26 November 2015

Globalization, growth and adverse health outcomes in sub-Saharan Africa

Dilara writes*

In the 1980´s economic globalization has been largely taken up by international monetary organizations like the IMF to the newly independent states in the post colonial ear in the form of trade liberalization, growth and poverty reduction programs. These programs were often set out as conditional loans to be given to developing countries with the terms of a restructuring in domestic policies particularly on the grounds of domestic economy. The loan programs also known as structural adjustment (SALs) are applied when cuts in government spending, privatization of government enterprises, and promotion of free trade, foreign investment and ownership were introduced. Since 1985, application of conditional loans has increased and had varied impacts on the economies of some of the states. A very common critique towards the SAL/SAPs has ben its limitations to civil well-being Zimbabwe for example, experienced a radical growth in the mid 1980s and was used an an example of successful implementation of SALs by the IMF.

Despite Zimbabwe’s financial leap, social sectors like health and education deteriorated, mostly due to cuts in government spending between 1991-1996. With the introduction of the cost-sharing system, healthcare expenditure increase and limited proper access for low-income populations. This impact was not only limited to Zimbabwe´s case but also to counties like Tanzania where healthcare turned into a commodity rather than a right [pdf]. The crippling of the healthcare and education systems was problematic especially because caused stagnations in state development. One could argue that implementation of Structural Adjustment Loans/Programs were driven by economic growth but lowered the social well-being which had an adverse outcome on the overall development of the state.

Bottom Line: While SAL/SAPs were aimed to promote economic globalisation in developing countries through liberalised, trade and conditional loans to reduce poverty, it crippled healthcare systems through cuts in government spending. This had an adverse effect on the well-being of the civil society.

* Please comment on these posts from my microeconomics / growth & development economics students, to help them with unclear analysis, other perspectives, data sources, etc.

3 comments:

  1. Hey Dilara,

    Your post highlights the neo-colonialist ways of the IMF, in which they often impose their growth models on less developed nations regardless of differences in backgrounds, culture and institutions. Although the states that apply for loans through the IMF they may be pursing any means to achieve self-reliance and better themselves with the income of funds, it would be naive to believe that the programs set out by the IMF are ‘one size fits all’.

    However, although the SALs may prove to be successful in some cases and create economic growth, it would be helpful to know whether or not there is a true pattern of positively impacted development within the nation- as it seems that a nation during this transition phase would better enhance itself and produce more sustainable prospects if they placed a greater emphasis on increasing their levels of development and standards of living.

    One solution that I see to this imposition of sovereignty by the developed world would be to abolish the ‘cookie-cutter model’ of the SALs and the IMF directly loan funds to nations which have set up goals and programmes specific to their individual needs and wants.

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  2. Hey Dilara,

    You correctly point out how the cost-sharing policy has undermined development in sub-Saharan Africa. Zimbabwe, Tanzania and even Kenya have had additional problems resulting from this policy. The difficulties of getting by due to higher health care and educational costs have also resulted in many anti-social income generating activities like hawking, drug dealing and selling stolen goods (Mwangi 2000).

    Despite that these anti-social income generating activities undermine sustainable development due to its illegal nature. It also undermines the growth of its economy since it operates outside of the formal economy.

    Thus I agree with Alicia that the best solution to this multi-faceted problem related to the SALs is to abolish the policy increase in funding for people with specific local circumstances within the country.

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  3. Hi Dilara,

    This is a very interesting topic and I think you raise valid points about the problems associated with structural adjustment loans. I would like to point out a possible alternative to SALs. I recently came across this article (http://www.un.org/africarenewal/magazine/april-2015/how-healthy-africa%E2%80%99s-sovereign-bond-debt) about how many subsaharan African companies have started issuing government bonds over the last decade or so. The advantage of this is that it provides an alternative source of income for governments of developing countries with no conditions attached. They can also determine the repayment period themselves.
    There have been some successful cases of bond revenues being invested in things like infrastructure projects and education, but there are also risks associated with bond issuance. Some countries have already gotten themselves into so much debt that they have asked for IMF assistance too repay the investors, possibly leading to more conditional loans. A second problem is that bonds have to be issued in foreign currency (US dollars or Euro) because investors tend to be weary of local currencies. This means that the value of debt increases when these currencies appreciate.
    At the moment government bonds are not yet a perfect solution, but perhaps if they can be useful when issued responsibly.

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