Constraints on the Success of Structural Adjustment Programmes in Africa (review)

As economic crises gripped sub-Saharan Africa in the years after independence, African leaders begrudgingly accepted the ‘tough pill’ of adjustment programs designed by the World Bank and the International Monetary Fund. African policy-makers, who often viewed these austerity programs as a threat to political stability, were at odds with their western counterparts, who claimed that bad government policies made adjustment necessary. While the programs have unquestionably failed to bring about wide reaching changes, there is little consensus amongst politicians, political scientists and economists on the reasons for the disappointing performance. Only in the past several years, after evidence has been collected and trends clearly identified, have others substantively joined in the debate. Constraints on the Success of Structural Adjustment Programmes in Africa offers empirical evidence which supports the now widely accepted perspective that structural adjustment is necessary but not sufficient to jump-start economic growth in Africa.

In contrast to many other recent analyses which focus solely on the macroeconomic consequences of adjustment in Africa, Constraints on the Success of Structural Adjustment Programmes in Africa explores the effects of structural adjustment on particular economic sectors in various African countries. The frequent use of terse economic models considerably narrows the book’s audience to students and practitioners of development economics and African political economy. Nonetheless, it offers compelling evidence on the various structural impediments to economic reform through, among others, fieldwork analysis on labor markets, the manufacturing sector and the civil service. Charles Harvey, the editor and an academic engaged in research on the African banking sector, persuasively defends the scope and methodology of the study. Sectoral analyses, he argues, must be viewed within a framework that addresses the severe macroeconomic distortions that have characterized African economies.

Adjustment programs have traditionally been comprised of two components: stabilization programs which address balance of payments deficits and structural adjustment which seeks to create efficiency in resource allocation through institutional reform. In his chapter on the effect of the real exchange rate on the Zimbabwean manufacturing sector, Joseph Muzulu discusses the use of devaluations as the main instrument of stabilization and the cornerstone of adjustment policy. Economic theory asserts that a real depreciation of the exchange rate should cause the price of tradable goods to rise relative to the price of non-tradables thereby improving the competitiveness of export producers. For African countries with severe balance of payments deficits, the result should theoretically lead to an increase in foreign exchange earnings resulting from an increase in exports and decrease in imports. Muzulu argues that the high import content of the manufacturing process in Zimbabwe prevented producers from reacting to the new price incentives. Similarly, in his discussion of the availability of pharmaceutical products in Kenya, Pius Owino attributes the low supply response of producers, in part, to the increased costs of production as a result of the rise in the price of imported inputs. While the results of these studies are not surprising given Africa’s long-standing and perilous reliance on imported goods, Owino suggests that the role of expectations may provide another explanation. Many producers in his survey expected the policies to be reversed and were therefore reluctant to switch resources in response to the new price incentives in exportable goods. Although the author gives only cursory treatment to this phenomenon, it is clear that lack of confidence in the sustainability of adjustment programs can potentially jeopardize the entire economic reform process.

As some of the contributors illustrate, the reluctance of African governments to implement adjustment programs stemmed in large part from the negative short-term repercussions on employment. Addressing a balance of payments deficit necessarily meant a reduction in the public sector for many African countries with a bloated civil service. Increased unemployment in an environment of economic crises, exacerbated by IMF austerity programs, caused political instability for what were often illegitimate governments with weak institutional capacity. Not...