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Reproduced with permission from
the United Nations Research Institute for Social Development

Structural Adjustment in a Changing World
Toward the Future: Issues and Options

When the Social Summit convenes in 1995, most countries in Africa and Latin America will be further in debt than they were 20 years ago. A larger proportion of the population will be in poverty. The institutional framework for providing social support will, on the whole, be weaker. And the capacity of many governments to ensure a stable environment for dialogue will be less.

Clearly, the particular form of adjustment in vogue for the past 15 years has not permitted the world community to deal effectively with problems of indebtedness and recession. A radical free-market programme, rigidly linking balance-of-payments assistance to disprotection of national markets and reduction of the public sector, has not created the necessary conditions for most people in adjusting countries to have a better future.

One reason for this lack of success may well be the failure to address the broader structural problems within the world economy which play a role in prolonging the crisis. There is therefore renewed interest in many quarters in taking up the debates which surrounded the creation of the post-war international system in the 1940s, in which adjustment was widely assumed to be as much a problem for creditor as for debtor countries.

Such a debate would have to consider questions like the following: What changes in the policy of the industrial nations would be required to make adjustment in the Third World more successful? What new mechanisms of debt relief can be found? And how could the system of international finance and trade be restructured to facilitate renewed development? It is perhaps particularly relevant to take a systemic view in the 1990s, as global economic integration advances rapidly.

In the attempt to develop new approaches to the problems of indebted countries, it is also important to discard stereotypes. The most simplistic, and least useful, debates on economic reform have involved contrasting "state" and "market", or "public" and "private" sectors, in highly ideological fashion. This obscures the real problems of specific social and economic systems and interferes with the design of pragmatic solutions.

Adjustment is not primarily a technical exercise. Technical expertise is of course an important element in designing policy reform; but in the last analysis, adjustment poses dilemmas which can only be resolved politically. There are many ways to deal with any problem of imbalance in the economy, and each way implies a varying distribution of benefits and losses for people within the society in question.

In consequence, measures worked out through adequate consultation with affected populations are likely to be more effective than those which are imposed. Although this point would be judged obvious when considering the design of economic reform in the industrialized North, it is sometimes forgotten in the context of the developing world.

Since conditionality is the principal mechanism through which the will of the international financial and donor community can be imposed on indebted countries, it should be used with caution. Withholding international assistance unless certain conditions are met is no doubt necessary in many cases. But conditionality can cut off dialogue and impose policies which are either technically inadequate, given local conditions, or politically unfeasible, or both.

Creating effective mechanisms of response to economic crisis requires a degree of familiarity with real local situations which cannot be expected of foreign advisers. Therefore there is a strong argument for reconsidering the role of international experts in designing adjustment policy, particularly when that role confers extraordinary power.

In the last analysis, improving the reform process is central to improving the likelihood that different groups of people, at various levels of society within many different countries, will find useful ways to put the crisis behind them. If there is one overriding lesson to be learned from the experience of the past two decades, surely it is that there is no single prescription which can be relied upon to solve the complex problems of development.

The end

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