THE TWO PHASES OF STRUCTURAL ADJUSTMENT/159occurs. Austerity undermines a country's capacity for recovery and
prevents it from reducing its debt burden. The only thing it more or
less ensures is that interest payments on debt will be met.
IMF measures actually increase a country's debt burden:
- loans granted on the basis of adjustment policies, in order to
repay old debts, increase both total debt and debt servicing; - in a context of trade liberalisation and the destruction of
domestic production, short-term loans are granted to enable
the country to continue importing goods from the world
market; - total import costs increase following currency devaluation;
- there is little or no capital accumulation in sectors not directly
tied to the export sector.
Macroeconomic stabilisation and SAPs are powerful tools in the
service of an economic restructuring that adversely affects the living
standards of millions of people. SAPs are directly responsible for the
process of mass impoverishment described thus far. The implemen
tation of the IMF's and the World Bank's 'economic remedies' has led
to the slashing of real wages, and the strengthening of an export
economy that feeds off a low-wage workforce. The same 'recipe' of
budget austerity, trade liberalisation and privatisation has been
implemented simultaneously in more than 100 debtor countries in
the Third World and Eastern Europe, including former Soviet
republics and Vietnam.
Political Consequences
Most debtor countries lose part or all of their economic sovereignty,
along with control over economic and monetary policy. The central
bank and Ministry of Finance are reorganised; some state institutions
fall apart, paving the way for outside 'economic supervision'. The
local teams and missions of the IMF and World Bank come to form a
'parallel government' which overrides local organisations and the
national parliament.
Countries not respecting the IMF's 'performance goals' are
blacklisted. Sudan is on such a list today, as was Nicaragua between
1979 and 1990.