The studies surrounding the success of structural adjustment programs conflict in varying degrees as to how effective these programs are. The simple answer is that it is in most cases hard to tell. The severity of economic crisis, political conflict and cultural upheaval play significant roles in determining the success of any adjustment program. Bird (2001) cites numerous studies that confirm and deny the success of structural adjustment policies. The debate that surrounds the success of adjustment programs center around three main questions. 1) How do we measure success? 2) Who owns the implementation of SAP? 3) How long should it take to succeed?

How do we measure success?

Structural adjustment programs are designed to address instabilities in macro-economic factors and thus the common measurement for the effectiveness of these programs has been to look at the condition of the balance of payments, economic growth, government deficits and inflation. A common indicator to measure success has been to evaluate the economic growth as an overall measure of economic health. However, even this simple measure bears contradictory results. Hutchison (2001) suggests that economic growth slowed for countries undergoing adjustment. Summer and Pritchett (1993) found that SAP works with higher growth, exports and savings. While Mercer-Black and Unigovskaya (2000) could not find evidence the adjustment programs affected growth. These economic indicators do not fully comprehend the complexities of economic crisis and stabilization. Economic growth may be an inappropriate goal for adjustment policies (Easterly 2002). The criteria of success should be extended to include other indicators of economic success (Bird 2001) as well as social and cultural indicators (Messkoub 1992).

Who owns the implementation of SAP?

Fisher (1997) suggests that the IMF needs to “design, negotiate and support programs that are more likely to be implemented and owned [by developing countries].” The unsuccessful result of structural adjustment policies has been that there has been a lack of commitment by developing countries to fully implement the structural adjustment policies. Some argue that it is due to the lack of “political will” to implement these socially unpopular policies (Bird 2001). While others contend that political corruption (Scott 1998) or domestic political agendas seeking international validation undercut the true intentions of adjustment programs (Przeworski and Hutchison 2003).

How long should economic stabilization take?

The nature of structural adjustment policies are in general suppose to alleviate short-run economic crisis by using long-run policy choices. There is a rising debate as to whether or not this strategy is appropriate for countries in crisis. Some suggests that even though there is a negative effect in the first year of a structural adjustment program in the following years the gains are positive (Conway 1994 and Khan 1990). Therefore a country under adjustment programs will ultimately see positive results from adjustment. Others argue that these short-run declines have a disproportionate effect on the poor and thus long-run social impacts (Messkoub 1992). The poor generally have fewer resources to deal with changes to the economy and particularly to reductions in public spending. Ultimately these short-run losses can affect a country’s growth potential well into the future when investment in education and health are reduced under SAP (Messkoub 1992).

References:

Bird, Graham, “IMF Programs: Do They Work? Can They be Made Better?” World Development Vol. 29, No. 11, pp. 1849-1865, 2001.

Scott, Gerald, “Who has Failed Africa? IMF measures or the African leadership.” Journal of Asian and African Studies, Vol. 33, No. 3 (August 1998).

Conway, Patrick, “IMF lending programs: Participation and impact”. Journal of Development Economics, Vol. 45 (1994) pp. 365-391.

Easterly, William, “What did structural adjustment adjust?” Center for Global Development, Institute for International Economics. August 2001.

Fischer, Stanely, “Applied Economics in Actions: IMF Programs”. The American Economic Review, Vol. 87, No. 2 (May 1997).

Hutchison, Michael, “A Cure Worse Than the Disease? Currency Crisis and Output Costs of IMF-Supported Stabilization Programs”. NBER Working Paper 8305, May 2001, http://www.nber.org/papers/w8305

Hutchison, Michael and Ilan Noy, “Macroeconomic effects of IMF-sponsored programs in Latin America: output costs, program recidivism and the vicious cycle of failed stabilizations”. Journal of International Money and Finance, Vol. 22 (2003) pp. 991-1014.

Mercer-Blackman, Valerie and Anna Unigovskaya, Compliane “With IMF Program Indicators and Growth in Transition Economies”. IMF Working Paper 2000 WP/00/47.

Messkoub, Mahmood, Development Policy and Public Action, Oxford Press (1992).

Przeworski, Adam and James Raymond Vreeland, “The Effect of IMF Programs on Economic Growth”. Forthcoming in the Journal of Development Economics.

Summers, Lawrence and Lant Pritchett, “Structural Adjustment Debate”. The American Economic Review, Vol. 83 No. 2, (May 1993), pp. 383-389.