Policies: By 1980, the anti-state, pro-market philosophy had been adopted by the World
Bank, whose power over policy-making in developing countries enormously increased with
the onset of the acute debt crisis in the early 1980s and the initiation of structural adjustment
loans. While the World Bank emphasised deregulation, reduced price controls, subsidies,
tariffs, and the elimination of restrictions against direct foreign investment, the IMF promoted
a monetarist view - that the prime objective of macro-economic policy should be to eliminate
budgetary and trade imbalances through tight control over the budget and money supply.9
Considerations of poverty reduction or basic needs virtually disappeared from the policy
views of these institutions. Throughout the developing world there were massive policy
switches in the 1980s in accordance with the IFI agenda.10 The policies were intended to
bring about a switch of behaviour from P/C and COOP to M, all premised on the supposed
greater efficiency of M modes of behaviour.
Consequences: for the regions most subject to Washington tutelage - Africa and Latin
America - the stabilisation and adjustment policies were accompanied by falling GDP per
capita for much of the 1980s, falling real pre capita expenditure on the social services and
rising poverty. Social indicators worsened in a number of countries and investment rates fell.
Although it does not appear that economic or social performance was systematically worse
in 'adjusting' than 'non-adjusting' countries - and may have been marginally better - the
widespread rise in poverty led many to question the apparent elimination of human concerns
from the development agenda.11
9 Williamson, 1990, conveniently labelled this set of
policies as representing the 'Washington consensus'.
10 See e.g. Williamson (ed.) 1990, World Bank and UNDP,
1989, Dean et al., 1994, for evidence of the advance of
these policies in Latin America and Africa.
11
There have been numerous studies of the macro-
effects of stabilisation and adjustment policies, both by
the IFIs themselves and by academics. The assessments of
the IMF tend to suggest somewhat negative effects on
growth, while those of World Bank slight positive effects
compared with an estimated 'counterfactual'. Effects on
investment were generally negative. See, e.g. Khan and
Knight, 1985; Khan, 1990; Killick et al., 1991; World
Bank, 1990; Mosley et al., 1991; Elbadawi, 1992. Most
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