Fair Trade Part 1: Structural Adjustment Programs
August 17, 2010
Over the next few days, I’ll be talking about some different factors that make Fair Trade an important part of dealing with poverty in the developing world. In order to spare you guys a very lengthy post, I’m splitting the discussion into three sections: Structural Adjustment Programs, Free Trade Zones and sweat shop labor and finally a bit of a discussion on why Fair Trade makes sense to me. I’ll also share some of the sources that have influenced my thinking. Here we go-
In discussing poverty in developing countries, it’s helpful to understand some of the structural challenges that these countries have to deal with. Why can’t they seem to get their heads above water? Why do they stay in debt? Where is their innovation?
Many (if not most) of these developing countries are post-colonial. When countries come out from under colonial rule, they have to create their own infrastructure. They need capital. Who do you go to for a loan? The International Monetary Fund and the World Bank.
Structural Adjustment Programs are stipulations that developing countries have to agree to in order to take a loan out from the International Monetary Fund (IMF) and the World Bank. Countries also may agree to Structural Adjustment Programs in order to negotiate a lower interest rate on existing debt. As I understand it, the overall goal of Structural Adjustment Programs is to force countries taking loans out to be more market oriented. The hope is that these parameters will help the country to focus on production and trade, thus making the economy stronger. Sounds good so far, right?
So, what are the programs? One is the removal of trade restrictions. The IMF and World Bank defend this policy by saying that citizens of developing countries should have the right to buy whatever product they want. They should be able to buy imported goods. The problem is that when there is a lack of trade restrictions, cheap goods are imported, which can hurt the local economy. An example is milk in Jamaica. When Jamaica’s Structural Adjustment Programs were enacted and trade opened to cheap milk, it decimated the local milk industry. Jamaica could import powdered milk from the UK for much cheaper than they could sell their local milk. So, instead of Jamaicans drinking fresh Jamaican milk, they drank reconstituted powdered milk. Jamaica didn’t benefit from this- the UK did. Jamaicans got a sub-standard product, and it decimated their local milk industry, putting Jamaican dairy farmers out of business. The same thing happened with farming. Structural Adjustment Programs had the unintended consequence of decimating local agriculture. Structural Adjustment Programs may have lowered food prices, but they also contributed to unemployment.
Structural Adjustment Programs also require austerity programs when the country is having difficulty paying off their debt. Loan funds cannot be spent on healthcare or education, which is truly problematic. In Kenya, because of Structural Adjustment Programs, education is not provided by the government after elementary school. So, families have to pay for their children to go to high school. In Kenyan society, males are highly valued. Young girls are viewed as an asset to their future husband’s families. If you come from a poor Kenyan family and you have to choose which child you are going to educate, it would be viewed as foolish to choose your daughter. Thus, many young girls’ only options are to go into the menial work force or to enter early marriages. They have no hope for a better future. A society suffers when its women are uneducated. Click here if you’re interested in reading some of the statistics from the UN about the status of women globally. Education empowers. Women who are uneducated are more vulnerable; and they have very limited choices. Gender discrimination in education is an unintended consequence of Structural Adjustment Programs throughout the developing world. Per the UN website, “women account for nearly two-thirds of the 776 million illiterate adults in the world”. I’m not blaming the IMF and the World Bank’s Structural Adjustment Programs for world-wide gender discrimination in education- but they are certainly a significant contributor to the problem.
It seems to me (and to many others) that if you are trying to boost your economy, taking money out of education would be a last resort. To be fair, these austerity programs probably are a last resort. But, the IMF and the World Bank are not helping the population that they’re meant to help. Indeed, their austerity programs seem to contribute to keeping the poor in poverty.
To read the other two part in this series, please click on the links below: