Crisis, Adjustment
and Social Change The fundamental
socio-political problem faced by indebted countries in the Third World and in the
ex-communist bloc is how to create a climate of stability and solidarity after decades of
economic crisis, verging in the worst cases on collapse. This is a far more complicated
task than phrases like "restructuring" or "institutional reform" might
suggest. Relations among people have been reordered in countless different ways by their
experiences with crisis and adjustment, and the results are not always easy to explain.
Since relatively similar remedies have been applied, to a
greater or lesser extent, in so many countries mired in recession and undergoing
adjustment in the 1980s and early 1990s, the experiences of hundreds of millions of people
have in some sense been similar. Contractionary economic policy reduces opportunities for
employment and access to income wherever it is implemented. At the same time, the central
objective of the radical neo-liberal form of adjustment to remove obstacles to
market integration, both within and among countries requires both deregulation and
the systematic disprotection of particular sectors of national economies and sections of
local populations through policy shifts which also have relatively similar implications
for individuals in many parts of the world.
This point can be illustrated by looking briefly at
agriculture. In countries (particularly in Africa) whose governments have traditionally
controlled agriculture closely and taxed export commodities heavily, deregulation of
markets has often provided an incentive to agricultural production. Whether farmers have
been able to gain from more direct participation in the market has, however, depended
(among other things) upon their capacity to obtain marketing and other services on more
favourable conditions than those originally offered by the government.
The commercial agricultural sector of many indebted
countries has in fact been harshly affected by continuing economic recession and
free-market reforms. In region after region, the elimination of government subsidies to
agriculture (manifested in support prices for basic grains, marketing services and
subsidized inputs) has meant that both large and small commercial farmers - producing for
export or for the national market - at best confront rapidly rising costs. At worst they
lose access to inputs and services essential for production. Rising costs have been offset
in part by lowering wages paid to farm labourers. This contributes to depressing local
markets, in which both large and small traders find it harder to make a living. Recession
in rural areas is further compounded by declining remittances from family members in the
cities, which constitute a significant element in the livelihood strategy of
semi-subsistence and subsistence farmers.
An often radical opening of national economies to foreign
competition permits governments and private traders to supply net deficit regions and
families with cheap imported food. The impact of such measures on farming can, however, be
devastating. It is obviously difficult for producers of basic foodstuffs in Third World
countries to compete with imported products whose price in part reflects very large
subsidies provided by Northern governments. Geographical remoteness or the breakdown of
transport systems can still protect local producers; but in general adjustment has
expanded the boundaries of international markets in a way which brings together farmers
possessing highly unequal initial resources.
Something similar occurs in industry. Radical
neo-liberalism has used the tool of conditionality to weaken protection of national
industry and open local markets to international competition. This has encouraged a
profound reorganization of the manufacturing sector in adjusting Third World countries. In
many instances, stagnation has been followed by deindustrialization, as countries stop
producing many goods which can be imported. Some forms of manufacturing shift into the
informal sector. At the same time, certain sectors of industry in relatively more advanced
Third World economies have developed strategies which allow them to compete effectively in
international markets. They are the exception within the industrial sectors of these
countries, which tend to be marked by very low or negative growth in formal sector
industry oriented toward national markets.
To survive during recession, and within the context of
pressure from much more technologically advanced international competitors, businesses in
adjusting Third World countries have relied upon what is frequently their only competitive
advantage: access to cheap labour. In this, they have been influenced by the tendency
throughout the world economy to promote the flexible use of the workforce, renouncing when
possible the obligation to provide formal employment benefits and avoiding collective
bargaining. They have also been assisted by governments following specific
adjustment-related guidelines to keep wages down.
Throughout most of the highly indebted Third World (and,
more recently, within the former Soviet bloc as well), the formal sector working class is
therefore shrinking and working conditions within it are becoming more difficult. Under
threat of unemployment and/or political repression, many of the gains won in earlier
periods by organized labour have been lost. Workers are now less likely than 10 or 20
years ago to have a say concerning the way production is structured within the factory or
shop, and to be able to protect themselves from arbitrary changes in their status or
remuneration.
Increasingly, the workforce includes women and young
people pushed out of home and school by declining family income. The entry of new groups,
often with little experience in the workplace, tends to push wages down and further
weakens existing union organization. These less protected strata are particularly sought
out by one of the few sectors of the economy which are currently growing in many heavily
indebted countries the labour-intensive assembly plants and agricultural processing
establishments producing exports under contract to foreign buyers.
A large number of people attempting to make a living
within the confines of sluggish and debt-ridden economies have turned to trade.
Liberalization of trade creates extraordinary opportunities for exporters and importers,
and especially for those who can operate on a large scale. At the same time, small-scale
importing has gained central importance in the livelihood strategies of many middle class
and poorer families which respond to demand from their neighbours and friends for imported
goods which are highly competitive with products produced at home. The new middle class of
Jamaica, for example is increasingly composed of higglers who bring in goods from Miami
and Panama. Factories formerly producing sweaters and cotton clothing in central Mexico
stand idle, since their owners have begun importing bales of used clothing from the United
States.
In the search for additional income, many households now
count members within the informal sector, which has grown at a very rapid rate within the
framework of adjustment. Here a process of diversification is occurring, as established
informal sector businesses feel pressure from new entrants. Members of middle or working
class families who turn to informal sector activities are often better educated and may
dispose of more capital than traditional businesses; and competition is forcing many
already precarious enterprises to shut their doors, or to adopt still harsher methods of
exploiting unremunerated labour.
Developments within the public service sector are closely
related to the rapid growth of informal or unregulated business activity. Reduction of
government expenditure in many countries has been accomplished both through eliminating
programmes and personnel, and through keeping wages low. Sharply declining income has
affected not only the livelihood strategy of civil servants but the quality of their work.
And cutbacks within such fields as public health and education have forced many people who
formerly depended upon access to these services to look for alternatives within the
private or informal sector.
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