Delving into neoliberal Structural Adjustment in the Global South during the 1980s and 90s

Structural Adjustment Programmes (SAPs) dominated the development agenda of the world during the 1980s and 1990s, when the most powerful international financial institutions, specifically the World Bank and International Monetary Fund (IMF), promoted them as the preferred instrument for short term fiscal balance and long term economic restructuring of developing countries. As is evidenced by increased poverty alongside widened inequalities in countries they were implemented in during the last two decades of the 20th century and as will be assessed, SAPs worsened living conditions for the majority of people. Before proceeding, it is necessary to mention what SAPs actually involve in the given context and to provide a working definition for development. SAPs involve international financial institutions providing low-interest loans to countries on the short term requirement that they adopt policies for fiscal balance and on the long term condition that they structurally adjust their economies by adhering to a neoliberal model of capitalism. For the purposes of this piece of writing, development is a multifaceted process to attain better living conditions for people. The underlying argument made below is that due to the neoliberal design of economic restructuring SAPs prescribed, the standard of living fell and development was reversed for some of the world’s least developed countries, where SAPs were implemented in during the 1980s and 1990s.

First and foremost, it is important to briefly outline the post-colonial development of developing countries and what preceded SAPs, that ultimately gave rise to their emergence. Following the Golden Age of Capitalism for the Western world and parts of East Asia in the post-World War Two to early 1970s period, a global sovereign debt crisis surfaced and SAPs emerged in the early 1980s as a response to this crisis, in developing countries of the Global South. The Golden Age of Capitalism was marked by consistently high levels of economic growth as well as low levels of unemployment both induced by state intervention, especially in the United States, Western Europe and Japan. At the same time, this period highlighted for the first time the growing structural gap between developed, industrialised countries and newly independent, developing and industrialising countries. The latter faced high population growth combined with low levels of food production, a deterioration in the terms of international trade coupled with high volatilities of commodity prices and widespread poverty (UN DESA, 2017). The socioeconomic development agenda for developing countries during the two United Nations Development Decades, in the 1960s and 1970s, was state-led focusing on self-sustained economic growth alongside social advancement (UN DESA, 2017). Self-sustained because it was to a large extent not dependent on financing and lending from developed countries, the World Bank or IMF. It was, however, funded substantially by primary commodity export revenues, largely from selling oil to developed countries in the Global North. These decades of significant progress in self-sustained and statist or dirigiste socioeconomic development came to an end in the early 1980s by global market forces largely beyond the control of developing countries. As the price of oil skyrocketed and was coupled with the collapse of the existing Bretton Woods fixed exchange rate system, the global sovereign debt crisis was eventually caused (Julianne, et al., 2018). Subsequently, in the absence of a fair debt relief workout mechanism, SAPs were introduced by international financial institutions to be implemented in developing countries as a response to this crisis and a lost decade for development ensued. Low-interest loans were provided to these countries, on the requirement that they adopt fiscal balance, also known as the balance of payments, intended to alleviate high debt burden, and on the long term condition that they structurally adjust their economies by implementing a neoliberal economic model.

At this stage, an assessment will be made of SAPs and the outcome of their neoliberal economic restructuring on the living conditions of people in the countries they were implemented in during the 1980s and 1990s. SAPs during those years were predominantly applied in sub-Saharan African and Latin American countries, with sub-Saharan Africa being the worst affected by them. While it is acknowledged by the World Bank itself, that as these adjustment programmes were implemented, development along with the previous advancements made either stalled or in most cases was reversed, there is a disagreement over why this occurred (Oliveira, 1992) (SAPRIN, 2002). Attributing the development reversal and worsening living conditions to the neoliberal design of adjustment programmes is most convincing, even though some, including the World Bank and IMF, attribute it to other factors based on implementation and not SAPs’ policy design. These factors centre around the countries not adequately implementing SAPs long term economic structural restructuring or not being “conducive to reform” by not having democratically elected governments, or by being ethnically fragmented such as in the cases of Zambia and Mozambique (Sparks, 1994) (Dollar & Svensson, 2000). But why is it most convincing to attribute the stall and reversal in development to the neoliberal design of adjustment programmes? An exploration of what neoliberalism is, what neoliberal structural adjustment entailed during the 1980s and 1990s, as well as how this led to worsening living conditions, is necessary. Ever since the early 1980s, neoliberalism has been the dominant variant of capitalism globally, with only a few exceptions of countries’ governments, at times, following a different economic model. The policies central to a neoliberal capitalist model imposed by long term structural adjustment in the 1980s and 1990s, had the overarching intention of lowering inflation and most importantly generating export-oriented growth that would attract foreign direct investment, which in turn could service debt (Ismi, 2004). Specifically, the main policies pursued were privatisation of industries and services, even of basic necessities such as healthcare where user fees were imposed, austerity meaning cuts to state spending on welfare including education, various financial deregulation measures leading to capital flight, labour deregulation entailing further work precarity; interest rate increases making borrowing prohibitive, as well as international trade liberalisation that removed protection from global markets’ forces (Oppong, 2014). In practice, the application of these neoliberal policies caused economic and social inequalities to widen between the overwhelming majority of people whose living conditions deteriorated, and the wealthiest classes both in developing and developed countries who accumulated more wealth (Navarro, 2007). As a direct outcome of the neoliberal economic restructuring, the portion of sub-Saharan Africa’s population living on less than 1.25 USD per day, therefore in extreme poverty as measured by the UN at the time, increasing by five percent from the year 1980 to 1990 (Oppong, 2014) (DESA, 2009). The International Covenant on Economic, Social and Cultural Rights, a global treaty signed or ratified by almost all African and Latin American countries at the time, was concurrently being violated by SAPs implemented in the same countries, during the 1980s and 1990s (United Nations, 1966). For example, the fundamental human right to health, codified in the aforementioned covenant, was breached when healthcare was universally privatised to be sold off mostly to transnational corporations. Therefore, healthcare became less accessible for most because of user fees imposed, causing the cases of ill-health to soar (Loewenson, 1993).

In this section, the case of structural adjustment implementation in Kenya and Argentina, will be critically assessed to reveal that neoliberal structural adjustment worsened living conditions. Kenya gained its independence from the British Empire in 1963 and for two decades, experienced impressive socioeconomic development with all the indicators showing the country well above the average of sub-Saharan Africa (Ronoi, 2002). As did other newly independent countries in the Global South before SAPs were imposed on them, Kenya followed a dirigiste development path whereby the state redistributed wealth and invested in healthcare, education and broadly welfare provisions. This meant that, for example, life expectancy at birth increased markedly from 44 years when Kenya won its independence, to 61 years by the early 1980s (Swamy, 1994). In the 1980s and especially during the 1990s, the country witnessed a reversal across all areas of development, something that is principally attributable to SAPs (Ronoi, 2002). Indicatively, by 2000 life expectancy at birth was 54 years, dropping seven years since the introduction of SAPs roughly two decades earlier (World Bank, 2020). In Kenya’s case, the neoliberal adjustment implemented by these programmes was almost identical to what was applied in all other developing countries experiencing structural adjustment at the time. Essentially, these IMF and World Bank adjustment policies and likewise their impacts as outlined further above, did not discriminate in terms of GDP between wealthier Argentina and poorer Kenya. That being said, beyond the strong similarities in impacts of structural adjustment policies, in Kenya the worsening living conditions and conditions of scarcity also exacerbated violent ethnic tensions, often leading to death and displacement (Ronoi, 2002).

The case of Argentina stands out in some respects, because by the mid-1970s when SAPs were implemented, it was a relatively developed and industrialised country for Global South levels. This is due to a combination of organised workers’ struggles led by influential trade unions, significant import substitution industrialisation by statist governments and the fact that Argentina was independent from the Spanish Empire since 1816, a century and a half earlier than the sub-Saharan African countries where SAPs were applied (Teubal, 2001). The country followed a series of neoliberal adjustment policies imposed by the IMF and World Bank, both under the military junta from 1976 to 1983 and the democratically elected governments from then onwards until 1999 (Teubal, 2001). Counterintuitively, the most severe structural adjustment for the Global South took place under the democratically elected Menem government from 1989 to 1999. This can be attributed to the greater legitimacy his government had to carry out such policies. Argentina’s experience of neoliberal structural adjustment, similar to any other country’s experience of SAPs, meant that income, wealth and power was transferred to the wealthiest classes, while the majority of its people faced worsening living conditions (Teubal, 2001). Indicatively, by 2002 after more than two decades of structural adjustment, when the Argentinian economy was in crisis, the share of national income received by the top 1 percent of earners was 15.3 percent, while that of the bottom 50 percent of earners was 7.8 percent, almost half of what it was in the early 1970s (World Inequality Database, 2020). This phenomenon is known as “social disarticulation”, whereby the economy is increasingly disarticulated from the demands of the majority of people who work for an income to make ends meet or to subsist (Samir, 1982). Fortunately, this disarticulation caused by SAPs mobilised opposition movements who demanded dignified living conditions and who were successful in ending the most severe neoliberalism by electing Nestor Kirchner as the country’s president in 2003 (Teubal, 2001).

To conclude, SAPs during the 1980s and 1990s were responsible for the lost decades for development in Africa and Latin America, where development stalled or even reversed with living conditions deteriorating. Owing to the neoliberal design of economic restructuring prescribed by SAPs, living conditions worsened in the countries they were implemented. By outlining the differences between the pre-structural adjustment, pre-neoliberal period and what followed, it has become clear that the policies pursued by these programmes were detrimental to the standards of living in the Global South during the 1980s and 1990s. This is accurately demonstrated through Kenya’s and Argentina’s case studies, with their significant similarities as well as their differences, especially the fact that Kenya is one of the poorest countries in the world whereas Argentina is one of the wealthier.

DESA, 2009. Rethinking Poverty: Report on the World Social Situation 2010, New York: United Nations.

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Swamy, G., 1994. Kenya: patchy, intermittent commitment. In: I. Husain & R. Faruqee, eds. Adjustment in Africa: Lessons from Country Case Studies. Washington DC: World Bank, pp. 193–237.

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