Wednesday, 1 December 1999

From "Debating foreign aid: right versus left"

By Jean-Philippe Thérien (Third World Quarterly, Vol 23, No 3, 2002, p. 452).

It should be recalled that the 1980s began with the most severe recession of the postwar period, and the rise of protectionist and monetarist policies throughout the developed world. One effect of these policies was to exacerbate the debt load of the Third World, which swelled from US$639 to US$1341 billion between 1980 and 1990." In this climate of crisis, structural adjustment programmes monitored by the IMF and the World Bank became the only possible development model, as well as the prerequisite for obtaining foreign aid [...] Structural adjustment was founded on two complementary principles: 'scaling down the role of the state and strengthening that of the market in the economy' [...] In practical terms, policy reforms involved reducing public spending, liberalising trade, devaluing currencies, restricting credit and promoting free enterprise.

Throughout the decade, the international financial institutions (IFIs) justified their rigid application of structural adjustment policies with two main arguments. First, for the IFIs, the difficult financial situation of the developing countries was the result of their poor economic management rather than of causes related to their external environment. Second, the IFIs viewed the structural adjustment solution as a matter of common sense: development of any kind was impossible without getting the macro-economic fundamentals right. In an environment dominated by the needs of the market, the very concept of aid was subject to modification.

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