This document provides background information on Ghana's Structural Adjustment Program (SAP) implemented in 1983. It discusses Ghana's deteriorating economic situation following independence that led successive governments to seek assistance from international lenders. Ghana was compelled to accept the SAP promoted by the IMF and World Bank to receive loans. The SAP required Ghana to implement free market reforms like privatization, trade liberalization, currency devaluation and cuts to social spending. The document examines the origins and requirements of the SAP as well as its impacts on Ghana's development.
The document discusses key concepts and principles of economic development. It defines development as a multi-dimensional process involving not just economic growth but also social, institutional and cultural changes that improve living standards. Several metrics are used to measure development, including GDP per capita, human development index, health and education indicators. Common characteristics of developing countries are identified such as low living standards, income inequality, poverty, dependence on agriculture and lack of industrialization. Theories of development and classifications of countries by institutions like the UN and World Bank are also outlined.
The document discusses several theories of economic growth and development that were proposed over time, including:
1) Linear stage theories that propose economies progress through distinct stages of growth. This includes Rostow's stages of growth model and the Harrod-Domar model focusing on physical capital.
2) Structural change theories like the Lewis model that view economies as having traditional and modern sectors, with labor moving from the former to the latter.
3) Dependency theories that argue less developed economies are held back by powerful external forces from more developed "core" economies.
4) Neoclassical growth theories including the Solow model incorporate technological progress and consider factors like savings rates, population growth, and capital accumulation.
Lewis proposed a model of economic development where a developing economy consists of two sectors: a subsistence agricultural sector and a capitalist industrial sector. Workers move from the agricultural sector with zero marginal productivity to the industrial sector with higher productivity. This increases profits in the industrial sector, fueling expansion and absorbing more agricultural workers. Eventually, wages rise in the agricultural sector as well. However, capitalist profits may not be reinvested as assumed, and other assumptions like constant wages are questionable. Overall, Lewis sought to explain how economies develop by transforming their economic structure and increasing savings and investment rates.
Schumpeter Theory of Economic DevelopmentKrishna Lala
Schumpeter's theory of economic development centers around the concept of "creative destruction", where innovations introduced by entrepreneurs periodically revolutionize the economic structure and cause long-term growth. He argues that development occurs in discontinuous bursts due to new innovations, rather than gradually. While innovations fuel capitalist progress, Schumpeter believes capitalism will eventually decline as large firms replace entrepreneurs and undermine private property.
The document discusses the global economic crisis of 2007-2009. It provides details on:
- How the US recession impacted other major economies like China, Europe, and Japan through decreasing exports and economic growth.
- Countries like India saw declines in sectors like IT and manufacturing that relied on US demand.
- The crisis had varying effects around the world, with some countries like Australia avoiding recession and others like Africa being less impacted due to less integrated markets.
- The downturn revealed weaknesses in many economies and their reliance on stable global demand, testing their financial systems and regulations.
Economic growth refers to an increase in a country's real GDP or output, measured as a higher value of goods and services produced, while economic development encompasses broader socioeconomic changes that improve living standards. Development considers changes in factors like income distribution, employment opportunities, education, health, and sustainability, whereas growth only focuses on quantitative increases in production. The Human Development Index provides a more comprehensive measure of a country's progress than GDP alone by also accounting for literacy, life expectancy, and other quality of life indicators.
The Russian financial crisis of 1998 resulted from declining productivity, a fixed exchange rate between the ruble and foreign currencies, and declining oil prices. On August 17, 1998, Russia devalued the ruble, defaulted on domestic debt, and imposed a moratorium on foreign debt repayment. This led to high inflation of 84%, bank closures, reduced agricultural subsidies, and a political crisis for President Yeltsin. Russia recovered through rising oil prices in 1999-2000, devaluation boosting domestic industries, non-monetary exchange, and cash infusions paying back wages and taxes.
The document discusses key concepts and principles of economic development. It defines development as a multi-dimensional process involving not just economic growth but also social, institutional and cultural changes that improve living standards. Several metrics are used to measure development, including GDP per capita, human development index, health and education indicators. Common characteristics of developing countries are identified such as low living standards, income inequality, poverty, dependence on agriculture and lack of industrialization. Theories of development and classifications of countries by institutions like the UN and World Bank are also outlined.
The document discusses several theories of economic growth and development that were proposed over time, including:
1) Linear stage theories that propose economies progress through distinct stages of growth. This includes Rostow's stages of growth model and the Harrod-Domar model focusing on physical capital.
2) Structural change theories like the Lewis model that view economies as having traditional and modern sectors, with labor moving from the former to the latter.
3) Dependency theories that argue less developed economies are held back by powerful external forces from more developed "core" economies.
4) Neoclassical growth theories including the Solow model incorporate technological progress and consider factors like savings rates, population growth, and capital accumulation.
Lewis proposed a model of economic development where a developing economy consists of two sectors: a subsistence agricultural sector and a capitalist industrial sector. Workers move from the agricultural sector with zero marginal productivity to the industrial sector with higher productivity. This increases profits in the industrial sector, fueling expansion and absorbing more agricultural workers. Eventually, wages rise in the agricultural sector as well. However, capitalist profits may not be reinvested as assumed, and other assumptions like constant wages are questionable. Overall, Lewis sought to explain how economies develop by transforming their economic structure and increasing savings and investment rates.
Schumpeter Theory of Economic DevelopmentKrishna Lala
Schumpeter's theory of economic development centers around the concept of "creative destruction", where innovations introduced by entrepreneurs periodically revolutionize the economic structure and cause long-term growth. He argues that development occurs in discontinuous bursts due to new innovations, rather than gradually. While innovations fuel capitalist progress, Schumpeter believes capitalism will eventually decline as large firms replace entrepreneurs and undermine private property.
The document discusses the global economic crisis of 2007-2009. It provides details on:
- How the US recession impacted other major economies like China, Europe, and Japan through decreasing exports and economic growth.
- Countries like India saw declines in sectors like IT and manufacturing that relied on US demand.
- The crisis had varying effects around the world, with some countries like Australia avoiding recession and others like Africa being less impacted due to less integrated markets.
- The downturn revealed weaknesses in many economies and their reliance on stable global demand, testing their financial systems and regulations.
Economic growth refers to an increase in a country's real GDP or output, measured as a higher value of goods and services produced, while economic development encompasses broader socioeconomic changes that improve living standards. Development considers changes in factors like income distribution, employment opportunities, education, health, and sustainability, whereas growth only focuses on quantitative increases in production. The Human Development Index provides a more comprehensive measure of a country's progress than GDP alone by also accounting for literacy, life expectancy, and other quality of life indicators.
The Russian financial crisis of 1998 resulted from declining productivity, a fixed exchange rate between the ruble and foreign currencies, and declining oil prices. On August 17, 1998, Russia devalued the ruble, defaulted on domestic debt, and imposed a moratorium on foreign debt repayment. This led to high inflation of 84%, bank closures, reduced agricultural subsidies, and a political crisis for President Yeltsin. Russia recovered through rising oil prices in 1999-2000, devaluation boosting domestic industries, non-monetary exchange, and cash infusions paying back wages and taxes.
This is a recording of a revision webinar exploring some of the causes of financial crises in developed and emerging market countries. There are many different types of crises ranging from currency/external debt crises to disturbances in banking systems.
This document summarizes a study on the relationship between financial development and economic growth in emerging market economies. The study uses empirical analysis through fixed effects regression models to examine how various financial development indicators, such as private credit levels, banking system assets, liquid liabilities, and stock market capitalization, impact per capita GDP growth in 27 emerging markets from 1960 to 2011. The results suggest that financial development can promote economic growth through indirect benefits, and several financial indicators were found to have a significant positive relationship with economic growth in the countries studied, including India. However, policies are needed to manage risks from financial openness and ensure credit quality.
The document discusses economic structural changes that occur during development. It defines structural changes as long-term shifts in the composition of economic sectors, such as the rise of manufacturing and services and decline of agriculture and industry over time. Countries experience rapid structural transformation as they industrialize, exemplified by many developing nations in Asia and Latin America that grew their manufacturing sectors. However, structural changes differ across countries depending on factors like endowments and history. More recently, the service sector has become dominant globally as the role of agriculture and manufacturing declines.
This document provides an introduction to basic macroeconomics terminology and concepts. It defines macroeconomics as focusing on the large picture of the overall economy, while microeconomics examines individual markets and economic actors. Key terms explained include inflation, recession, GDP, fiscal and monetary policy tools, and business cycles. GDP is discussed as a measurement of economic growth, and the relationships between actual, potential, nominal, and real GDP are outlined.
This document summarizes Harrod's growth model, which argues that steady economic growth is inherently unstable due to entrepreneurs' inability to accurately predict the warranted rate of growth. It outlines Harrod's key assumptions and shows how the actual growth rate diverging from the warranted rate leads to boom/bust cycles. The model concludes that full employment steady growth is impossible to achieve due to exogenous factors like savings, technology, and population growth being rigid over time.
The Greek debt crisis began in 2009 when it was revealed that Greece's budget deficit was much larger than originally reported, reaching 15.4% of GDP rather than the claimed 6.7%. This caused Greece's borrowing costs to skyrocket and prevented the country from repaying its debts. The crisis had severe impacts, including unemployment rising to 25%, riots over austerity measures, and Greece ultimately defaulting on IMF loans in 2015. While three bailout packages involving the EU, ECB, and IMF imposed austerity, Greece's debt-to-GDP ratio rose to over 180% as the economy shrank by 25%. The crisis demonstrated the risks of misleading deficit reporting and overspending by Greece's government.
Inequality, Economic Growth and Developmenttutor2u
The document discusses inequality, economic growth, and development. It covers several topics: Kuznets and income inequality; real income growth in the USA and top income shares; a global perspective on inequality between 1988-2008 showing rising incomes for the middle class in China and India. It also discusses the root causes of inequality like less progressive tax systems and market failures in education and housing. Strategies to reduce inequality include investing in education, pursuing inclusive pro-poor growth policies, and microfinance. Overall, the document examines inequality from various economic perspectives and proposes approaches to promote shared prosperity across populations.
Dr. Katundu is a lecturer at the Moshi Co-operative University (MoCU). He works under the Department of Community and Rural Development specializing in the area of rural development. He holds a PhD and Master of Arts in Rural development from the Sokoine University of Agriculture (SUA), Morogoro Tanzania and a Bachelor of Arts (Hons) in Geography and Environmental Studies from the University of Dar-Es-Salaam, Tanzania. His research interests include: Agriculture and rural development, rural land reform, rural livelihoods and cooperatives, community driven development, environment and natural resource management, entrepreneurship development, impact evaluation. His PhD thesis is titled: Entrepreneurship Education and Business Start Up: Assessing Entrepreneurial Tendencies among University Graduates in Tanzania whereas; Master dissertation is titled: Evaluation of the Association of Tanzania Tobacco Traders’ Reforestation Programme: The Case of Urambo District.
The document discusses the Phillips Curve and the relationship between inflation and unemployment. It notes that in the short-run, there is an inverse relationship where lower unemployment is associated with higher inflation and vice versa. However, in the long-run there is no consistent tradeoff because aggregate supply shocks can cause both inflation and unemployment to rise simultaneously. While adverse shocks can shift the Phillips Curve outward in the short-run, in the long-run the curve will always be vertical as the economy adjusts through factors like declining wages and input prices.
The document provides an overview of public debt including its definition, history, types and trends in developing countries. It discusses how the role of governments has increased over time leading to rising public debt levels. Developing countries in particular have experienced growing debt burdens due to factors like budget deficits, economic crises, and infrastructure development needs. Prudent management of public debt is important to control costs and risks. The objectives of debt management include meeting government borrowing needs at minimum cost while developing domestic capital markets.
Inward FDI flows to developing economies in 2014 reached their highest level at $681 billion with a 2 per cent rise. Developing economies thus extended their lead in global inflows. China became the world’s largest recipient of FDI. Among the top 10 FDI recipients in the world, 5 are developing economies. What are the advantages and disadvantages of foreign direct investment for developing countries?
The Harrod-Domer model theorizes that a country's economic growth rate is defined by its savings level and capital-output ratio. It suggests there is no natural balanced growth. The model was developed independently by Roy Harrod and Evsey Domar to explain growth in terms of savings and capital productivity. It requires continuous net investment to sustain real income and production growth. The model's assumptions include no government intervention, full initial employment, a closed economy, fixed capital-labor ratios and constant savings and interest rates. Its main criticism is the unrealistic assumption of no reason for sufficient growth to maintain full employment.
Deficit financing is bad economics but good politicsGaurav Sinha
The document discusses deficit financing, which occurs when a government's expenditures exceed its revenues and the difference is covered by borrowing. Deficit financing is often used during wars, economic depressions, and periods of economic development to stimulate the economy. However, deficit financing also carries risks like higher interest payments, inflation, and limitations on using debt for productive investments. The document advocates for prudent fiscal management to reduce deficits and cut non-essential spending in order to address financial crises.
1) Industrial growth in India increased since independence, but faced challenges like weak infrastructure and lack of government intervention initially.
2) The first two Five-Year Plans aimed to develop industries in the public sector and allocate public resources.
3) Various industrial policies and controls were implemented to regulate growth, including licensing, import/export controls, and allocation of credit and raw materials.
4) Industrial growth accelerated in the 1980s due to policy shifts, but slowed from the mid-1960s to the late 1970s due to constraints like slow agricultural growth and infrastructure bottlenecks.
The Latin American debt crisis of the 1980s was triggered when Mexico defaulted on $80 billion of sovereign debt in 1982. Several other Latin American countries also defaulted. The crisis had its roots in the 1970s when high oil prices led to petrodollar recycling, with US banks lending large amounts to Latin American countries. Rising US interest rates in the early 1980s made debt repayments unsustainable as rates Latin American countries had to pay increased. The crisis was addressed through IMF and World Bank led austerity programs and debt restructuring under the Brady Plan and Baker Plan, focusing countries on export-led growth and trade liberalization. Long term impacts included shifts away from import substitution industrialization and a push for greater economic openness across
The document discusses Amartya Sen's concept of poverty as a severe lack of capabilities rather than just income or basic needs. It argues that basic needs are simply means to various ends like health, education, and productive activity. There are many means that can provide a single end, and many ends require multiple means. It also discusses how Sen's capabilities approach considers what people are able to do and be, going beyond just commodities and ownership. Poverty involves a severe failure of a person's capabilities.
The document discusses economic growth in several countries and regions. It provides data showing some of the fastest growing countries in 2015, with Papua New Guinea having the highest growth rate at 19.33%. It also discusses factors that have contributed to rapid economic growth in many African countries in recent years, such as rising commodity prices and increasing foreign direct investment. The document analyzes sources of economic growth in China, finding that over 60% has come from increasing capital and labor inputs, while 30-40% has come from rising productivity.
effect of inflation on indian economy pptBabasab Patil
India's economic growth over recent decades has had significant impacts globally and environmentally. India has experienced strong growth averaging over 5% annually since the 1980s, reducing poverty and becoming an emerging global economic power. This growth is projected to contribute substantially to future global economic expansion. However, it also risks increasing global energy demand and greenhouse gas emissions substantially if India's development remains fossil fuel reliant. There is potential for India and other developing nations to pursue more sustainable "leapfrog" strategies emphasizing renewable energy and resource efficiency.
This document outlines the structural theory of inflation in less developed countries. It discusses how structural defects and bottlenecks exist in these economies that cause inflation, making the traditional quantity theory of money not applicable. Three main types of bottlenecks are described: agricultural bottlenecks due to issues like land ownership that limit food production growth; government resource constraints that force them to print money to fund infrastructure projects leading to inflation; and foreign exchange bottlenecks from low exports and high import payments causing currency devaluations and price increases. The structural theory argues these bottlenecks must be addressed through balanced investment instead of just monetary or demand-side policies to effectively reduce inflation in less developed economies.
The Bretton Woods system established in 1944 aimed to govern international monetary and exchange rate regulations through institutions like the IMF and World Bank. It intended to set a fixed exchange rate between currencies pegged to the U.S. dollar, which was pegged to gold. This was expected to promote international cooperation and financial stability. However, the system broke down in the 1970s as countries could no longer maintain the required exchange rate adjustments due to large balance of payments crises, replacing it with floating exchange rates.
This is a recording of a revision webinar exploring some of the causes of financial crises in developed and emerging market countries. There are many different types of crises ranging from currency/external debt crises to disturbances in banking systems.
This document summarizes a study on the relationship between financial development and economic growth in emerging market economies. The study uses empirical analysis through fixed effects regression models to examine how various financial development indicators, such as private credit levels, banking system assets, liquid liabilities, and stock market capitalization, impact per capita GDP growth in 27 emerging markets from 1960 to 2011. The results suggest that financial development can promote economic growth through indirect benefits, and several financial indicators were found to have a significant positive relationship with economic growth in the countries studied, including India. However, policies are needed to manage risks from financial openness and ensure credit quality.
The document discusses economic structural changes that occur during development. It defines structural changes as long-term shifts in the composition of economic sectors, such as the rise of manufacturing and services and decline of agriculture and industry over time. Countries experience rapid structural transformation as they industrialize, exemplified by many developing nations in Asia and Latin America that grew their manufacturing sectors. However, structural changes differ across countries depending on factors like endowments and history. More recently, the service sector has become dominant globally as the role of agriculture and manufacturing declines.
This document provides an introduction to basic macroeconomics terminology and concepts. It defines macroeconomics as focusing on the large picture of the overall economy, while microeconomics examines individual markets and economic actors. Key terms explained include inflation, recession, GDP, fiscal and monetary policy tools, and business cycles. GDP is discussed as a measurement of economic growth, and the relationships between actual, potential, nominal, and real GDP are outlined.
This document summarizes Harrod's growth model, which argues that steady economic growth is inherently unstable due to entrepreneurs' inability to accurately predict the warranted rate of growth. It outlines Harrod's key assumptions and shows how the actual growth rate diverging from the warranted rate leads to boom/bust cycles. The model concludes that full employment steady growth is impossible to achieve due to exogenous factors like savings, technology, and population growth being rigid over time.
The Greek debt crisis began in 2009 when it was revealed that Greece's budget deficit was much larger than originally reported, reaching 15.4% of GDP rather than the claimed 6.7%. This caused Greece's borrowing costs to skyrocket and prevented the country from repaying its debts. The crisis had severe impacts, including unemployment rising to 25%, riots over austerity measures, and Greece ultimately defaulting on IMF loans in 2015. While three bailout packages involving the EU, ECB, and IMF imposed austerity, Greece's debt-to-GDP ratio rose to over 180% as the economy shrank by 25%. The crisis demonstrated the risks of misleading deficit reporting and overspending by Greece's government.
Inequality, Economic Growth and Developmenttutor2u
The document discusses inequality, economic growth, and development. It covers several topics: Kuznets and income inequality; real income growth in the USA and top income shares; a global perspective on inequality between 1988-2008 showing rising incomes for the middle class in China and India. It also discusses the root causes of inequality like less progressive tax systems and market failures in education and housing. Strategies to reduce inequality include investing in education, pursuing inclusive pro-poor growth policies, and microfinance. Overall, the document examines inequality from various economic perspectives and proposes approaches to promote shared prosperity across populations.
Dr. Katundu is a lecturer at the Moshi Co-operative University (MoCU). He works under the Department of Community and Rural Development specializing in the area of rural development. He holds a PhD and Master of Arts in Rural development from the Sokoine University of Agriculture (SUA), Morogoro Tanzania and a Bachelor of Arts (Hons) in Geography and Environmental Studies from the University of Dar-Es-Salaam, Tanzania. His research interests include: Agriculture and rural development, rural land reform, rural livelihoods and cooperatives, community driven development, environment and natural resource management, entrepreneurship development, impact evaluation. His PhD thesis is titled: Entrepreneurship Education and Business Start Up: Assessing Entrepreneurial Tendencies among University Graduates in Tanzania whereas; Master dissertation is titled: Evaluation of the Association of Tanzania Tobacco Traders’ Reforestation Programme: The Case of Urambo District.
The document discusses the Phillips Curve and the relationship between inflation and unemployment. It notes that in the short-run, there is an inverse relationship where lower unemployment is associated with higher inflation and vice versa. However, in the long-run there is no consistent tradeoff because aggregate supply shocks can cause both inflation and unemployment to rise simultaneously. While adverse shocks can shift the Phillips Curve outward in the short-run, in the long-run the curve will always be vertical as the economy adjusts through factors like declining wages and input prices.
The document provides an overview of public debt including its definition, history, types and trends in developing countries. It discusses how the role of governments has increased over time leading to rising public debt levels. Developing countries in particular have experienced growing debt burdens due to factors like budget deficits, economic crises, and infrastructure development needs. Prudent management of public debt is important to control costs and risks. The objectives of debt management include meeting government borrowing needs at minimum cost while developing domestic capital markets.
Inward FDI flows to developing economies in 2014 reached their highest level at $681 billion with a 2 per cent rise. Developing economies thus extended their lead in global inflows. China became the world’s largest recipient of FDI. Among the top 10 FDI recipients in the world, 5 are developing economies. What are the advantages and disadvantages of foreign direct investment for developing countries?
The Harrod-Domer model theorizes that a country's economic growth rate is defined by its savings level and capital-output ratio. It suggests there is no natural balanced growth. The model was developed independently by Roy Harrod and Evsey Domar to explain growth in terms of savings and capital productivity. It requires continuous net investment to sustain real income and production growth. The model's assumptions include no government intervention, full initial employment, a closed economy, fixed capital-labor ratios and constant savings and interest rates. Its main criticism is the unrealistic assumption of no reason for sufficient growth to maintain full employment.
Deficit financing is bad economics but good politicsGaurav Sinha
The document discusses deficit financing, which occurs when a government's expenditures exceed its revenues and the difference is covered by borrowing. Deficit financing is often used during wars, economic depressions, and periods of economic development to stimulate the economy. However, deficit financing also carries risks like higher interest payments, inflation, and limitations on using debt for productive investments. The document advocates for prudent fiscal management to reduce deficits and cut non-essential spending in order to address financial crises.
1) Industrial growth in India increased since independence, but faced challenges like weak infrastructure and lack of government intervention initially.
2) The first two Five-Year Plans aimed to develop industries in the public sector and allocate public resources.
3) Various industrial policies and controls were implemented to regulate growth, including licensing, import/export controls, and allocation of credit and raw materials.
4) Industrial growth accelerated in the 1980s due to policy shifts, but slowed from the mid-1960s to the late 1970s due to constraints like slow agricultural growth and infrastructure bottlenecks.
The Latin American debt crisis of the 1980s was triggered when Mexico defaulted on $80 billion of sovereign debt in 1982. Several other Latin American countries also defaulted. The crisis had its roots in the 1970s when high oil prices led to petrodollar recycling, with US banks lending large amounts to Latin American countries. Rising US interest rates in the early 1980s made debt repayments unsustainable as rates Latin American countries had to pay increased. The crisis was addressed through IMF and World Bank led austerity programs and debt restructuring under the Brady Plan and Baker Plan, focusing countries on export-led growth and trade liberalization. Long term impacts included shifts away from import substitution industrialization and a push for greater economic openness across
The document discusses Amartya Sen's concept of poverty as a severe lack of capabilities rather than just income or basic needs. It argues that basic needs are simply means to various ends like health, education, and productive activity. There are many means that can provide a single end, and many ends require multiple means. It also discusses how Sen's capabilities approach considers what people are able to do and be, going beyond just commodities and ownership. Poverty involves a severe failure of a person's capabilities.
The document discusses economic growth in several countries and regions. It provides data showing some of the fastest growing countries in 2015, with Papua New Guinea having the highest growth rate at 19.33%. It also discusses factors that have contributed to rapid economic growth in many African countries in recent years, such as rising commodity prices and increasing foreign direct investment. The document analyzes sources of economic growth in China, finding that over 60% has come from increasing capital and labor inputs, while 30-40% has come from rising productivity.
effect of inflation on indian economy pptBabasab Patil
India's economic growth over recent decades has had significant impacts globally and environmentally. India has experienced strong growth averaging over 5% annually since the 1980s, reducing poverty and becoming an emerging global economic power. This growth is projected to contribute substantially to future global economic expansion. However, it also risks increasing global energy demand and greenhouse gas emissions substantially if India's development remains fossil fuel reliant. There is potential for India and other developing nations to pursue more sustainable "leapfrog" strategies emphasizing renewable energy and resource efficiency.
This document outlines the structural theory of inflation in less developed countries. It discusses how structural defects and bottlenecks exist in these economies that cause inflation, making the traditional quantity theory of money not applicable. Three main types of bottlenecks are described: agricultural bottlenecks due to issues like land ownership that limit food production growth; government resource constraints that force them to print money to fund infrastructure projects leading to inflation; and foreign exchange bottlenecks from low exports and high import payments causing currency devaluations and price increases. The structural theory argues these bottlenecks must be addressed through balanced investment instead of just monetary or demand-side policies to effectively reduce inflation in less developed economies.
The Bretton Woods system established in 1944 aimed to govern international monetary and exchange rate regulations through institutions like the IMF and World Bank. It intended to set a fixed exchange rate between currencies pegged to the U.S. dollar, which was pegged to gold. This was expected to promote international cooperation and financial stability. However, the system broke down in the 1970s as countries could no longer maintain the required exchange rate adjustments due to large balance of payments crises, replacing it with floating exchange rates.
The IMF and World Bank were established in 1944 to promote international monetary cooperation and economic development. The IMF works to foster global monetary cooperation and secure financial stability, while the World Bank provides loans and technical assistance to developing countries for programs that reduce poverty. Both organizations are based in Washington D.C. and have over 180 member countries. They work to stabilize exchange rates and international trade, as well as promote high employment, sustainable growth, and poverty reduction worldwide.
What is Structural Adjustment Programs of IMFSAJJAD HAIDER
Structural Adjustment Programmes (SAPs) are economic policies for developing countries that have been promoted by the World Bank and International Monetary Fund (IMF) since the early 1980s by the provision of loans conditional on the adoption of such policies.
BSFF Buffer Stock Financing Facility (1969–2000)
CCFF Compensatory and Contingency Financing Facility
(1988–2000)
CCL Contingent Credit Line (1999 –2003)
CFF Compensatory Financing Facility (1963–88, 2000–09)
The document summarizes information about the International Monetary Fund (IMF) and the World Bank. The IMF tracks global economic trends and provides financing and policy advice to member countries. Its goals are to promote financial stability, international trade, and economic growth. The World Bank provides long-term loans and financing to developing countries for capital programs and development projects, with the goal of reducing poverty. Key differences are that the IMF focuses on short-term balance of payments issues while the World Bank concentrates on long-term economic development projects.
India faced a balance of payments crisis in 1991 that pushed the country near bankruptcy. In response, India began liberalizing its economy through various reforms like abolishing industrial licensing, freeing interest rates, and opening the economy to foreign investment and trade. The economic reforms led to rapid GDP growth, exports of IT services, and increases in foreign exchange reserves, investment, and savings over the following decades. However, liberalization also introduced new challenges around governance, infrastructure development, and unemployment.
The document summarizes the Bretton Woods system established in 1944. It discusses the goals of creating international monetary cooperation and stable currency exchange rates through the IMF and World Bank. However, within a few years, problems emerged as member nations underestimated the funds needed, draining the IMF. The end of the gold standard in the 1970s severed the final link between currencies and gold, transitioning to a system of flexible exchange rates. The IMF and World Bank continue operating, though they have faced criticism over some policies.
Structural adjustment programs (SAPs) are economic reform policies imposed by the IMF and World Bank on developing countries as conditions for receiving loans. SAPs began in the 1980s and involved 187 programs across 64 countries. They aimed to boost exports, reduce government deficits, and improve investment climates. Typical SAP measures included currency devaluation, cutting social spending, privatizing industries, and deregulating markets. While SAPs achieved some economic growth in countries like Ghana, they also had many negative social impacts by reducing education, healthcare and living standards. Critics argue SAPs undermine national sovereignty and prioritize private profits over public welfare. In response to criticisms of SAPs, the IMF and World Bank introduced Poverty
The IMF was created to address financial problems and promote monetary stability. However, its policies have marginalized less developed countries (LDCs) by imposing loan conditions that are unsuitable and increase dependence. Nigeria initially had little debt but accumulated large debts under successive governments. While leaders criticized IMF conditions, they ultimately accepted its prescriptions. Structural adjustment programs had negative impacts like contraction of incomes and costs borne by the poor. The debt crisis can be understood through dependency theory which views LDCs as peripheries exploited to benefit wealthy center states. However, liberalization was meant to reduce resource gaps but paradoxically increased indebtedness and poverty. Corruption by leaders and exploitation in trade relations between Nigeria and Western nations worsened the debt situation.
Structural Adjustment Policies and Africa, November 2013Africa Cheetah Run
Structural Adjustment Policies are economic policies which countries must follow in order to qualify for new World Bank and International Monetary Fund (IMF) loans and help them make debt repayments on the older debts owed to commercial banks, governments and the World Bank. Most countries in Africa rely on SAP's for economic development and poverty reduction. On the contrary some countries have sighted exploitation by donor countries.
The document discusses several criticisms of the International Monetary Fund (IMF), including that it has supported dictatorial regimes for political reasons, exacerbated neocolonialism in developing countries, mismanaged the economic crises in Argentina in the 1990s and several Asian countries in the late 1990s, and failed to predict or appropriately respond to the global housing bubble crisis and recession. The IMF is also criticized for having policies that are often procyclical and exacerbate economic downturns in low-income countries. Reforms suggested include reducing the United States' outsized influence over the IMF and giving more voice to developing countries.
This work shows the various stages the economy of Cameroon went through since independence. It is an analytical eye and element to learn more about this state
(1) The document discusses economic development challenges in Cameroon since independence from France and Britain in 1960-1961. (2) It analyzes Cameroon's economic policies and five-year development plans from 1961-1990 and the impacts of structural adjustment programs in the 1980s. (3) The document applies Fandjio's Deceptive Power Theory to explain how political elites in Cameroon have manipulated situations like an avian flu outbreak to deceive farmers and pursue their own economic interests over those of citizens.
The document discusses the positive and negative influences of scholars, analysts, and international news media on Africa's economic development programs. It notes that media coverage has both encouraged global awareness of issues in Africa but also sometimes perpetuated negative stereotypes. International organizations like the IMF and World Bank introduced structural adjustment programs in over 40 African countries that have been associated with increasing food insecurity, declining health services, and rising poverty. While the goals were to stabilize economies and restructure markets, the programs had unintended negative consequences for many Africans. In recent decades, some scholars argue there has been a shift with some African nations emerging as part of a "New Africa Rising."
1) The IMF faces many challenges as global economic and political power shifts, including rising populism, protectionism, and great power rivalry. It must adapt to remain relevant.
2) Key changes needed are rebalancing voting shares to reflect economic weights, increasing financial resources, and making the top leadership truly global and merit-based.
3) Ultimately, the IMF relies on countries cooperating in a rules-based global system. If that cooperation breaks down, the IMF's role will be difficult to maintain.
This document provides an economic overview and outlook for sub-Saharan Africa in three parts:
1) Economic growth has slowed in 2015-2016 due to falling commodity prices, though growth remains higher than other regions. There are large disparities between commodity exporters and importers.
2) New challenges to growth include lower commodity prices, deteriorating global financial conditions, and long-term challenges of climate change and rapid population growth.
3) Growth prospects are examined for select oil exporters, frontier economies, and individual countries like Cote d'Ivoire and Ghana, which are expected to continue robust growth despite challenges.
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The document summarizes the roles and impacts of the International Monetary Fund (IMF) and World Bank in Pakistan and other developing countries. It outlines how Pakistan has frequently received loans from the IMF since 1958 to address balance of payments issues and economic crises. While IMF programs in Pakistan in the 1990s failed to achieve targets, programs in the 2000s and 2010s helped restore fiscal stability. The World Bank also introduced structural adjustment programs and shifted to providing advice, expertise, and project-linked financing for development. However, both institutions have faced criticism for negative social, environmental, and economic impacts of their policy conditions.
East Asia experienced extensive economic growth in the second half of the 20th century while Latin America saw stagnated growth and decline. This was largely due to differences in total factor productivity. Latin America adopted import substitution industrialization which led to inefficient state-owned enterprises, high inflation, and vulnerability to external shocks. In contrast, East Asian countries limited government intervention and inflation while promoting exports, education, savings, and sustainable growth through balanced budgets and market policies. As a result, East Asia saw investment exceed 20% of GDP annually and rapid growth, while Latin America suffered from low productivity following economic shocks.
The document summarizes the global economic crisis, providing details on what an economic crisis is, the history of past crises like the Great Depression, common causes of crises, and the overall effects on countries. Specific countries that were heavily impacted by the crisis are discussed, such as Argentina, Australia, Thailand, and conclusions call for reforms to the international financial system to prevent future crises.
This document is an essay discussing constraints on state intervention in Sub-Saharan Africa since independence, and whether public policies conducted by high-growth Asian developmental states are relevant for Sub-Saharan African economies. It analyzes constraints such as weak institutions, dependence on commodities, and delayed development. It argues that while constraints make development difficult for Sub-Saharan Africa, countries can still follow the path of Asian developmental states by using state intervention to diversify their economies through policies like investing commodity revenues into other industries and infrastructure. It uses the examples of South Korea and the Republic of Congo to show how Congo could potentially follow a similar development path if it commits to diversifying its oil-dependent economy and strengthening state institutions.
The document discusses the global financial crisis, its causes and impact on various economies including Pakistan. It outlines steps taken by governments and organizations like the US, World Bank, and Pakistan to address the crisis. Suggestions include developing countries becoming less dependent on trade, spending on development rather than military for the US, and global coordination to limit contagion effects. Recovery signs include stabilizing policies by Pakistan's government and projected growth rates for countries like India and China.
The IMF was created in 1945 after WWII to prevent another Great Depression and promote international monetary cooperation. It is governed by 188 member countries and led by a Managing Director. The IMF aims to facilitate balanced global economic growth and make resources available to countries experiencing financial crises. It provides loans with conditions requiring economic reforms. While the IMF helped stabilize economies like China, programs in countries like Venezuela failed due to public backlash against imposed austerity measures, demonstrating how IMF involvement can infringe on national sovereignty.
The document discusses several topics related to inclusive growth and democratic governance in Africa:
1) Africa has experienced strong economic growth in recent years but growth has failed to reduce inequality or poverty for many. Youth unemployment poses a challenge to stability and sustained growth.
2) The Arab revolutions have inspired citizens across Africa and governments are taking action to address issues like inequality, poverty, employment and income distribution.
3) Barriers to inclusive growth in Africa include lack of government effectiveness, economic diversification, integration, and enabling environment for the private sector.
4) The AfDB aims to support inclusive growth through improving governance, infrastructure, private sector development, education, and addressing financial exclusion and vulnerability to shocks
The document discusses several topics related to inclusive growth and democratic governance in Africa:
1) Africa has experienced strong economic growth in recent years but growth has failed to reduce inequality or poverty for many. Youth unemployment poses a challenge to stability and continued growth.
2) The Arab revolutions have inspired citizens across Africa and governments are taking action to address issues like inequality, poverty, employment and income distribution.
3) Barriers to inclusive growth in Africa include lack of government effectiveness, lack of economic diversification, lack of integration, and an unfriendly environment for business.
4) The AfDB aims to support inclusive growth through improving governance, infrastructure, private sector development, education, and addressing financial exclusion and
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Current condition of world economy and Bangladesh in Covid-19 pandemic, Ways to recover from this pandemic destruction, Challenges faced by world and Bangladesh in Covid-19 pandemic
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Structural Adjustment Programmes in Ghana
1. VALLEY VIEW UNIVERSITY
FACULTY OF ARTS AND SOCIAL SCIENCES
DEPARTMENT OF DEVELOPMENT STUDIES
GROUP MEMBERS
NAME ID
MENSAH SOLOMON WISE 213DS01000055
KONOR WILLIAMS ENOCH 210DS01005716
KEITA SIRA 213DS02000907
ADOMAKO JASSIE ANDREW 213DS01000068
GINA YAA BENEWAAH 212DS01008594
TOPIC: STRUCTURAL ADJUSTMENT PROGRAME IN GHANA.
COURSE: THEORIES OF DEVELOPMENT AND
UNDERDEVELOPMENT
15TH
, APRIL, 2014.
LECTURER: MR SAMUEL ELVIS ADDO
2. INTRODUCTION
Ghana as a Nation has undergone many economic, social and political stress and turmoil just
after her final liberation from colonial domination in 1957. As a result, the people of Ghana
suffered, and their socio-economic and political plights worsened. Beside this the Nation was
absolutely left with nothing to boast of as its economy was completely ravaged by the unguarded
policies of her leaders. Ghana’s economy then deteriorated and decayed to an unthinkable level
thus giving room for governments (both incumbents and successive) to seek help from anywhere
and not taking into cognizance the dire implications and consequences of those assistance they
are seeking.
This presentation therefore focusses greatly on one of Ghana’s most controversial foreign
assistance during 1983 which was called the structural adjustment program (sap). It was
known in Ghana as the economic recovery program (erp). This term was first introduced into
the Ghana’s economy by General J.A Ankrah under the leadership of the National Liberation
Council (NLC) but was finally implemented by the military Junta Lieutenant J.J Rawlings
upon assuming office in his second military intervention known as the 31st December 1981
revolution with his Provisional National Defense Council regime (PNDC).
However, the high hopes of Kwame Nkrumah (Ghana’s original nationalist leader) and
Ghanaian were dimly shrouded as the economy of this vibrant Nation just after the struggle for
liberation was seen slowly teetering toward bankruptcy; with dried up foreign reserves,
Plummeting GDP and serious national debt among other economic woes.
A devastating phenomenon that struck Ghana from the early 1966 through to the mid-1990s
could best described as catastrophic for Ghana as her first National leader was overthrown in a
bloody coup. Ghana’s economy was in shatters and all attempts made to rebuild and restore
Ghana’s tarnished image proved futile.
3. The reconstruction of Ghana’s economy was virtually impossible, it rather fell under the
merciless dictates of the two Bretton Woods institutions’ namely- International Monetary
Fund (IMF) and World Bank sponsored Structural Adjustment Programs (SAPs). These
Bretton Woods institutions have touted Ghana as one of the best examples of successful
economic restructuring in Africa. Which however was a misrepresentation of facts about Ghana.
And the ramifications of these so called successful programs have produced dire costs to the
Ghanaian economy.
Our reflections in this presentation will therefore examine the following;
The real definition of the SAP,
Short history of the SAPs, World Bank, & the I.M.F formation,
Requirements of SAP from developing Nations (Ghana inclusive)
Why Ghana opted for the SAP,
Successes and failures of the SAP in Ghana,
And lastly the conclusion that the impact of these Adjustment Programs have not
been totally beneficial to Ghana’s development as is often claimed and pontificated
by the IMF and World Bank.
THE REAL DEFINITION OF THE SAP
Structural adjustment programs refer to the comprehensive economic programs that the major
international lenders such as the two Bretton Woods institutions require of developing countries
when they are granted a loan. It also embraces a set of "free market" economic policy reforms
imposed on the developing Nation’s as a condition for receipt of loans.
SHORT HISTORY OF THE SAPS, WORLD BANK, & THE I.M.F FORMATION
Structural Adjustment Programs- as they are known today, originated due to a series of global
economic disasters during the late 1970s: the oil crisis, debt crisis, multiple economic
depressions, and stagflation (recession, inflation and standstill of economic processes).
4. These fiscal disasters led policy makers to decide deeper intervention to improve a country's
overall well-being. Historically the International Monetary Fund and the World Bank were
conceived by 44 nations at the Bretton Woods Conference in 1944 with this goal;
Creating a stable economic framework for developing & post-war global economies.
The IMF- was originally envisioned to promote steady growth and full financial balance to
countries, offer unconditional loans to economies in crisis establish mechanisms to stabilize
exchange rates and to facilitate currency exchange.
Much of that vision, however, was never born out. Instead, the IMF took to offering loans based
on strict conditions as a result of compulsion from the U.S representatives and other major
stakeholders such as the so called rich Nations or the G7 Nations. For decades, the IMF and
World Bank have been largely controlled and directed by these so called developed nations such
as the USA, Germany, France, UK, Japan, Britain, and Canada... statistically the so called
G7 Nations hold more than 40% of the votes on the Boards of Directors of these institutions
of which the U.S. alone accounts for almost 20%... (16.45% of the votes at the World Bank,
and over 17% of the votes at the International Monetary Fund.) In addition, the World
Bank is 51% funded by the U.S. Treasury.
NB- Not surprisingly, the World Bank and IMF was directed by the governments of these
world’s richest countries to circumvent its vision to developing a policy that have the tendency
of decimating social safety and worsening labor and environmental standards in developing
countries. A policy ostensibly tailored to gain stronger influence over the economies of debt-
strapped governments in the South. Structural Adjustments Program was the end result of that
idea in the 1980s.
The World Bank -The International Bank for Reconstruction and Development was created to
serve a purpose;
Fund the rebuilding of infrastructure in nations ravaged by World War Two.
Its vision too, however, soon changed in the mid 1950’s.
Over the past two decades, the World Bank and International Monetary Fund (IMF) have
undermined Africa’s health through the policies they have imposed on their economies. The
5. dependence of poor and highly indebted African countries on World Bank and IMF loans
has given these institutions leverage to control economic policy-making in these countries.
The policies mandated by the World Bank and IMF have forced African governments to
orient their economies towards greater integration in international markets at the expense
of social services and long-term development priorities. They have reduced the role of the
state and cut back government expenditure.
Requirements of SAP from developing Nations
Since borrowing nations are usually in dire straits, they have no choice but to comply with
whatever plans are laid out in order to receive funds to keep their Nation’s functioning. This
means that the IMF and the World Bank can force through policies that the borrowing
government and the people themselves may oppose strongly to which in many ways can
undermine the democratic integrity and the will of the populace.
Some of the requirements usually takes the form of the following;
Extreme free market strategies, monetary austerity, Fiscal austerity, Privatization and
Financial Liberalization - such as;
deregulating banking sectors,
Cutting expenditures (austerity measures),
removing trade barriers,
Privatization or divestiture of all or part of state-owned enterprises- (privatizing
natural resources and government industries),
devaluing currencies against the dollar- (which increase import costs while
reducing the value of domestically produced goods), NB-Devaluation makes their
goods cheaper for foreigners to buy and theoretically makes foreign imports more
expensive),
strictly adhering to balanced budgets,
Enhancing the rights of foreign investors vis-à-vis national laws- (changing
national laws to make an environment more conducive to foreign investment),
building up export economies,
6. Trade liberalization, (lifting import and export restrictions and high interest rates
to attract foreign investment),
Removal of price controls and state subsidies,
a shift from growing diverse food crops for domestic consumption to specializing in
the production of cash crops or other commodities (like rubber, cotton, coffee,
copper, tin etc.) for export,
abolishing food and agricultural subsidies to reduce government expenditures,
Deep cuts to social programs usually in the areas of health, education and housing
and massive layoffs in the civil service.
Consequently Nations that fail to enact these programs (notably privatization, deregulation and
reduction of trade barriers.) may be subject to severe fiscal disciplines.
NB- Critics argue that the financial threats to poor countries amount to blackmail, and
that poor nations have no choice but to comply.
WHY GHANA OPTED FOR THE SAP.
Preamble to the origin of Ghana’s economic crisis and the SAPs consequent inception and
Implementation;
Explanation of the Origin of Ghana’s Economic Crisis and the consequent implementation of the
SAP in Ghana by the PNDC regime in 1983 stems from the poor approaches used by the
incumbent and successive governments.
As a result, one need also to revisit the statistics in order to fully appreciate the economic decay
Rawlings and the PNDC inherited which paved the way for the SAPs final implementation in
Ghana.
Ghana’s Decision therefore to Implement Structural Adjustment Program (SAP), dates back to
the late 1960s when the N.L.C overthrew Kwame Nkrumah, Ghana’s first president in a
bloodless coup d'état.
1) At independence in March 1957, Ghana’s prospects for developments were bright and
there was general optimism in the international community that an irreversible process of
political, social, and economic development was about to unfold. Ghana was having a
7. stable economy based on natural resources such as timber, gold and cocoa. There
was relatively high per capita income, Low national debt, and sizeable foreign
currency reserves, the education system was relatively advanced, and? Its people
were heirs to a tradition of parliamentary government...Ghana was the world’s
largest producer of cocoa and endowed with such resources as gold, diamond,
manganese, and bauxite. These apparently ample resources facilitated President
Kwame Nkrumah’s pursuit of a state-led strategy. The result was a centrally planned
economy in which free trade was highly discouraged
Nkrumah’s Seven-year Development Plan after independence stressed the following;
Industrialization through domestic production of import substitutes.
His central planning approach also included state provision of a wide range of
social welfare services such as free education, health care, and housing.
Nkrumah’s socialist-oriented policies were predicated on the continuation of the post-war
increase in the prices of raw materials and agricultural goods, particularly cocoa. However,
Nkrumah’s state-led approach resulted in economic problems such as; overstaffing of state
enterprises, corruption, and incompetence.
Since his focus was on redistributing national prosperity to the masses, the state virtually
became the “father and mother” making it extremely difficult to resist huge public expenditures.
Unfortunately, the price of Cocoa-the major export earner of the economy fell in the early 1960s,
resulting in the Nation’s inability to fund these state-led social policies. As a result, Nkrumah
was toppled in a bloodless military coup on February 24th 1966.
2) The successor government was the National Liberation Council (NLC) under the
leadership of General J. A. Ankrah.
The NLC abandoned all the state led social policies and most of the industries established by
Nkrumah, and immediately became pro-IMF and initiated Ghana’s first negotiation with the
Bretton Woods institutions with standby agreement such as; Trade liberalization, removal of
subsidies, fiscal and monetary discipline and most importantly, devaluation of the Ghana’s
cedi.
8. The NLC sought to empower the private sector to become the engine of economic growth.
However, recognized professional bodies representing the masses resisted these market-oriented
policies of Ankrah. These pressures forced the NLC to handover to Dr. K. A. Busia’s Second
Republic in 1969.
3) The Second Republic government of Bussia was equally pro-IMF, and occupied itself
with addressing the weaknesses in the private sector as well as reducing inflation. In
other words, Busia’s approach was to use same neo-liberal economic policies of Ankrah
to bring back the economy on track.
Consequently, Bussia’s drew an austerity budget of 1971 and introduced the ff; Taxes on
imports, development levy, withdrew subsidies, liberalized trade, and abolished free
education and transport, it also devalued the cedi by 44%.
NB-The reason why Dr. Bussia implemented IMF austerity measures is because of Ghana’s
weak bargaining position compared with the powerful Western economic institutions.
Again, major segments of the Ghanaian population were discontented and these austerity
measures were cited by the military as reckless and wicked. Resulting in another coup of the
Second Republic on January 13, 1972.
4) The National Redemption Council (NRC/SMC) of Col. I. K. Acheampong and F. W. K.
Akuffo assumed office with a promise to capture the “commanding heights” of the
Ghanaian economy.
Col.I. K Acheampong & F.W.K Akuffo with the NRC sought to rid the Nation of neo-liberal
economic policies and tendencies by restructuring the economy through; Abolishing the
development levy, restoring full benefits to public sector workers, repudiated many of the
country’s external debts and revalued the Nation’s currency by 42%. -The intention of the
NRC was to put the cedi back fairly close to where it was before Busia altered the exchange
rate.
The early years of Acheampong’s rule focused on;
9. Achieving food sufficiency through Operation Feed Yourself (OFY)-These decisions
won immediate popular support, but eventually worsened the country’s economic
locus.
Notwithstanding the flushing out of the major neo liberal economic tendencies inherited by
Acheampong from the Bussia’s regime and the restructuring strategy employed to heal the
already fragile economy, some Ghanaian observers have contended his regime of;
economic mismanagement,
Corruption, and incompetency
Siphoning of the country’s scarce resources.
And that the foreign exchange realized from the unprecedented increase in world
producer prices of cocoa was largely diverted.
It was in this era of economic uncertainty that saw the first coming of the military junta Flight
Lieutenant Jerry John Rawlings in politics on June 4, 1979.
5) Rawlings and his supporters established the Armed Forces Revolutionary Council
(AFRC) with the intention of cleaning-up the “mess” created by the NRC/SMC. True to
its promise, the AFRC fought; corruption, profiteering (exploitation), and
mismanagement.
To a great extent, the AFRC succeeded in suppressing these vestiges (shadows, tinctures, traces)
of exploitation before acting on its promise to hand power over to a civilian government of Dr.
Hilla Limann in September 1979
6) Dr. Limann’s Third Republic and the PNP, inherited; a collapsing social infrastructure,
shortage of foreign exchange, scarcity of consumer goods, and weak state
institutions.
Mismanagement under the NRC/SMC had resulted in an era in Ghanaian social life where
“destitution and despondency “became the order of the day, and Rawlings’s brief rule had not
changed that situation fundamentally.
Limann and the PNP regime likewise did consider seeking external assistance, including IMF
loans, to resuscitate the economy. However domestic pressure groups such the Association of
10. Registered Professional Bodies (ARPB), the National Union of Ghana Students (NUGS),
and the Ghana Bar Association (GBA), once again, compelled the government to withdraw
from such negotiation. As usual, these domestic groups were concerned about the negative
impact of IMF prescriptions.
In addition, the military concluded that the PNP was; Incompetent and “dull” and a result
Limann’s third PNP was abruptly ended on December 31, 1981 by another coup led by
Rawlings, which saw the second coming of the military junta.
7) Immediately Rawlings declared a revolution and established the Provisional National
Defense Council. (PNDC)
When the PNDC assumed office in 1981, the country’s economy was in disarray and its
economic position had further weakened as a result of the aggregate mismanagement of the
Nation’s economy since 1966 up till 1981. PNDC was confronted with economic and political
realities.
The PNDC implemented its preferred economic measures during its first year in office even in
the face of dramatic decline of the Nation’s economy. However, these measures failed.
Rawlings’ PNDC, therefore came to a realization that the time to seek external support had
arrived. In the absence of any credible alternative, the PNDC accepted neo-liberal policies.
The PNDC knew that participating in the global economy meant accepting neo-liberal
economic policies, which have the potential of giving the Western business firms control of
Ghana’s economy.
Even though successive governments in Ghana have stressed the need for domestic self-
sufficiency and sought to de-link Ghana’s economy from that of the metropolitan countries.
These efforts, however, have been unsuccessful. As is typical of developing countries, Ghana did
not have the necessary material base to resist neo-liberal policies and neo-colonialism.
Additionally, Ghana was heavily dependent on external sources for its machinery, manufactured
items, petroleum, and other essential commodities and de-linking itself from this external sources
would be a recipe for economic disaster.
11. Fact must be presented Ghana had no way of dealing with its economic decline. Because
the reliance on the cultivation of cocoa as the only major export earner was insufficient to
shoulder its economic difficulties. And the Nation’s inability therefore to diversify cash
crop production meant that Ghana had no choice, but to follow the dictates of the
prevailing international economy. Indeed, because the economy was deeply linked to the
international capitalist arrangement, there is very little, if any, that any leader could do to
reverse these trends.
In effect, despite the rhetoric of non-alignment in their dealings with the great powers, economic
and political exigencies have compelled the PNDC regime to seek foreign support to undertake
national development programs thus the full implementation of the SAPs in Ghana for the first
time in 1983.
Three major factors that led to the PNDC government’s adoption of the SAP
a) First, the disappearance of rents- that is the gradual inability of the government to pay its
people because of disappearing resources among others. This also increased the threat to
the survival of the PNDC regime.
Available statistics backing these facts indicate that;
Between 1970 and 1983, the Gross Domestic Product (GDP) per capita fell by more
than 2% per annum.
Industrial output also dropped by 4.2% per annum,
While agricultural production dropped by 0.2 % (Bawumia, 1998:50).
Within the same period, the ratio of exports to GDP fell from 21% to 4%
Similarly, the ratio of investment to GDP dropped by 14% to 2%,
real wages reduced by 80%,
With earnings from exports reducing by 50%.
Per capita income equally declined by 30% (World Bank cited in Brydon,
1999:368).
Between 1974 and 1983, Ghana’s currency was devalued only once (from 1.15 to
2.75 cedis to US$1), and this unwillingness to devaluate the currency led to
accumulation of external debt. This is because an overvalued exchange rate made
12. production for export less profitable for major exports such as cocoa, and gold.
Instead of raising exports to attract foreign exchange.
Ghana had to use its dwindling foreign exchange to import such essential commodities as
spare parts, crude oil, and drugs. No wonder Ghana’s debt in 1982 stood at 105.7% of its
GDP.
b) These poor economic figures were compounded by several internal and external shocks
that hit the country by 1983.
Firstly, between 1978 and 1983, the PNDC regime had to deal with series of bush fires and
severe drought. And this reduced;
The production of major agricultural commodities.
The bush fires destroyed both food and exportable crops such as cocoa.
Ghana was only able to meet two-thirds of its own food requirement,
The government had to import grains on a commercial basis at a time when the
national coffers were running empty.
Because about 65% of Ghanaians depended on farming, mass poverty became
unavoidable.
The drought also compelled the Akosombo Hydroelectric power plant to operate
under capacity.
The failure of Akosombo to provide the needed hydroelectric power reduced
Ghana’s export of energy to neighboring West African states further decreasing its
export earnings
It also led to decrease in industrial production since power supply was rationed.
c) Thirdly, Ghana’s precarious economic situation was worsened in January 1983 by the
Nigerian government’s decision to deport about 1 ½ millions of Ghanaians residing in
Nigeria. These deportees were part of the over two million Ghanaians who traveled to
Nigeria in the early 1970’s to take advantage of the oil boom. (Boafo-Arthur, 1999b: 47).
13. President Shehu Shagari who was facing elections later in 1983 deported undocumented
aliens as a way of reducing unemployment and invigorating Nigeria’s economy. There was
no doubt that the deportees from Nigeria worsened Ghana’s food situation as well as
adding to the pressure on the collapsing social infrastructure.
SUCCESSES AND FAILURES OF THE SAP IN GHANA.
Successes; Despite the fact that the ERP brought some costs to Ghanaians, it also chalked some
successes. Below are the important successes chalked under the Economic Recovery Program?
First, the ERP had a good impact on macroeconomic indicators. -There was an
increase in national income by 10.34% in 1984 and a decrease in the inflation rate
from 123% to 39.5% in 1983.
Secondly, export volumes also increased by 2% in 1984 compared with the decline
of 27.8% in 1983.
Third, the investment rate in the country increased by 50% between 1984 and 1985,
and increased by 30% between 1986 and 1987.
Fourth, the total national output expanded in 1984 for the first time in four years,
and GDP growth was 8.6% in 1984. GDP growth continued at 5% for the next three
years, 1985, 1986, and 1987.
Fifth, the ERP brought significant flows of aid into Ghana, and along with the
devaluation of the cedi, contributed to the increase in the value of cocoa exports,
which doubled between 1983 and 1986. Government revenues and the incomes of
cocoa farmers also increased.
Sixth and finally, the increase in exports and imports led to a rapid expansion in
domestic transportation, retailing, and wholesaling. Imports and exports as a share
of GDP together doubled from 18% in 1984 to 37% in 1992 (Gyekye-Jandoh 2006).
NB-However, those who benefited the most from the ERP were big local and foreign
capitalists or businessmen who were engaged in gold mining and timber industries, and
rural, cash crop and cocoa farmers, who benefited from the devaluations and producer
price increases.
14. Ghana received official aid, long-term loans, and private transfers constituting 9% of GDP. It
also received about $4 billion in concessional loans and grants between 1983 and 1991.
Failures
First, there were grave inequities in the distribution of the benefits of economic
growth. Students and urban workers went on strike in the 1980s, and nurses went
on strike in 1986 regarding wages, but the PNDC government cracked down on
these shows of agitation.
Second, another cost of the implementation of the ERP in Ghana in the 1980s was
that real wages remained low and income growth was slow, while the level of
poverty was high. Between 1987 and 1988, 36% of Ghanaians lived below the
poverty line. In the years 1987-1990, poverty levels worsened.
Third, urban unemployment rose due to PNDC retrenchment policies and
withdrawal of subsidies from public services. Many public service workers were laid
off, and the cost of living rose as subsidies on health and education were withdrawn.
Between 1987 and 1988, the civil service lost 24,000 people, and 12,000 more civil
servants were to be let go in 1989, a big blow to the Civil Servants Association
(Nugent 1996: 184). The cost recovery policy on health, education, and public utility
services led to a decline in real wages. By 1993, unemployment had risen to 13%.
Over the remaining years of the decade, the Trades Union Congress (TUC) leadership
consistently opposed the withdrawal of public subsidies, particularly on petroleum, and was
always at odds with the PNDC over the daily minimum wage, which Bank/IMF SAP policies
sought to keep down (Nugent 1996: 148).
These major woes brought by the implementation of the SAPs led to the PNDC’s creation
of another intervening program called the Program of Action to Mitigate Social Costs of
Adjustment in 1988. (The PAMSCAD).
The PAMSCAD was a US$85 million fund donated by external donors to help those who
suffered due to the strict implementation of the SAP.PAMSCAD was set into motion and sought
to create 40,000 jobs over a two-year period. It was aimed at;
the poorest individuals,
15. small-scale miners and artisans in particular,
And communities were to be helped to implement labor intensive self-help projects.
The PAMSCAD tried however but failed to bring a human face to the effects of the adjustment
policies in Ghana.
CONCLUSION
Firstly, the World Bank and the IMF argue that SAPs are necessary to bring a developing
country from crisis to economic recovery and growth. Economic growth driven by private sector
foreign investment is seen as the key to development. These agencies argue that the resulting
national wealth will eventually "trickle down" or spread throughout the economy and eventually
to the poor. These neo liberal policies of imposing; Harsh economic measures which deepen
poverty, undermine food security, and self-reliance and, lead to unsustainable resource
exploitation, environmental destruction, and Population dislocation and displacement can
never be said to bridge the gap between the poor and the rich in both local and global
terms.
Secondly, SAPs call for increased exports to generate foreign exchange to service debt. As a
result, most important exports of developing countries like; Timber, oil and natural gas,
minerals, cash crops, and fisheries exports have been destroyed all in the name of defraying
debts
Thirdly, the acceleration of resource extraction and commodity production that results as
countries increase exports is not ecologically sustainable.
Fourthly, deforestation, land degradation, desertification, soil erosion and salinization,
biodiversity loss, increased production of greenhouse gases, and air and water pollution are but
among the long-term environmental impacts that can be traced to the imposition of SAPs.
Fifthly, many developing nations are in debt and poverty partly due to the policies of these two
Bretton Woods Institutions. This is because SAPs are based on a narrow economic model that
perpetuates poverty, inequality, and environmental degradation.
Finally, a program which;
16. over-emphasize the restoration of balance of payments instead of adopting a more
just and equitable approach to resolving the debt crisis;
undermine the state's sovereignty and limit its role for socio-economic intervention
through deregulation, privatization and dismantling of the state in the name of "free
markets"
exacerbate the disparities between rich and poor by facilitating income
concentration by the wealthy and the exclusion of the poor from decisions and
control over resources;
Undermine democracies and democratic process by imposing non-democratic
economic programs even if they conflict with government policy and the will of the
people thereby resulting in bankruptcy;
lack transparency, accountability and public participation in their design and
implementation;
Hurt the poor disproportionately through deep cutbacks in social programs. User
fees, privatization, massive layoffs and retrenchment of social services which have
led to malnutrition, school and hospital closures, recurrence of previously
eradicated disease, and deepening poverty;
undermine national food security
make many basic necessities inaccessible to local people as currency devaluations
drastically reduce the buying power of local wages;
Violate the UN Convention on the Rights of the Child, the UN Declaration on the
Right to Development- According to UNICEF, over 500,000 children under the age
of five died each year in Africa and Latin America in the late 1980s as a direct result
of the debt crisis and its management under the International Monetary Fund’s
structural adjustment programs.
These programs required the abolition of price supports on essential food-stuffs, steep
reductions in spending on health, education, and other social services, and increases in taxes. The
debt crisis has never been resolved for much of sub-Saharan Africa. Extrapolating from the
17. UNICEF data, as many as 5,000,000 children and vulnerable adults may have lost their lives
in this blighted continent as a result of the debt crunch.
These programs cannot be said to be an intervention to a Nation’s already sickening economy
but rather a thorn in the flesh of the Nation’s progress. However, in a more cynical or harsher
description, structural adjustments and other trade related policies could also be seen as a
“weapon of mass destruction” as Raj Patel hints, (commenting on the Doha WTO conference
in November, 2001.)
NB- A fertilizer bombs that kills 100 in Oklahoma and Fuel-laden civil jets that kill 4000 in
New York cannot be compared to a sanction policy that kills 1 and a half million in Iraq
and a trade policy that bleeds continents to death.
You can make a bomb out of anything but the ones on paper hurt the most.
However, we have seen that the achievement of the social well-being of our people is
not an integral component of SAPs as claimed by the two Bretton Woods
institutions, but a hoped-for result of applying free market principles to the
economy. A process of adjustment, as described by many World Bank and IMF
officials to developing countries, is one of a "sacrifice," of one’s "present pain for
future hope." SAPs are based on a narrow economic model that perpetuates
poverty, inequality, and environmental degradation.
BIBLIOGRAPHY/REFERENCES
Susan George, A Fate Worse Than Debt, (New York: Grove Weidenfeld, 1990), pp. 143,
187, 235
The U.S. uses its dominant role in the global economy and in the IFIs [International
Financial Institutions] to impose SAPs on developing countries and open up their markets
to competition from U.S. companies.
Carol Welch, Structural Adjustment Programs & Poverty Reduction Strategy, Foreign
Policy in Focus, Vol 5, Number 14, April 2000
Raj Patel, They also make bombs out of paper, ZNet, November 28, 2001
18. Ross P. Buckley, The Rich Borrow and the Poor Repay: The Fatal Flaw in International
Finance, World Policy Journal, Volume XIX—
Carol Welch, Structural Adjustment Programs & Poverty Reduction Strategy, Foreign
Policy in Focus, Vol 5, Number 14, April 200, No 4, Winter 2002/03 (Emphasis Added)
Joseph Stiglitz, What I learned at the world economic crisis. The Insider, the New
Republic, April 17, 2000
(John F. Henning Center for International Labor Relations, Institute for Industrial
Relations, University of California, Berkeley) (http://ghanaian-
chronicle.com/features/fighting-poverty-and-enhancing-rural-development/).
Posted by U.G POLITICAL SCIENCE DEPARTMENT at 00:48
Evaluating the Impact of Development Projects on Poverty: A Handbook for
Practitioners, by S. Horton, R. Kanbur and D. Mazumdar. Washington D.C: EDI
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The World Bank, March 2000.The Lost Decades: Developing Countries’ Stagnation in
Spite of Policy Reform 1980
Ghana Statistical Service (1995) the Pattern of Poverty in Ghana January 1988-1992.
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1990s, October. Ghana Statistical Service (2000) Ghana Living Standards Survey: Report
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