Help that Makes things Worse

A Malnutrition during the 1980s is increasing in many parts of the developing world. Evidence of rising malnutrition exists in ten African countries, Belize, Bolivia, Chile, Jamaica, and parts of the Philippines and Sri Lanka.

B Infant mortality has been rising in some areas – including Barbados, Brazil and Ghana – after decades of decline, while the trend towards improvement has been halted in at least twenty-one countries.

C The proportion of low birthweight babies increased in at least ten countries between 1979 and 1982, including Barbados, Cameron, Guinea-Bissau, Jamaica, Malaysia, Rwanda and Tanzania. Diseases thought to have been eliminated have reappeared – yaws and yellow fever in Ghana, for example, and malaria in Peru.

D Education has also been affected. In Chile and Ghana, for example, primary-school attendance has been falling and drop-outs rates increasing; child labour has become more common. In Bolivia absenteeism from primary schools increased from 2.2. per cent in 1980 to 8.5 per cent in 1983.

E In Sri Lanka there is evidence that literacy and school attendance decreased from 1979 to 1981. In Jamaica the percentage has dropped sharply. School failures and drop-outs rates have been increasing in Sao Paolo, Brazil.

F The health services are acutely short of drugs in most countries; and in many, including Ghana, Jamaica and Sri Lanka, health workers’ morale is low because of falling incomes, deteriorating facilities, and lack of money for day-to-day expenses.

G In Ghana attendance at clinics and hospitals fell by a third between 1979 and 1983. In Jamaica charges have been introduced for services which were previously free, while patients in hospitals have to bring their own linen and food to survive.

H These problems are the end product of the most severe economic recession since 1930s. Developing countries were the victims of the world recession of 1980-83, of an almost unprecedented worsening in their terms of trade (which has not been reversed despite some recovery in the industrialized countries), and of an intolerable debt burden.

I These negative trends had a magnified effect on developing economies. Stagnant world trade reduced their trade opportunities and the prices of their exports. Aid flows stagnated, being less in 1985 than in 1980, while net private bank lending, which had provided the major source of development finance in the 1970s fell to almost nothing in the 1980s. By 1985, the only net positive bank lending to developing countries was the lending mandated by international agreements.

J Developing countries also had to contend with the huge debt accumulated in the 1970s which, for the third world as a whole, had grown to $ 888 billion by the end of 1985, while debt service payments – payments owed on past borrowing – exceeded $ 130 billion, representing nearly a quarter of their export earnings.

K The resulting imbalances led to a need for major economic adjustments in many countries – but unfortunately the form of the adjustment policies has frequently contributed to worsening conditions among vulnerable groups, especially in the short run.

l IMF adjustment policies typically include three elements: first, policies to cut demand, especially government expenditure, so as to lower imports, improve the trade balance, and reduce the budget deficit; secondly, policies to improve the allocation of resources so as to increase the production of exports and of substitutes for imports; and thirdly, policy reforms designed to improve the long-run efficiency of the economy.

M In the first category, adjustment packages almost invariably include limits on government expenditure, with cuts in subsidies being a priority, and controls over domestic lending.

N In the second category, policies include exchange rate devaluation and increased producer prices to boost agricultural production.

O In the third category, a typical adjustment package includes reforming financial markets and increasing interest rates, liberalizing imports, and privatizing state-owned assets. Restrictions on demand – or deflation – dominate all conventional adjustment packages while the other elements occur in the majority of cases.

P There are three major mechanisms by which adjustment policies tend to worsen conditions for the most vulnerable, at least in the short run: by reducing employment, and earnings from employment, for low-income households; by increasing the price of basic commodities, especially food; by reducing government expenditure on basic services – especially health, education and sanitation…..

Q Between 1979 and 1983 expenditure per head on health at constant prices decreased in nearly half the African countries for which data exist, and in 60 per cent of the countries in Latin America. Education expenditure per head declined in a third of African countries and 59 per cent of Latin American counties….

R No adjustment programme is acceptable which allows children to be sacrificed for the sake of financial stability. Yet this has happened, and it need not happen. Alternatives exist. What is needed now is to convince decision makers at all levels – both in national governments and international institutions – to take appropriate action quickly. Many children will die; and many of the survivors suffer permanent damage because of failure to act now.

S Debts should be rescheduled. Very poor countries need to have at least some of their debt cancelled.

T Aid flow needs to be more substantial, they should be redirected to measures which benefit those at risk, and they must be guaranteed over the medium term.

U Almost all developing countries need greater access for their exports to the markets of developed countries.