A Closer Look at International Lending Policies

By Alysha Alani 

Alysha Alani, '15

International aid is a phrase that is used often, but rarely unpacked. It can encompass a variety of programs and initiatives. One type of international aid is loans from an international lending agency such as the World Bank or the International Monetary Fund (IMF). This type of aid is not altruistic, and comes with strings attached in the form of structural adjustment programs (SAPs). Briefly, SAPs are policies that change a country's economy to increase export & production while privatizing (and often sacrificing) social services. The “Washington Consensus” prescribes these measures of economic reform based on World Bank and IMF policies, which are endorsed by the US Treasury Department.

First of all, SAPs are usually created undemocratically (ie: Country A tells B what to do instead of working together).

Secondly, the same SAPs are assumed to work for all countries. There is no room for individual difference; all countries are seen as homogenous in their structure, culture, etc.

When a government applies for a loan from an international lending agency, it must abide by conditions including:

1) cuts in social welfare spending (education, healthcare, etc.) aka austerity measures

2) privatization of state-owned enterprises. Often, the aim of the private company is to maximize profit not to maximize public benefit. Greater profit incentives lead to a rise in prices of goods and services previously subsidized by the government, unjust labor practices, and life necessities like water into commodities that only few can afford are likely to occur.

3) opening the economy to foreign competition

Through liberalization and deregulation of industry and the market, foreign governments or major international corporations (or international corporations working on behalf of governments) are free to start up industries that are synonymous with environmental exploitation (drilling for oil, mining for metals, deforestation, etc.). Deregulation means that any policies protecting a country’s people and resources are removed in favor of foreign investment.

In addition, SAP policy on agriculture promotes extensive cultivation of cash crops for exportation. While the country initially profits, the market becomes flooded with this crop and the price drops leaving little monetary gain and agricultural fields depleted of nutrients. Thus the use of fertilizers (and pesticides) is necessary to increase crop yields. Of course, runoff from agricultural fields pollutes local water bodies making water unsafe and killing off fish populations, just a few of the environmental consequences.

            Overall, while SAPs are supposedly created to be beneficial to a country in need of financial aid, they do more harm than good. While there may be short-term benefits, the overall effect of this type of foreign aid is unsustainable and detrimental to a country’s long-term health and prosperity.