The International Political Economy of Structural Adjustment Programmes and Poverty Reduction ...

250 Pages·2012·5.75 MB·English

The International Political Economy of Structural
Adjustment Programmes and Poverty Reduction Strategy
Papers in Africa: A Comparative Analysis

By

Leon Hartwell

Submitted in fulfilment of the requirements for the degree of Magister Artium

Department of Political Sciences, Faculty of Humanities, University of Pretoria

Supervisor: Prof Maxi Schoeman

November 2011

©© UUnniivveerrssiittyy ooff PPrreettoorriiaa
Acknowledgements

To my family, you have shown me a lot of love and support throughout my research. Baie
dankie to Alan, Bernadette, Claudia, Jackie, Noel, Michelle, Reneé, Sharon and Stella who
never cease to encourage me with my work. It has been a long but worthwhile journey.

To Maxi Schoeman, my supervisor, thank you for your valuable advice and support. You
inspired me, not only during the research phase of this study, but already many years ago
when you taught me my first lesson in International Political Economy (IPE). Thank you
also to Pieter Fourie, Alois Mlambo, Brendan Vickers and Sally Matthews for stimulating my
particular interest in IPE and African Politics. Furthermore, there are a number of people that
provoked my thoughts in related academic fields. I am therefore greatly indebted to Yolanda
Spies, Anton du Plessis, Anthony Court, Nicola de Jager, Hussein Solomon, Rentia Pretorius,
Roland Henwood, Katabaro Miti, and Gerhard Wolmarans. Thank you also to Rina du Toit
who is always very helpful.

I would also like to specifically thank all my students throughout my lecturing experience at
the University of Pretoria. Your questions have helped me in more ways than you can
imagine.

Thank you to many of my former colleagues and friends at the Embassy of the Kingdom of
the Netherlands. It was a wonderful experience to engage you on political and development
issues, whether it was in the kitchen, corridors, via email, or in a meeting. I would therefore
like to express my sincere gratitude to Wouter Jurgens, Rob de Vos, Peter Mollema, Hanneke
Boerma, Monique van Welie, Deidre Bachelor and Luuk Bouwers, from whom I have
learned a lot.

I would like to single out tovarishch Yarik Turianskyi. Thank you for always being a good
friend, colleague and advisor! Last, but not least, thank you to Emile Ormond. Several years
ago you have emphasised the importance of reading to me - without it this study would have
been impossible.

Ngiyabonga kakhulu!
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Abstract

This study focuses on the debtor-creditor relationship between African states and the
International Financial Institutions (IFIs). More specifically, it makes use of ‘post-positivist’
approaches as analytical tools and it compares the controversial Structural Adjustment
Programmes (SAPs) with so-called ‘post-SAPs’ in order to establish whether the latter debt
relief strategies are an improvement on the former. Post-SAPs include, amongst others, the
Enhanced Heavily Indebted Poor Countries Initiative (HIPC II) and Poverty Reduction
Strategy Papers (PRSPs).

Jointly, the post-SAPs initiatives aim to make debt more sustainable, boost social spending
and reduce poverty. The PRSP initiative in particular was full of promise (at least initially),
as it entailed that debtors would rightfully be given the scope to create their own
developmental strategies and that a blanket approach to development would be abandoned.
Upon closer inspection the PRSP initiative is disappointing. The process itself is
predetermined and there are additional IFI mechanisms (with traditional SAPs
conditionalities) that should be read alongside this initiative.

As the Great Recession starting in 2007 unfolded, the IFIs tended to stress the success and
‘resilience’ of HIPC II and PRSP countries. However, this study argues that supposed
achievements are somewhat artificial and one needs to remain cautious about its long-term
impacts. African economies experienced high economic growth rates in recent years, not
because of World Bank and IMF endorsed policies, but because of debt relief and a
commodity boom in the 2000s. The IFIs have not done anything to forge the developmental
state in Africa. Several HIPC II and PRSP graduates are already starting to show signs of
debt distress. Thus, there is a need to seriously rethink the roles of the World Bank and IMF
in Africa. This study recommends that true adherence to the PRSP approach could be a first
step to empower African states, and it calls for the establishment of an independent
mechanism that will hold debtors and the IFIs accountable for unsustainable debt.

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Table of Contents

page
Chapter 1
Africa and the IFIs: an Introduction

1. Introduction 1
2. Identification of Research Theme 2
3. Literature Review 8
4. Identification and Demarcation of the Research Problem 10
5. Methodology 13
6. Structure of the Research 15

Chapter 2
A Methodological Framework for Analysing the African Debt Crisis

7. Introduction 19
8. The BWIs, Power and the Knowledge Structure 20
8.1 Background 20
8.2 The Power to Enforce Knowledge 22
8.3 Power to Produce and Distribute Knowledge 30
8.4 What Type of Knowledge? 33
9. The Nexus between Power, Knowledge, the BWIs and the Developing World 37
9.1 Positivism: A Social Construct with Political Implications 37
9.1.1 Critical theory 39
9.1.2 Postmodernism 41
9.1.3 Constructivism 42
9.2 Post-positivist Perspectives in the Context of this Study 45
9.2.1 Critical Theory 45
9.2.2 Postmodernism 48
9.2.3 Constructivism 49
10. The Comparative Method in the Context of this Study 50
11. Conclusion 53

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Chapter 3
The African Debt Crisis: Whodunit?

12. Introduction 55
13. The Political Economy of the International Debt Structure 56
13.1 Why Do States Experience Balance of Payment Deficits? 57
13.2 What is the Importance of a Healthy Current Account Balance? 59
13.3 What Option Do Debtor States and Creditors Have? 60
14. Background to the African Debt Crisis and the Emergence of Powerful Creditors 63
15. The Ideational Structure of SAPs: A ‘Panopoly’ on Development Policy 67
16. The Material Structure of the African Debt Crisis: 1980 to 2000 69
16.1 ‘Debt Peonage’ 69
16.2 Low Inferior Growth and Unequal Growth 71
17. Who or What is to Blame for the Failure of SAPs? 75
17.1 Adherence to SAPs 76
17.2 Dictators, Development, and Democratisation 78
18. Conclusion 85

Chapter 4
The Implementation of a Flawed Idea: Howcatchem?

19. Introduction 87
20. Unpacking the Washington Consensus 88
20.1 Enter SAPs 89
20.2 Privatisation of Public Enterprises 93
20.3 Capital Account Liberalisation 96
20.4 Trade Liberalisation 102
20.5 Currency Devaluation 111
20.6 Slashing Government Expenditure 114
20.6.1 Downsizing the Bureaucracy 115
20.6.2 Cutting Back on Education and Healthcare 117
21. Conclusion 123

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Chapter 5
TATA to TINA? The Triviality of the Poverty Reduction Strategy Paper

22. Introduction 126
23. From SAPs to the HIPC II Package? 127
24. What Constitutes the HIPC II Package? 130
25. PRSPs: What’s in a Name? 132
25.1 Are PRSPs Based on Participation? 136
25.2 Are PRSPs Based on National Ownership? 137
25.3 Are PRSPs Comprehensive? 139
25.4 Are PRSPs Results-Orientated? 143
25.5 Are PRSPs Partnership-Orientated? 144
26. No PRSP is An Island 145
26.1 Layers of Old School Conditionality 146
26.2 HIPC II Documents 147
26.3 The Real Deal: Additional Concessional Lending Instruments 148
26.4 The CPIA 152
26.5 The PSI 156
27. Conclusion 159

Chapter 6
Downplaying the African Debt Crisis and Taking Credit for Recent Developments
28. Introduction 161
29. The Great Recession: Too Much To Gain, Too Much To Lose 162
30. Evaluating the ‘Post-SAPs’ Era 164
30.1 The Significance of Debt Relief 165
30.2 Contextualising Improvements 169
30.3 Is Africa Coping With the Crises? 173
31. Unpacking the Good Governance Agenda 177
32. Avoiding Odious Debt, Illegitimate Debt, and Other Losers 181
33. SSA Can Do Much Better 185
34. Conclusion 188

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Chapter 7
From SAPs to Post-SAPs: An Evaluation
35. Introduction 189
36. Summary of Research Findings 190
37. Recommendations and Conclusion 195

38. Bibliography 200

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Acronyms

AU African Union
BWIs Bretton Woods Institutions
CPIA Country Policy and Institutions Assessment
CAS Country Assistance Strategy
CSOs Civil Society Organisations
EBD Executive Board of Directors
ECA Economic Commission for Africa
ECF Extended Credit Facility
EU European Union
GWP Gross World Product
HIPC Highly Indebted Poor Country
IFC International Financial Cooperation
IFIs International Financial Institutions
I-PRSP Interim Poverty Reduction Strategy Paper
IDA International Development Association
IEG Independent Evaluation Group
IEO Independent Evaluations Office
IRAI IDA Resource Allocation Index
HDI Human Development Index
HIPC Heavily Indebted Poor Countries
HIPC II Enhanced HIPC Initiative
IMF International Monetary Fund
IPE International Political Economy
JSA Joint Staff Assessment
JSAN Joint Staff Advisory Notes
LIC Low Income Country
LDC Least Developed Countries
MDG Millennium Development Goal
MDRI Multilateral Debt Relief Initiative
NGO Non Governmental Organisation
OAU Organisation of African Unity
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OECD Organisation for Economic Co-operation and Development
OSAA United Nations Office of the Special Advisor on Africa
PBA Performance Based Assessment
PRGF Poverty Reduction and Growth Facility
PRSP Poverty Reduction Strategy Paper
PRS Poverty Reduction Strategy
PRSC Poverty Reduction Support Credit
PSIA Poverty and Social Impact Analysis
PSI Policy Support Instrument
SAP Structural Adjustment Programme
SSA Sub-Saharan Africa
TATA There are Thousands of Alternatives
TINA There is No Alternative
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNESCO United Nations Economic and Social Council
UNSC United Nations Security Council
UK United Kingdom
US United States
WTO World Trade Organisation

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List of Tables
page

Table 1: GDP by Region for 2009 3
Table 2: HDI 2010 3
Table 3: SSA’s Debt Burden: 1980-2010 4
Table 4: Top Salaries in 2007 22
Table 5: The World Bank and IMF’s Chiefs since the 1980s to Present 25
Table 6: Voting Power at the IFIs 28
Table 7: Differences of SAPs and PRSPs 52
Table 8: Debt in Comparative Perspective 61
Table 9: Rises in US interest rates that had an impact on debt repayment 65
Table 10: Sub Sahara Africa’s Debt Burden: 1980 to 2000 70
Table 11: Strong versus Non-Adjusters 73
Table 12: GDP per capita, current prices 74
Table 13: Debt Incurred by African Dictators 82
Table 14: Commodity Export Dependence 107
Table 15: Portion of the budget dedicated to basic social services and to the servicing
of debt in 1992-1997 115
Table 16: General Civilian Public Sector Employment: Developing Country Regions 117
Table 17: Botswana and Mauritius Basic Statistics 117
Table 18: Education: Gross enrolment rates in Sub-Saharan Africa, 1960 to 1997 119
Table 19: Infant Mortality Rate, 1950 to 2000 120
Table 20: Life Expectancy at birth for Africa, 1950 to 2000 120
Table 21: Recent Changes Related to IFIs’ Structures and Initiatives 129
Table 22: List of Countries That Have Qualified for, are Eligible or Potentially Eligible
and May Wish to Receive HIPC II Initiative Assistance 131
Table 23: Proclaimed Differences between SAPs and PRSPs 134
Table 24: The Number of Conditions Contained within 2005 World Bank Loans to
African Countries 150
Table 25: CPIA Components 154
Table 26: SSA’s Debt Burden: 1980-2010 167
Table 27: GDP Growth Rates from 2000 to 2010 167
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