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Destructive Structural Adjustment

by Elmar Altvater (mbatko [at] lycos.com)
This study of 10 developing countries shows that privatization, deregulation and liberalization of markets increase poverty and inequality. This 2002 study translated from the German was the result of 5 years of analysis.
Destructive Structural Adjustment

Worldwide Poverty Production instead of Combating Global Poverty

By Elmar Altvater, et. al.

[This January 2002 study published with the cooperation of the Structural Adjustment Participatory Review Initiative Network (SAPRIN) is translated from the German on the World Wide Web, http://weedbonn.org.]

[After five years of research, the results of the “Initiative for a Participatory Review of Structural Adjustment” (SAPRI: Structural Adjustment Participatory Review Initiative) are now published. The initiative called into being by groups of civil society and the World Bank analyzed the effects of the structural adjustment program (SAP) of the World Bank in ten examples (Ecuador, El Salvador, Mexico, Bangladesh, Philippines, Ghana, Mali, Uganda, Zimbabwe and Hungary). At many national forums, groups in civil society (especially unions, associations of artisans and farmers, indigenous groups, environmental-, human rights-, women’s- and youth organizations and so forth) compiled material and insights from the ten case studies. Participation of the World Bank, the national civil society and the respective government could not be realized in every case. While the World Bank backed off when fundamental changes in its policy were clearly necessary, the SAPRI was taken seriously… The results of the SAP (Structural Adjustment Program) are identified in trade policy, the financial sector, employment, privatization, agricultural policy, mining and health care and the educational system (1-7). The downward cycle of impoverishment intensified by SAP is described (8) and alternatives are sketched (9).]

1. The effects of trade policy reforms: Unemployment, repression and destruction of indigenous industries

Reform of trade policy, a key element of the structural adjustment package, should generate foreign currency and advance export-oriented growth through reduction and gradual removal of trade barriers. Beside measures supporting the export sector, trade reform packages usually included the abolition of protection and support for firms producing for the domestic market. Inefficient and non-competitive firms that take away resources from export-production by their existence should be removed. To this end, quantitative import restrictions were usually abolished, import tariffs reduced and a system of flexible exchange rates introduced.

Since the middle of the 1980s, trade liberalization measures were implemented in seven countries analyzed by SAPRIN: Bangladesh, Ecuador, Ghana, Hungary, and Mexico. The Philippines and Zimbabwe. Although these states are different regarding income levels and economic realities, they have had one thing in common since the beginning of this period: the value of their imports exceeded their exports. While exports in most of the analyzed countries rose, imports increased even more strongly. Therefore the deficits of the trade balance and currency balance grew and led to a higher level of foreign indebtedness. Through declining terms of trade, the situation deteriorated. More exports were needed to import the same quantity of goods. The large part of their export growth was based on a few resources and articles produced with semi-skilled workers. In many countries, the profits from export growth flowed to multinational corporations – to the burden of native producers.

The failure of many local production firms, especially innovative, small and medium-size enterprises that created many jobs is one of the central findings of this study. In many cases, central activities in the manufacturing sector suffered under the general import liberalization. This resulted in a decline of production output, bankruptcy of numerous businesses and the loss of jobs. Flooding local markets with cheap imports displaced native goods and led to a decline of domestic production. This state intensified through the absence of a proper industrial policy supporting native firms grappling with new conditions on international markets. The lack of access to credits and technology transfer also contributed to the devastation of native industries. Decline in demand occurred on account of job losses and falling wages. In addition the devaluation of currency did not contribute to the desired effect of increasing the international competitiveness of indigenous producers. Instead imported prefabricated products were more expensive and production costs rose that especially harmed businesses producing for the domestic market. The destruction of indigenous businesses is reflected in the labor market development. Insufficient new jobs arose to keep the unemployment rate constant. The few jobs that were created concentrated in export-oriented industries hiring unskilled workers (often assembly plants in export production zones) and in the service area.

All in all real wages have fallen and income inequalities have intensified. Job insecurity and “informalization” are spreading. The concentration of export growth in a few activities that are unconnected with the domestic economy and do not stimulate native production has led to a reinforcement of the inequalities.

In summary, the studies show that liberalization of imports can destroy indigenous production capacities and reduce the purchasing power of large population sectors. Consequently liberalization of imports annuls the advantages for consumers expected from market opening before these advantages can arise. Export growth has not become a driving force in these countries. Foreign indebtedness has remained high or even increased. In the opinion of SAPRIN, trade reforms should contribute to building a strong industrial sector as the foundation of economic development. At the same time the inefficiency of native businesses should be combated through circumspect state interventions and institutional and organizational changes.

2. Liberalization of the financial sector: Growing concentration, decreasing efficiency and increasing instability

Liberalization of the financial sector was an integral element of the structural adjustment package in four of the states – Bangladesh, Ecuador, El Salvador and Zimbabwe. This shift to a system of financial management controlled more strongly by the market was mainly a reaction to the failure of past policies that largely set the financial sector under state control to stimulate economic growth. The reform strategy praised by the World Bank included the liberalization of rates of exchange, abolition of entrance barriers in financial markets, ending the targeted awarding of credits, restructuring of the financial sector and introduction of improved capital market supervision.

In practice the reform of the financial sector in these states turned out to be shortsighted process that concentrated primarily on liberalization of interest rates and capital traffic and at the same time weakened or dismantled existing regulations and controls. Only a little private elite that has become monopolistic in its pursuit of profit maximization benefit from these structural reforms. Therefore liberalization has neither improved economic efficiency nor resulted in macro-economic stability. Instead liberalization has strengthened the structural weaknesses of national economies. Liberalization of the financial sector intensifies social exclusion tendencies and leads to political destabilization. The following consequences are substantiated in the country studies:

· The financial assets have increasingly concentrated. Instead of helping producers who need capital to maintain or expand their businesses, the financial intermediaries have financed large, mostly urban businesses and forwarded a large part of the credits to a few powerful economic actors. This had hindered the development of small and medium-size enterprises and rural economies as a whole and reinforced existing inequalities…

· Important economic sectors and population groups have no access to payable credits. Small and medium-size businesses, rural and indigenous producers and women have only limited access to the formal financial system… Access to long-term loans has become very difficult for small and medium-size businesses since the liberalization process leads to a reorientation of national production systems away from long-term, non-export-oriented activities to short-term investments. The reforms have neglected the fact that the standard procedures introduced by private financial institutes are unsuited for dealing with the diversity of the economic situation and the needs of borrowers. Many small businesses declared bankruptcy or were forced to take informal credits and money loans to survive.

· In practice the reforms encourage short-term speculation and accepting credits for consumer goals. They facilitate the striving for fast profit and contribute to the redirection of resources away from productive sectors. At the same time liberalization of interest-rates and capital traffic contributes to economic crises and increased susceptibility to external shocks. As a result, the structural weaknesses of neoliberal economic systems intensify.

· The abolition of public control mechanisms has weakened the state. Financial liberalization has strengthened small private interest groups that usually do not follow the authority of the state and reinforced models of economic growth based on anti-competitive practices. Oligopolies were maintained and strengthened in many cases. The institutional framework crated by the reform process does not allow any effective control… Rules necessary to carry out complementary and corrective regulatory measures to control the private sector through financial resources or to restrain speculative conduct remain without authority and legitimacy.

· Economic efficiency in the financial sector has not increased. The gap between credit- and savings-interests expanded in the four countries. Despite all the reforms, liberalized banking systems cannot lower operating costs or realize extraordinary profits. This has led to losses for consumers and producers.

3. Labor market reform and employment: Flexibilization, reduced wages and growing insecurity

Although adjustment policies like privatization and liberalization of trade and finances had far-reaching effects on employment in all the countries, employment problems within the structural adjustment programs (SAPs) were not addressed directly. The SAPs did not include any explicit strategies for stimulating production in labor-intensive sectors. Specific labor market reform policies implemented as part of strategies for market liberalization to end the public regulation of labor relations had negative employment effects. The policy of “flexibilization” has generally weakened the position of employees. Labor market reform treats the labor market like any other commodity market that had to be liberalized to optimize its functioning. People assumed that wages reduced by the teamwork of supply and demand would make a country more competitive on account of lower labor costs and attract investments. Competitiveness on this basis must inevitably be shortsighted and volatile since labor costs can also be lowered elsewhere.

Moreover this competitiveness is only possible at the cost of deteriorating labor-and living-conditions, loss of collective capacities for defending the rights of workers and a decline in household income, purchasing power and demand for indigenous products. On the other hand, long-term competitiveness on the basis of product quality =, stable employment and good living standards for workers become more and more remote. The specific effects of labor market reform policies on workers and employment were analyzed in four countries: Ecuador, El Salvador, Mexico and Zimbabwe. The political changes included modifications of the legal framework both in labor law annulling special protections of workers and changes of regulations concerning employers’ conduct.

Both these legal reforms and the actual changes in labor practice have lowered the price of labor with the goal of increased competitiveness. The reforms have led to reductions in employment stability and regulations on termination practices. Term contracts were widely promoted. Workers are defenseless toward possible decisions of their employers to reduce personnel. Negotiating restrictions on the right to strike and collective wage bargaining, employee rights are damaged like the weakening of organizational possibilities for employees through increasing employment of temporary workers and use of individual contracts. Altogether the country studies showed:

· Employment levels declined. New jobs were not created on the scale that was desired. Critical declines in employment and job losses occurred in economic sectors on which low and medium income groups depended.

· Real wages have deteriorated and income distribution is more unequal than before the structural adjustment policies. The studies show that the share of wages in the gross domestic product declined while profit rates clearly increased during the reforms. More employees are employed without protection from unlawful termination. Unemployment has risen. The lowest income groups register the greatest employment losses and the greatest wage losses. Reduced purchasing power and further income concentration are manifest in the analyzed countries.

· Working conditions have become more precarious. The flexibilization of the labor market occurred on a low level. Employers are able to employ and dismiss workers at the lowest possible costs and with minimal social responsibility. There is an over-supply of employees especially in labor-intensive sectors with minimal qualification requirements. These employees are confronted with falling wages and are in a weak position in wage negotiations. Steps to improve working conditions by joining employees in decision-making process or in connecting the purchasing power of wages and increased productivity were not taken in any of the cases. As a result, employees are increasingly worried about the loss of their jobs and ready to renounce on their employee rights or refrain from union membership.

· The reforms have led to greater flexibility for employees in organizing employment conditions. This is reflected in increased part-time work and in contract work. Lower direct wage costs were achieved through reduced wages and social benefits.

· Women have suffered most intensely under the labor market reforms. Women are the majority of semi-skilled employees. They are disproportionately affected by job insecurity and flexibilization of working conditions. In some cases, these flexibility measures have annulled special protective measures for women, as for example in protection from unlawful termination during pregnancy and legal protection for expectant mothers.

· More children and seniors are working on account of declining household incomes through falling wages. For example, weekly working hours have increased in Ecuador. These survival strategies of families negatively impact education- and health standards and lead to a deteriorating quality of life.

· On balance, increased productivity and competitiveness sought with the flexibility of the labor market and related adjustment policies were not achieved. Although export sectors experienced growth through the use of new technologies or cheaper workers, all the productivity increases are limited to certain economic sectors or regions. Deteriorating working conditions in connection with an expansion of the informal sector, unemployment and shifting of labor to sectors with lower productivity neutralized all the positive effects of increased productivity.

4. Economic and social consequences of privatization: Increasing dependence and inequality without gains in efficiency

Seen historically, state property was based on the need to control strategic sectors, assure essential services, strengthen economic growth and guarantee key investments that the private sector could not or would not make. In the past two decades when states experienced growing financial crises and foreign indebtedness, state enterprises and services were increasingly viewed as inefficient by nature, hindering free competition and limiting private economic growth. Privatization is commonly considered as a cure-all or panacea for improvement of the economic performance of a country on the macro- and micro- or business planes and for improvement of the financial position of government.

Privatization measures are an important component of the structural adjustment programs. Notwithstanding the extent or efficiency of public property in the affected country, privatization measures are often preconditions for loans from the World Bank and the IMF… Although Bangladesh, El Salvador, Hungary, Uruguay, Mexico and the Philippines are different countries, they all had very similar experiences with privatization.

The civil society groups in SAPRIN distinguish between the privatization of enterprises involved in the production process and those providing basic goods like water and electricity. Concerning the latter category, access to payable quality services for society did not improve in the three states where privatization of public institutions was investigated. In some cases, access even deteriorated…

Small and large firms must be distinguished in the privatization of production in the analyzed states. Small enterprises were also state property in a transformation country like Hungary. The privatization of these enterprises was experienced as positive on principle. Previously centralized management was transferred to firms that could respond more effectively to local needs. On the other hand, enterprises had problems in competing with large transnational firms. The privatization of large firms had conflicting consequences. Some firms could raise profits; others registered constant or increasing losses. Some of these firms went bankrupt or were closed on account of privatization…

5. Reforms in the agricultural sector: Less food security, more environmental problems and cash crop production

Agricultural reform policies were implemented as part of the structural adjustment processes in countries where agriculture plays an important role in the export economy. The practices vary from country to country. These policies usually included abolition of subsidies for agricultural means of production and credits, privatization of state bodies involved with the marketing and distribution of means of production and products, liberalization of trade in agricultural means of production and goods and currency devaluation. Agricultural reforms were investigated in Bangladesh, Uganda, Zimbabwe, Mexico and the Philippines.

The studies could not identify any clear tendencies on the consequences of privatization for agricultural production. In some countries, productivity increased. In others productivity declined. This is also true within the respective countries for cash-crop production. At the same time, the studies showed that the reforms had different effects along socio-economic lines and intensified rural inequality. Real incomes of most farmers, especially small farmers, either remain low or are declining owing to higher prices for agricultural necessities. Only the producers who previously had access to resources and mammoth markets profited from the reforms. Food security – in the sense of access to adequate and nourishing food for all people in every age – has worsened. There is even more destruction of the environment on account of new production models…

6. The effects in the mining sector: Promotion of TNCs (transnational corporations), overexploitation of the environment and repression of indigenous groups

The World Bank has significantly increased its investments, credits and guarantees to the extractive raw material sector in harmony with its emphasis on the private sector and export orientation as growth motors. The World Bank supports policies to liberalize and deregulate the mining sector, privatize state mining interests, attract private investments and improve the climate for foreign investments. Together with the World Bank, SAPRIN has analyzed the economic, social and ecological effects of these programs in two states, Ghana and the Philippines. Ghana has massive gold-, diamond-, bauxite and manganese resources. Gold, copper and nickel occur in the Philippines.

The main conclusion of these studies is that the political reforms led to greatly increased investments, production and external output in the mining sector but were not used by the economy or communes in mining areas. Instead the profits largely flowed to foreign mining firms that exploited attractive investment policies and law environmental regulations. On the national plane, the reform makes only a minimal contribution to state revenues and leads to trifling net currency revenues. On the local plane, deepening health- and environmental crises, social unrest and economic decline occur.

Liberalization, deregulation and privatization in the mining sector enable transnational corporations to extract resources and profits from countries without generating sustainable economic growth. Advantages for the national or local economy fall by the wayside. These reforms and the facilitating legal changes grant generous incentives and tax breaks to investors and allow them to keep the large majority of their export revenues in foreign accounts. The contribution of this sector to the state income remained minimal because firms are not generally liable to pay income taxes. The growth in the mining sector was hardly important for the aggregate economy. In addition, privatization, deregulation and liberalization of the mining sector did not create any new jobs on account of the low labor intensity of strip mining. Simultaneously the privatization of former state mines and the continuing decline in raw material prices were added with cost-reductions that often meant mass dismissals. In addition, mining has forced countless farmers from their land and has not created enough jobs to compensate for the subsequent unemployment.

7. The consequences of budget reforms for the health- and educational systems

Budget reforms including control of public expenditures were central elements of the structural adjustment package. Cuts in social spending with the goal of curbing budget deficits and inflation frequently occurred. However the reforms went beyond cuts in public spending and exposed the social sector to the forces of the free market. Up to now the state had played an important redistribution role in the social sector. The subsequent decline in the state’s ability to allocate resources in the social realm led to deterioration in the access of important parts of the population to reasonable qualitative benefits and to worsening poverty and inequality.

Education- and public health systems are the central social services impacted by the reforms and of special interest in several of the investigated countries. The studies in Ghana, Zimbabwe, Mexico and Hungary concentrated on the effect of the reforms on access to the quality of the benefits while the studies in Uganda and the Philippines probed the effects on expenditures for education and health care. In Ecuador, the analysis focused on social assistance and subsidies, the comprehensive role of the state in the social realm and the question whether state support should be universal or targeted.

The studies came to the conclusion that the reforms weakened the role of the state in the social area. In the scope of the reforms, state functions were often limited and state spending for education and health care reduced. Their effectiveness and distribution was not improved in any case. Consequently, the access possibilities of broad parts of the population to education and health care are determined by market forces whose only criteria is profit maximization. SAPRIN concluded that the introduction of user fees and higher tariffs increased the misery of the poor population. The strategy of targeting assistance only to those living in extreme poverty cannot overcome the massive problems of the poor or stop the growth of poverty and inequality.

In the worst cases, the structural adjustment programs have led to reduced public expenditures for health and education and at best to inadequate increased expenditures. Public expenditures for education and health were drastically cut in Hungary and Zimbabwe where the state had been very active in social spending. This led to deteriorations in access to social benefits and quality of benefits.

8. A destructive cycle: Poverty production through structural adjustment

The structural adjustment programs were developed to increase economic competitiveness and stimulate investments by restructuring and accelerating opening. Poverty was to be reduced through the generation of growth and development. Efficiency and competitiveness should be achieved through liberalization of trade and the financial sector, privatization and reform of the labor market, the agricultural sector, the mining sector and public expenditures. In the countries analyzed by SAPRIN, the reforms have increased the profit margins of the credit institutions. Often the privatization of public institutions and services has led to higher prices, not to more competition. Reforms limiting wages and salaries have not contributed to the creation of jobs to the expected extent.

Separately and taken together, these adjustment measures have high social costs. Sector reforms in areas like agriculture and mining resulted in worse working conditions, less employment and flexibilization of the labor market and caused social dislocations prompting extensive migration. Reforms in the financial sector and the sudden abolition of import restrictions have taken away the ground from under the feet of small and medium-size producers cutting the economy and society to the quick. Privatization and reform of agricultural- and other sectors have contributed to concentration of the means of production and prosperity while the rising costs for health care, education and other key services accelerated the fast decline of prosperity for the disadvantaged. Profits and income concentration have clearly risen while wages and employment in the lowest income groups declined significantly.

The destruction of national production capacities is the most far-reaching result of the reforms. Financial deregulation led to a diversion of capital into speculation, consumption and other unproductive activities. A large part of the investments in production occurred in the export sector, often in the so-called free production zones or in assembly plant enclaves without a significant connection to the indigenous economy. The consequences were de-industrialization (in the sense of reduced national industrial capacities of a country), national economic heterogenization and food security. The combination of flooding markets with cheap goods as a result of earlier trade liberalization, deficient access to affordable credits, decline of incomes and purchasing power on account of labor market reforms and other adjustment measures and the removal of state support proved fatal and led to the mass destruction of agricultural- and other enterprises. Accordingly a majority of the population became unemployed. Semi-skilled workers with low incomes were especially hard hit. Many of them emigrated or chose other survival strategies, for example in the informal sector or in criminality.

The poor employees who kept their jobs also took their toll. Temporarily limited labor contracts and other flexibility measures impair the rights, social benefits, subsidies, security and negotiating power of employees. Declining wages, longer working hours and higher work volumes were the consequences and aggravated the strain of families. Family members often entered the labor market to raise their family income. In some countries, the problem of child labor intensified. Small farmers and farm workers without enough means of production to utilize possibilities of the export economy suffered under the influence of liberalized imports. They will be harmed even more by the liberalization of mining in some countries. De-industrialization (in the sense of reduced industrial capacities of a country), economic heterogenization and food insecurity were the consequences.

Agricultural lands were completely lost or made unusable through pollution-laden destruction of the environment. The loss of livelihood went hand in hand with the loss of the land. Sicknesses spread and livelihood costs (especially for food, water and medical care) rose significantly. Even in areas unaffected by mining, the increasing dependence on food imports, the food situation and the health of poor families deteriorated. Privatization led to the intensification and spread of poverty. Many employees were dismissed in the course of the privatization wave of the last years. Often the owners of privatized firms replaced employees with contract workers. The fees inherent on the market generally rose in cases of privatized social institutions. Those with low consumption renounced on the steep increases of fees. The poor could least afford the higher prices. For the same reason, privatized entrepreneurs do not supply many people with low incomes particularly in rural areas. Where services remain in public hands, governments are under pressure to reduce deficits and grant priority to debt cancellation…

User fees were introduced at a time when the sufferings of the poor population increased and social institutions were especially needed. Thus the poor paid twice, both with their taxes and with fees or the loss of past benefits for debts that they did not contract. Declining public investments in education and the public health system created a new generation of poverty. The deteriorating infrastructure, declining salaries and inadequate training for teachers, insufficient material and introduction of fees have caused lower quality of education, aggravated access to education and higher withdrawal rates. These deteriorations affect young women above all. Similar problems occur in the public health system where access to medical care in hospitals and medical stations worsens.

The increasing impoverishment through structural adjustment has affected women more intensely than men in many regards. Women with small and micro-enterprises were especially harmed by liberalization of trade, the subsequent import glut and deregulation of credit institutions. The privatization or closing of local businesses led to the dismissal of many employees. Women with little education and without special qualifications were particularly impacted. Many of them were forced into the informal structure…

The stubbornness of international institutions through structural adjustment programs leads to the expansion of poverty, inequality and insecurity all over the world. The polarization bound with these measures foments tensions between different social classes, strengthens extremist movements and takes away legitimacy from democratic political systems. Their effects on the poor are so drastic and widespread that none of the social investments can master the social crises. Only the reform of productive sectors through framing institutional conditions can guarantee that economic possibilities, resources and profits flow to all parts of the population.

9. Exodus from structural adjustment and new ways in economic policy

The analysis of the economic, social and ecological consequences of the adjustment policy in nine countries in the course of SAPRI points to the necessity of new approaches in economic policy. To mitigate poverty and economic inequality, political programs must produce functioning and growing economies that create good jobs at fair wages, strengthen the rights and purchasing power of workers, support small agricultural enterprises and food security in an ecologically sustainable way and guarantee access to essential provisions and services for the whole population. The experience of the last two decades shows that a clear exodus from the structural adjustment paradigm is necessary.

· Trade policy.

For most countries, the focus should be on developing well-integrated economies with stable connections within and between agriculture, industry and other economic sectors. The trade policy should create strong manufacturing sectors and support agricultural and industrial production instead of destroying these sectors in the name of cheap imports and the struggle against inefficiency. Trade liberalization should not be implemented before a suitable industrial policy exists to tackle the structural pressures responsible for the inefficient functioning of local enterprises. Technological upgrading, technical support in the areas of product quality and marketing as well as additional measures should be central. Only in this way can indigenous firms be helped to survive amid competition with exports. Regional trade and interconnection between relatively equal partners could be the foundation of a gradual integration in global markets. Local businesses could be offered chances to adjust to the foreign competition.

In every country, certain industries and economic sectors play a key role in development and are very important as job sources for lower and medium income groups. Trade policy should target the strategic sectors of a country. Small and medium businesses have a special significance since they are by far the largest employers and innovators.

· Fiscal policy

Beyond providing falling interest rates, fiscal policy should strive to reduce the gaps between savings- and debtor interest. Development banking mechanisms should be introduced to support job-creating businesses. Regulations need authority and legitimacy to guide the private sector through financial resources, to curb speculative conduct and grant credits to all population groups, all sizes and types of businesses and all regions. Regulating and monitoring framing conditions are needed so financial institutions can help the poor gain access to the formal financial system and survive. This is especially true outside the mammoth population centers and for businesses with an informal character.

· Investment policy.

Although export-production is admittedly important, investments should be supported that create local economic connections and are not import-intensive to avoid balance of payments deficits. For example, the agricultural industry can raise the export value and reduce dependence on import. Other native industries could be successful on both the domestic market and foreign markets without depending on cheap laborers or exploiting the environment. In dealing with transnational corporations, those investments should be preferred that support the national development strategy with the necessary capital, technology and know-how, contribute to export diversification and strengthen local economic connections instead of displacing indigenous businesses or endangering the economic sovereignty of the country. Simultaneously import expenditures could be reduced by a high tax on luxury goods.

· Agricultural policy.

In the agricultural sector, significant investments must be made before import liberalization to guarantee food security and the survivability of small agricultural enterprises. Strategies of rural development are needed that grant priority to agriculture producing food as an important factor for food security and local foundations of life instead of relying on food imports. The active government should promote political and investment initiatives supporting small agricultural enterprises that produce for the local market. Its task must include giving small farmers access to payable agricultural means of production, credits and markets, improving rural roads and transportation systems, developing irrigation systems and encouraging land reforms. Production for export should not be promoted at the expense of further marginalization of small farmers producing for the local market, above all women, and degradation of the soil.

· The mining sector.

The legal and political framing conditions in the mining sector should be thoroughly examined to increase the responsibility and accounting duty of businesses with regard to ecological- and social questions. Environmental legislation should be strengthened to prevent the pollution of the water and the environment, diverse health problems and destruction of agricultural acreage. Until these changes have occurred along with a complete evaluation of the adjustment consequences for this sector and a careful examination of alternative development strategies, international development banks should not grant credits any more for mammoth mining projects and stop supporting extensive liberalization, deregulation and privatization of the mining sector.

· Active growth- and employment policy.

For reviving local economic activity oriented in both the domestic- and the export market, more will be necessary than a useful trade- and fiscal policy coupled with regulatory and planning state activity. Demand for locally produced goods and services should be stimulated. Local purchasing power must be raised through a labor-intensive growth strategy and an active employment policy. The creation of jobs should be supported and promoted by the advancement of labor-intensive branches of production, above all locally rooted small and medium-size businesses. Long-term competitiveness in these sectors can be strengthened by a wage policy that stabilizes a fair salary structure and creates job security.

Three-sided commissions of employees, employers and governments should be formed to find consensus in the question of proper regulatory framing conditions for labor- and employment practices. The reforms should guarantee employee rights like the right to free unions, prohibition of discrimination against women and minorities as well as improved employee protection regarding job security and working conditions.

Privatization should not occur in an undifferentiated way. Rather all forms of ownership should be considered starting from local realities and development needs. Measures should be taken to prevent the displacement of indigenous businesses by TNCs. Where privatization would be advantageous, mechanisms of civil participation should be developed and supported to facilitate transparent processes. In this way corruption would be reduced and greater influence on decision-making structures would be granted to the citizens.

· Responsibility of the public sector.

Ideally, public institutions and services should remain under state or communal control to encourage the best-possible provision of all parts of society with affordable high-quality services. The public availability of essential and strategically important resources at affordable prices contributes to reducing poverty, pressure on the environment and the additional strain on women. As a rule, general subsidies are more effective than targeted assistance guaranteeing provisions for the many poor in most countries. High expenditures in the health- and education sectors must be maintained to allow sufficient provisions, an improved infrastructure, equipment and personnel. Improvement of service quality and just distribution of services should be emphasized. User fees and breaking even programs for basic medical care and prevention or elementary education should be abolished. Investments in these areas may not occur at the expense of medical institutions for healing sicknesses and continuing education.

Where general access to affordable social services is very important, the national conclusions of the SAPRI/CASA studies altogether see revival of local economic activity and facilitation of paid work – structures systematically destroyed by the structural adjustment programs – as the foundations for reducing poverty and inequality and the possibility of sustainable development. Citizens and civil organizations emphasized one thing again and again on all planes of our participative field studies from local workshops to national public forums: the importance of creating economic chances and dignified employment possibilities for tackling poverty at its economic root.


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