How Structural Adjustment Paved the Way for Covid Crisis
The Global South's pandemic response has been hamstrung by mountains of global debt – but also by the neoliberalism it had to accept to get loans in the first place.
Patients suffering from Covid-19 are treated in a general ward in New Delhi. Credit: Anindito Mukherjee / Getty Images
Since the start of the pandemic, critiques of worsening global inequality have taken the discursive centre-stage. The capacity for poorer countries to contain the spread of the virus and vaccinate their populations has proven immensely strained.
This is not just due to lack of finances – it is intrinsically tied to the legacy of extraction and exploitation from the West in the name of ‘development’. After more than forty years of assault on public goods through austerity and privatisation, neoliberal capitalism has meant that the vast majority of people living in the Global South are still at risk and cannot access vital healthcare services.
A watershed moment in the increasingly neoliberal development agenda was the Structural Adjustment Programmes of the 1980s, commonly referred to as SAPs. Countries seeking economic assistance from the International Monetary Fund were required by SAPs to meet certain conditions in order for loans to be granted: these conditions included the likes of privatisation of public services, trade liberalisation, deregulation of the financial markets, financialisation, and reduced social spending. The rollout of these policies signified a unified effort to legitimise the interests of the West, particularly financial institutions, in the name of development.
The ideological apparatus behind these interventions was the Washington Consensus. This movement toward free-market ideology prioritised the interests of the wealthiest countries alongside transnational corporations, with two American financial institutions heading the shift. Between 1980 and 2014, 109 out of 137 developing countries have had to enter into at least one programme.
Today, there is clear evidence that these programmes have continually weakened the capacity of poorer countries not only to strengthen their economies, but also to provide fundamental services to those most in need.
The Debt Problem
Skyrocketing debts accumulated from years of conditional lending have worsened the disparities between rich and poor countries. A recent study found that fiscal spending between 41 countries ranged from 0.35 to 42.3 percent of GDP. With high debt repayments and stringent policy conditions, SAPs have limited poorer nations’ ability to provide pandemic recovery in the form of social welfare spending or other crucial provisions: 25 countries were spending more on debt than healthcare, education, and social protection combined in 2019, meaning the immense strain of an international health crisis has left swathes of populations without access to essential services and resources.
Continually, the IMF and World Bank have demonstrated their inability to ensure that social development is not only equitable but attainable in the first place. In a meagre bid to tackle this dilemma, the IMF proposed the allocation of Special Drawing Rights worth $650 billion, which would allow countries to pay for vaccines and other pandemic relief measures. But such measures only go so far: the SDRs are allocated according to countries’ respective financial contribution shares in the IMF, meaning that only eight percent would be allocated to countries classed as ‘highly debt-vulnerable’. Again, the pandemic has revealed to us how the system is tailored in favour of those countries that already possess the benefits of wealth, power, and privilege.
Privatisation Programmes
Another fundamental condition tied to SAPs was the privatisation of healthcare services and systems in a bid to gift corporations a new arena of profit accumulation. The privatisation of health services has been linked to reduced quality and efficiency of services globally. A study in South Africa, the most unequal society in the world, found privatisation to be the primary cause of deprivation of most of the population’s access to healthcare; India entered its third decade of privatisation reforms in the healthcare sector when the Covid pandemic hit, which significantly reduced the government’s capacity to prioritise public health needs over private profit interests. The lack of central coordination over resource allocation had cataclysmic consequences for the country when it experienced oxygen shortages at the height of its second wave.
Free trade policies since Structural Adjustment Programme implementation have also led to inequitable trade relationships, empowering richer economies to control the flow of resources. Global monopolies embedded in the World Trade Organisation’s TRIPS agreement grants investors of new medicines a twenty-year monopoly to charge their chosen prices. Consequently, Big Pharma have been able to reap immense profits from these gaps in access.
The neocolonial nature of these items of international policy—restricting access to essential resources and capitalising on conditions of deprivation—has too been reflected in the vaccine rollout programs. Vaccine inequality has become the new face of global inequality in the age of Covid-19: only one percent of the 1.3 billion vaccines injected globally has been administered in Africa, whereas Canada secured more than ten doses for every resident.
A Post-SAP Future
Moving forward, it is imperative that we address the unethical nature of conditional lending and its production of immoral monopolies over essential medicines. As poor countries across the Global South struggle to access vital vaccines, their already weakened healthcare systems are experiencing another fatal blow.
Now, we ought to look towards historical efforts at international cooperation like those taken by revolutionary leaders across the Global South for genuine solutions. Debt cancellation and the colonial origins of debt have long been an area of focus for liberatory movements and their leaders. As Thomas Sankara, late leader of Burkina Faso, argued: ‘Those who lend us money are those who colonized us. […] We had no connections with this debt. Therefore we cannot pay for it.’
Put simply, the neocolonial nature of SAPs conditions creates a deeply exploitative relationship between the Global North and Global South and brings sustainable social development to a halt as a consequence. While wealthier countries are now on their way back to resembling some sense of normality, poorer countries across the Global South are being hindered. Unfairly imposed debt burdens have too long restricted poorer countries’ abilities to manifest improvements which would improve health standards globally; in the wake of a global pandemic, these have been amplified to a level the world’s political leaders can no longer afford to ignore.
The global political economy must aim to move away from Western hegemony if we are to decolonise development. Expecting new modes of capitalism to be the solution to deprivation is not an option.