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Research and analysis on Africa
Africa beyond Structural Adjustment
Introductory comments presented by the author at a public panel discussion arranged in connection with the NAI SAP programme's Synthesis Conference on Structural Adjustment and Socio-Economic Change in Contemporary Africa, held at the Center for Development Studies in Copenhagen 3-5 December, 1998. Papers presented at the conference can be requested.
By: Adebayo Olukoshi, researcher at the Nordic Africa Institute.
In the period since the early 1980s, African countries have been implementing structural adjustment programmes under the supervision of the International Monetary Fund and the World Bank. The programmes were designed to move African countries away from the state-led model of development which they had followed in the first two decades of independence towards a fully market-driven system of allocation of resources. The broad intellectual context for this reform drive was offered by the Berg Report of 1981 which argued that the reason why African economies were in difficulty and were unable to fulfill their promise was the dominant role of the state in the political economy. Berg argued the case for African economic policy-making to shift emphasis towards getting prices right and liberating the forces of the market in order both to revive exports and improve the incomes of the rural agricultural populace. His main arguments were taken up by the World Bank which commissioned his report; they were also extended by Robert Bates whose influential study on agricultural policy in Sub-Saharan Africa gave concrete empirical backing to most of his propositions. With the publication of the Berg Report and the study by Bates came the birth of an entire "political economy" industry rooted in public choice approaches and dedicated to understanding the political, social and economic context of structural adjustment reforms in Africa.
It is ironic that the Berg Report was issued at about the same time as the Organisation of African Unity had, at its extraordinary Summit in Lagos in 1980, taken stock of the declining economic fortunes of its members and decided to adopt a plan of action aimed at overcoming the problems. The so-called Lagos Plan of Action retained the broad state-led model of accumulation that had underpinned post-independence efforts at economic development. It also laid out a detailed programme of accelerated and increased regional co-operation on the continent, emphasising the importance of this approach to the prospects of African countries for sustained development. But where the Lagos Plan of Action placed emphasis on the role of adverse external factors such as declining terms of trade accompanied by falling primary commodity exports and the rising energy costs associated with the two oil shocks of the 1970s, the Berg report completely disregarded the role of external factors, focusing instead on internal policy distortions. Structural adjustment, in the way in which it was presented, was designed to overcome the domestic economic policy constraints that had militated against African economic development. As is already well known, great emphasis was placed in the design and implementation of the programme on the liberali sation of prices, interest rates, exchange rates, trade and investment. Furthermore, subsidies were withdrawn, cost recovery measures introduced, state agricultural marketing boards dissolved or privatised, the civil service trimmed down and public enterprises slated for reform either through commercialisation or privatisation.
However, nearly two decades after the introduction of structural adjustment, African countries are yet to experience any significant movement towards economic recovery and sustained development. From being initially a programme designed to be a temporary diversion from the task of development, structural adjustment has become the very fulcrum around which efforts are now made to organise development. Although, some countries have experienced 4-5 per cent growth rates these are just marginally above the rate of population growth, and they are also too low in real terms to make a decisive impact on the developmental prospects of countries. In fact, the growth rates of the best African adjusters are still little more than a shadow of the average rates of growth which African countries recorded during the 1960s and early 1970s, the hey-day of the state-led model of accumulation. This is entirely ironic given that a key claim of the Berg Report was that post-independence Africa experienced economic stagnation or very low rates of growth on account of the interventionist economic policies that were pursued. The adjustment programmes have also taken their toll on the social livelihoods of Africans, not just the so-called vulnerable groups - women and children - but also the erstwhile middle class whose ranks have been severely depleted.
Quest for an alternative
In responding initially to the lacklustre performance of the adjustment programmes, the approach of the Fund and the Bank consisted more in blaming implementational slippages by African countries and less in questioning the validity of the assumptions that under-pinned the adjustment package in the light of observed reality. African governments were repeatedly accused of failing to adhere to the adjustment programmes, backsliding on commitments, and, in some cases, abandoning the reform process altogether. This stop-go- stop approach to reform tended, according to the Bank and the Fund, to complicate the task of reform since it amounted to a postponement of the hard decisions that needed to be taken. To compel African countries to show the required "political will" and "commitment", the conditionality and cross-conditionality clauses that had been employed in the first place to win acceptance of the adjustment programme were revamped to try to ensure adherence to the prescribed policy measures. Suggestions from African officials and intellectuals that the adjustment programmes were wreaking havoc on the real sectors of the economy and the social and political fabric of countries were lightly dismissed as nothing more than the special pleadings of vested interests whose rent-seeking/ neo-patrimonialist ways were being severely threatened by the market reform agenda. It was only when external voices, notably from UNICEF and the ILO, began to validate some of the African criticisms of the adjustment framework that the Bank and the Fund started to respond favourably. These external voices in turn emboldened the quest within Africa for an alternative to the adjustment policies. Perhaps the best known of these was the African Alternative Framework to Structural Adjustment (AAFSAP) that was promoted, with limited success, by the Economic Commission for Africa which had been the main source of technical advice for the development of the 1980 Lagos Plan of Action.
In the guise of responding to the concerns raised about the adverse effects of adjustment the Bank and the Fund introduced programmes that were purportedly designed to mitigate the social costs of market reform. In fact, these programmes served little purpose given the poor commitment to funding the social dimensions of adjustment and the grafting of the relief programmes onto the adjustment framework without that framework itself being reviewed. And although it is true that in Uganda and Ghana, the social expenditure of the governments has gone up, these increased expenditures were achieved on the back of very massive public sector employee retrenchments, itself a social problem. Also, both in Uganda and Ghana which are currently being celebrated as success stories in the beneficial social sector effects of adjustment, the question of popular access to the services on offer remains a real one.
WB admits errors
Beyond seeking to save structural adjustment by disclaiming its adverse consequences, a new chapter would appear to have been opened in the quest for African economic reform signalled by the statements of the new Chief Economist and Senior Vice-President of the World Bank, Joe Stiglitz, who has pointedly admitted to major errors in the design and implementation of structural adjustment programmes. Significantly, his critique not only echoes the essence of many of the arguments which radical critics of the adjustment framework and process have made but also touches on some of the core assumptions of the programme and the entire question of ownership. Interestingly, an influential voice from within the Bank has become part of the pleas for a post-adjustment blueprint for development. Yet, nagging questions persist. To admit that some of the wild experimentation with market liberalisation was both reckless and damaging to the real sectors of African economies is one thing; to be prepared to take responsibility for this and then put in place mechanisms for making amends and also preventing this kind of moral hazard from repeating itself is another thing. Clearly, costs have to be associated with the advocacy of faulty policies that fail to live up to the promise of their authors. To put it in another way, mechanisms have to be devised for making the Bank and the Fund accountable.
The future?
But beyond the question of how to avoid moral hazard in Bank and Fund policy prescriptions, there are several important issues associated with the basic ingredients of a post-adjustment strategy for African economic recovery and development. Some of these issues include the role of the state in the economy, the pace of the liberalisation agenda and how this relates to the circumstances of particular countries, and the ownership of the reform process. These are not easy questions to tackle but it seems clear now that highly intrusive conditionality is counterproductive and cannot be a substitute for genuine policy ownership by African countries. This in turn has implications for the policy design and implementation process, since governments would have to pay closer attention to internal political and policy negotiations that would give legitimacy to the reform agenda that is adopted. Unfortunately, the extent to which the Bank is willing to respect domestic ownership is severely compromised by continuing reliance on conditionality and the principle and logic of selectivity which it has been promoting. Furthermore, the question of the role of the state in making some of the social and infrastructure investments which are crucial for national economic well-being but which are not of immediate interest to the private sector needs to be taken into account. It is in this context that many African intellectuals have been making the case for the state to resume a critical role in the accumulation process. Ordinarily, this would appear to tally with the Bank's recent views recognising the state as a key player in the political economy. But more than that recognition, and setting aside the Bank's practice in this area, it is pertinent to underline that the critical issue is less whether the state has a role and more the type of state we are talking about. Africa certainly needs much more than a state that simply creates an "enabling" environment. In the end, theoreticians and practitioners of development would have to come to terms with the fact that the old approach of developing and applying a one-size-fits-all policy reform model to African countries is both outdated and inappropriate. For, in some countries, the critical reform issues that are at stake may even have little or nothing to do with the goal of getting prices right that became the prime obsession of the authors of the orthodox structural adjustment model.
In the period since the early 1980s, African countries have been implementing structural adjustment programmes under the supervision of the International Monetary Fund and the World Bank. The programmes were designed to move African countries away from the state-led model of development which they had followed in the first two decades of independence towards a fully market-driven system of allocation of resources. The broad intellectual context for this reform drive was offered by the Berg Report of 1981 which argued that the reason why African economies were in difficulty and were unable to fulfill their promise was the dominant role of the state in the political economy. Berg argued the case for African economic policy-making to shift emphasis towards getting prices right and liberating the forces of the market in order both to revive exports and improve the incomes of the rural agricultural populace. His main arguments were taken up by the World Bank which commissioned his report; they were also extended by Robert Bates whose influential study on agricultural policy in Sub-Saharan Africa gave concrete empirical backing to most of his propositions. With the publication of the Berg Report and the study by Bates came the birth of an entire "political economy" industry rooted in public choice approaches and dedicated to understanding the political, social and economic context of structural adjustment reforms in Africa.
It is ironic that the Berg Report was issued at about the same time as the Organisation of African Unity had, at its extraordinary Summit in Lagos in 1980, taken stock of the declining economic fortunes of its members and decided to adopt a plan of action aimed at overcoming the problems. The so-called Lagos Plan of Action retained the broad state-led model of accumulation that had underpinned post-independence efforts at economic development. It also laid out a detailed programme of accelerated and increased regional co-operation on the continent, emphasising the importance of this approach to the prospects of African countries for sustained development. But where the Lagos Plan of Action placed emphasis on the role of adverse external factors such as declining terms of trade accompanied by falling primary commodity exports and the rising energy costs associated with the two oil shocks of the 1970s, the Berg report completely disregarded the role of external factors, focusing instead on internal policy distortions. Structural adjustment, in the way in which it was presented, was designed to overcome the domestic economic policy constraints that had militated against African economic development. As is already well known, great emphasis was placed in the design and implementation of the programme on the liberali sation of prices, interest rates, exchange rates, trade and investment. Furthermore, subsidies were withdrawn, cost recovery measures introduced, state agricultural marketing boards dissolved or privatised, the civil service trimmed down and public enterprises slated for reform either through commercialisation or privatisation.
However, nearly two decades after the introduction of structural adjustment, African countries are yet to experience any significant movement towards economic recovery and sustained development. From being initially a programme designed to be a temporary diversion from the task of development, structural adjustment has become the very fulcrum around which efforts are now made to organise development. Although, some countries have experienced 4-5 per cent growth rates these are just marginally above the rate of population growth, and they are also too low in real terms to make a decisive impact on the developmental prospects of countries. In fact, the growth rates of the best African adjusters are still little more than a shadow of the average rates of growth which African countries recorded during the 1960s and early 1970s, the hey-day of the state-led model of accumulation. This is entirely ironic given that a key claim of the Berg Report was that post-independence Africa experienced economic stagnation or very low rates of growth on account of the interventionist economic policies that were pursued. The adjustment programmes have also taken their toll on the social livelihoods of Africans, not just the so-called vulnerable groups - women and children - but also the erstwhile middle class whose ranks have been severely depleted.
Quest for an alternative
In responding initially to the lacklustre performance of the adjustment programmes, the approach of the Fund and the Bank consisted more in blaming implementational slippages by African countries and less in questioning the validity of the assumptions that under-pinned the adjustment package in the light of observed reality. African governments were repeatedly accused of failing to adhere to the adjustment programmes, backsliding on commitments, and, in some cases, abandoning the reform process altogether. This stop-go- stop approach to reform tended, according to the Bank and the Fund, to complicate the task of reform since it amounted to a postponement of the hard decisions that needed to be taken. To compel African countries to show the required "political will" and "commitment", the conditionality and cross-conditionality clauses that had been employed in the first place to win acceptance of the adjustment programme were revamped to try to ensure adherence to the prescribed policy measures. Suggestions from African officials and intellectuals that the adjustment programmes were wreaking havoc on the real sectors of the economy and the social and political fabric of countries were lightly dismissed as nothing more than the special pleadings of vested interests whose rent-seeking/ neo-patrimonialist ways were being severely threatened by the market reform agenda. It was only when external voices, notably from UNICEF and the ILO, began to validate some of the African criticisms of the adjustment framework that the Bank and the Fund started to respond favourably. These external voices in turn emboldened the quest within Africa for an alternative to the adjustment policies. Perhaps the best known of these was the African Alternative Framework to Structural Adjustment (AAFSAP) that was promoted, with limited success, by the Economic Commission for Africa which had been the main source of technical advice for the development of the 1980 Lagos Plan of Action.
In the guise of responding to the concerns raised about the adverse effects of adjustment the Bank and the Fund introduced programmes that were purportedly designed to mitigate the social costs of market reform. In fact, these programmes served little purpose given the poor commitment to funding the social dimensions of adjustment and the grafting of the relief programmes onto the adjustment framework without that framework itself being reviewed. And although it is true that in Uganda and Ghana, the social expenditure of the governments has gone up, these increased expenditures were achieved on the back of very massive public sector employee retrenchments, itself a social problem. Also, both in Uganda and Ghana which are currently being celebrated as success stories in the beneficial social sector effects of adjustment, the question of popular access to the services on offer remains a real one.
WB admits errors
Beyond seeking to save structural adjustment by disclaiming its adverse consequences, a new chapter would appear to have been opened in the quest for African economic reform signalled by the statements of the new Chief Economist and Senior Vice-President of the World Bank, Joe Stiglitz, who has pointedly admitted to major errors in the design and implementation of structural adjustment programmes. Significantly, his critique not only echoes the essence of many of the arguments which radical critics of the adjustment framework and process have made but also touches on some of the core assumptions of the programme and the entire question of ownership. Interestingly, an influential voice from within the Bank has become part of the pleas for a post-adjustment blueprint for development. Yet, nagging questions persist. To admit that some of the wild experimentation with market liberalisation was both reckless and damaging to the real sectors of African economies is one thing; to be prepared to take responsibility for this and then put in place mechanisms for making amends and also preventing this kind of moral hazard from repeating itself is another thing. Clearly, costs have to be associated with the advocacy of faulty policies that fail to live up to the promise of their authors. To put it in another way, mechanisms have to be devised for making the Bank and the Fund accountable.
The future?
But beyond the question of how to avoid moral hazard in Bank and Fund policy prescriptions, there are several important issues associated with the basic ingredients of a post-adjustment strategy for African economic recovery and development. Some of these issues include the role of the state in the economy, the pace of the liberalisation agenda and how this relates to the circumstances of particular countries, and the ownership of the reform process. These are not easy questions to tackle but it seems clear now that highly intrusive conditionality is counterproductive and cannot be a substitute for genuine policy ownership by African countries. This in turn has implications for the policy design and implementation process, since governments would have to pay closer attention to internal political and policy negotiations that would give legitimacy to the reform agenda that is adopted. Unfortunately, the extent to which the Bank is willing to respect domestic ownership is severely compromised by continuing reliance on conditionality and the principle and logic of selectivity which it has been promoting. Furthermore, the question of the role of the state in making some of the social and infrastructure investments which are crucial for national economic well-being but which are not of immediate interest to the private sector needs to be taken into account. It is in this context that many African intellectuals have been making the case for the state to resume a critical role in the accumulation process. Ordinarily, this would appear to tally with the Bank's recent views recognising the state as a key player in the political economy. But more than that recognition, and setting aside the Bank's practice in this area, it is pertinent to underline that the critical issue is less whether the state has a role and more the type of state we are talking about. Africa certainly needs much more than a state that simply creates an "enabling" environment. In the end, theoreticians and practitioners of development would have to come to terms with the fact that the old approach of developing and applying a one-size-fits-all policy reform model to African countries is both outdated and inappropriate. For, in some countries, the critical reform issues that are at stake may even have little or nothing to do with the goal of getting prices right that became the prime obsession of the authors of the orthodox structural adjustment model.