak of

strikes, demonstrations and other social unrest. This lag is

interesting since it proves - contrary to the hypothesis of rational

expectations - that political reactions occur when measures are

implemented rather than when they are announced.

A Worthy Role Model: Hassan II

That said, there is an example of a government successfully

avoiding this risk, such as in Morocco in 1983-1985. There were

two reasons for this political success: caution (price rises were

moderate and gradual) and good public relations (for example, the

king proclaimed that the poor should be protected from the effects

of adjustment, using the slogan 'austerity yes, pauperisation no').