The Politics of Envy: Statism as Theology by Doug Bandow

Author:Doug Bandow [Bandow, Doug]
Language: eng
Format: epub
Tags: Constitutions, Political Science, General
ISBN: 9781351294102
Google: ByFWDwAAQBAJ
Goodreads: 39950081
Publisher: Routledge
Published: 1994-01-01T00:00:00+00:00

Future Promise of Adjustment Lending?

Still, would so-called adjustment loans, particularly SALs, make sense if project funding did not undercut pressure for reform? Introduced in 1980, SALs basically offer to pay borrowers to improve their economic policies. The goal of SALs—economic freedom for people in developing states—is worthwhile. And despite the often traumatic experience of nations embarking upon adjustment programs, surveys consistently find that countries which adopt economic reform programs do better than those which do not. The reason is simple. Adjustment must eventually occur; delaying it only makes the process more painful.

However, this does not mean that Bank SALs have substantially advanced the reform process. One early Bank study warned that “the theory of reform on which the SAL rests is not clearly spelled out.” How exactly are SALs expected to buy change? Moreover, there are potential countervailing risks: necessary reforms may be identified with unpopular foreigners, for instance. Yet if SALs do not result in meaningful economic adjustment, admits Bank staffer Moeen Qureshi, “it has largely been money down the drain.”

A variety of surveys raise serious doubts about the efficacy of SALs. A 1986 Operations Evaluation Department review found that none of the ten major SAL recipients had implemented its reform program on time. Two countries failed almost entirely and four other had serious difficulties in meeting the conditions. The auditors reported that “the impact of the structural adjustment programs on a countries economic performance has generally remained below expectations.” In 1991 Senior Vice President Stern admitted that “Time and again the best of policy intentions, the best of policy letters solemnly agreed to and signed by the finance minister and the Bank, broke down.”

Some at the Bank argue that recent adjustment lending has been more successful. A 1990 Bank review, for instance, concluded that six of every ten loan conditions had been fully met and another 24 percent had been “substantially fulfilled.” Even if true, however, such compliance statistics may mean little. Not all conditions are equal: some are formalistic and superfluous, which means their fulfillment increases formal compliance figures without improving the borrowers’ economic performance. And surveys show that the highest degree of compliance tends to occur on the least important conditions.

In any case, the Bank’s optimistic assessment is not shared by outsiders. A major study underwritten by Great Britain’s Overseas Development Administration estimated the overall compliance rate for adjustment loans to be around 54 percent. Moreover, the researchers observed slippage even in the best of cases and found other SALs to be almost complete failures. The major achievement in the Philippines, for instance, was to get the Marcos regime “to consider liberalization of any sort,” not to actually do anything. As for Kenya, explained the report, “of all the policy conditions attached to its money, … it is difficult to name a single one during the SAL period which was implemented because of its pressure.”

One of the most serious flaws in SALs is weak policy requirements. Bank consultants Elliot Berg and Alan Batchelder, for instance, contend that preconditions for SALs “look hard, but the conditionality involved is mostly illusory.

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