Structural Adjustment

After winning independence, many global South governments introduced progressive and radical policies to rebuild economic sovereignty: land reform, public services, capital controls, labour protections, nationalization of key resources, plus tariffs and subsidies to support national industry. These policies delivered rapid development and improved social indicators.¹

But the core states were not pleased, as this shift constrained their access to cheap labour and resources, and reduced their control over Southern markets, triggering supply-price inflation and contributing to a crisis of capital accumulation in the 1970s. The US Federal Reserve responded by raising interest rates toward 20%, hoping to crush wages. This triggered a debt crisis across the global South, and governments took steps toward default. To protect Wall Street banks, the US sought to enforce debt payment by using the World Bank and the IMF to impose structural adjustment programmes (SAPs) on Southern governments.

SAPs forced governments to cut public spending and divert resources to debt service.  They also privatized public assets and abolished protective tariffs, subsidies and regulations, rolling back the progressive reforms of the post-colonial era. SAPs were the mechanism by which neoliberalism was imposed on the global South, as a backlash against the anti-colonial movement. From 1980-2004, SAPs were imposed on 132 countries, representing 82% of the world population, shifting control over macroeconomic policy from the parliaments of the global South to bankers and technocrats in Washington and New York.

Structural adjustment “kicked away the ladder” to sovereign industrialization,² but also re-cheapened Southern labour and resources, forced open Southern markets, and organized Southern production around supplying Northern firms through global commodity chains. SAPs therefore restored the basic tenets of the imperial arrangement.³ This arrangement has enabled the core to achieve a massive appropriation of wealth from the global South through unequal exchange.⁴

For the global South, the consequences were disastrous. Structural adjustment induced a prolonged economic crisis across most regions, with national income declining and stagnating for the rest of the 20^th century.  SAPs compressed Southern consumption, caused poverty and unemployment to increase, reduced healthcare access and caused social progress to slow.⁵ See our entry on global poverty for more.

This chart illustrates the crisis in Latin America, Sub-Saharan Africa, the Middle East and North Africa. After three decades of impressive gains, income contracted dramatically under SAPs and did not recover until more than two decades later. This decline in living standards triggered widespread protests which eventually forced the IMF and World Bank to abandon some of their more draconian policies.

In China and India, structural adjustment did not lead to a collapse in national income. On the contrary, their income growth accelerated during the 1980s and 1990s. They had strong nationalist governments that had come to power through popular anti-colonial struggle, and were able to negotiate more reasonable terms with the IMF and World Bank. By contrast, many of the major African and Latin American countries were governed by military regimes that came to power through Western-backed coups against anti-colonial leaders, and were willing to align with Western economic interests.

Even so, SAPs had a serious impact on food security in India and China. In India, the proportion of the rural population consuming insufficient calories increased from 56% in 1973-4 to 76% in 2009-10.⁶ There was a similar increase among the urban population. According to the Indian economists Utsa Patnaik and Prabhat Patnaik, this occurred because neoliberal reforms reallocated agricultural production away from food for working-class people and towards cash crops for export to the global North.

In China, structural adjustment caused a dramatic increase in extreme poverty, measured in terms of access to basic subsistence.⁷ Under SAPs, the Chinese government dismantled the system of public provisioning and price controls that had previously guaranteed access to food, housing, and other basic necessities at low cost. Even though national income improved in China during this period, a dramatic spike in the cost of food pushed over 60% of the Chinese population into extreme poverty.

Only a few countries managed to resist SAPs and avoid succumbing to neoliberal policy. Cuba is one of them. Cuba managed to maintain universal public provisioning systems while they were dismantled or prevented across the rest of the global South.  As a result, Cuba has some of the best social indicators of any country in the global South today.

This is clear when it comes to nutrition. Since the revolution of 1959, Cuba’s socialist government has funded a public food programme designed to ensure universal access to basic nutritional requirements. Thanks to this system, Cuba has one of the lowest death rates due to malnutrition in the world, lower even than in many high-income countries, such as the United States and France. Remarkably, Cuba has achieved this while subject to an illegal US-imposed blockade that prevents them from importing essential goods. This demonstrate the power of public provisioning, and illustrates what could have been achieved elsewhere in the global South if structural adjustment had not been imposed.

Countless studies have demonstrated the human toll of neoliberal policy, but one way to illustrate the scale of it is to compare the death rate from malnutrition in Cuba to neoliberal economies where public food systems have either been dismantled or prevented. This map illustrates recent research showing deaths due to malnutrition for all countries in excess of Cuban levels over the period 1990 to 2019. This includes 35,000 deaths in the US; 409,000 in Mexico; 729,000 in China; 1.2 million in Indonesia; and 3.65 million in India. In total, 15.63 million excess deaths could have been prevented with Cuba-style policies.