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Is the structural adjustment programme solution to our problems?

Discussion in 'Jukwaa la Siasa' started by Mzito Kabwela, Jan 2, 2010.

  1. Mzito Kabwela

    Mzito Kabwela JF-Expert Member

    Jan 2, 2010
    Joined: Nov 28, 2009
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    Structural adjustment programs attempt to correct economic imbalances and improve efficiency of developing and transitional economies, thereby setting the state for further development. David Reed used nine case studies to research the impacts of such programs in an attempt to understand their effectiveness and impact. One of those studies examined Tanzania.

    A common problem exists, however, when structural adjustment is concerned: The environmental impacts of adjustment are "complex, ill-defined, and difficult to bound." Therefore, the authors used many techniques to design a model that identifies price and non price factors which determine responses to structural adjustment. More simply, what are the micro-level responses to policy implementations on the macro-level? A given response is likely to have many environmental consequences.

    Tanzania is varied in its physical environment. The contrasts range from abundant wildlife plains to heavily populated agricultural areas. Abundant mineral resources exist, but have yet to be exploited. Tanzania is known for its diversity and magnitude of wildlife. This is partially due to the fact that 25% of the country is protected in reserves. The population is primarily rural agricultural. Farming accounts for 85% of employment and 60% of GDP. Only one-fifth of the country has consistent annual rainfall causing heavy concentrations in these areas. Only 5% of the remaining four-fifths is cultivated land.

    During the 1960's and '70's, Tanzania implemented policies of self-reliance. These included extensive compulsory villigization (ujamaa), nationalization, and price controls. They experienced short-run growth, but a long-run economic downturn. By the 1980's Tanzania was the world's second poorest country in GDP per capita terms. At the same time, its natural resource base became noticeably threatened. These problems signaled a movement towards more market-oriented policies and a change of political leadership.

    During the 1970's, Tanzania attempted to ensure food and crop export production by large-scale production-oriented agricultural parastatals. This strategy, combined with ujamaa, disrupted traditional resource uses and accelerated environmental degradation.

    The National Environmental Management Council (NEMC) in Tanzania pursued strategies of conservation in the 1980's and later modified them to sustainable development in 1992. Problems existed in this area. Legislation was geared toward control, rather than proper incentive structures. Enforcement was also poor because staffing was limited and fines were continually eroded by inflation. During the 1980's, Tanzania tried its own structural adjustment programs. These included the National Economic Survival Program in 1981 and the Structural Adjustment Program in 1983. The details of these programs were not discussed as Tanzania could not muster enough external resources to implement them successfully.

    So in 1986, a donor-sponsored Economic Recovery Program (ERP) was decided upon. The aim was to achieve sustainable growth in real income and output. Better pricing of crop production, improved product and input marketing, an increase in government outlays for agriculture, an increase in industrial capacity utilization by liberalizing raw material imports, a decrease in the balance of payments deficit through devaluation, export incentive schemes, and foreign exchange liberalization, and better control of the budget deficit and money supply were thought to be the key ingredients necessary to achieve this goal. Although agricultural prices increased, producers' benefits were reduced by inflation. Also, the marketing reform failed to improve producer margins. Despite these problems, agricultural output and exports rose, industrial imports increased, and per capita income gained 6%.

    In 1989, the ERP program was modified to create the Economic and Social Action Program (ESAP). The goal of the new program was to restore the physical infrastructure and ease social impacts. While, industrial capacity and nontraditional exports (other than agriculture) increased, farmers did not benefit as prices for their crops did not improve and prices for inputs such as fertilizer rose. Simultaneously, job creation declined and minimum wages actually decreased.

    So although the ERP and ESAP did produce some positive responses they also strained Tanzania's resource base even more. Specifically, structural adjustment greatly impacted Tanzania's already large problems: deforestation and soil erosion. Each will be discussed in turn.

    In Tanzania, 2% of forest area is lost per year and the data show an increasing trend. Land clearing accounts for 40% of deforestation. Clearing continues today because of poorly designed land laws that do not address encroachment and structural adjustment's impact on input pricing. The net effect is that farmers cannot expand their production by intensification, but only by clearing more land. Extraction of wood products is responsible for the remaining 60% of deforestation. Most of this is fuelwood, but some is due to tobacco farming and commercial logging. High population growth and a lack of energy alternatives are the biggest reasons wood extraction has not subsided.

    Structural adjustment is responsible for a 13% increase in land area used for tobacco farming. It has also increased construction which directly increases demand for wood and thus extraction of wood resources. Furthermore, external market liberalization has caused an increase in timber exports made possible by logging.

    The soil erosion problem is not as "simple" as deforestation. It is hard to quantify amounts and thus rates of erosion so little data exist. However, 63% of farmers interviewed for this study indicated that erosion was a serious problem. The causes of erosion are land clearing as discussed earlier, poor farming practices, and cultivation of erosive crops. Farming practices have not improved because structural adjustment has limited the farmers' access to better technologies like superior seeds and fertilizer because they are not affordable due to lower crop prices and higher input prices. Cropping patterns have also changed due to adjustment. Tanzania experienced a 17% increase in land planted with cash crops. About 80% of this increase consists of highly erosive crops. Although several speculative reasons have been suggested, structural adjustment's market liberalization facet is a known contributor to the problem. It has encouraged production for export of cotton and maize, both highly erosive, and both major cash crops in terms of area cultivated.

    Overall, structural adjustment in Tanzania has increased rates of environmental degradation by increasing input prices, promoting unsustainability through market liberalization, and reducing expenditures on "reforestation." In addition, unrelated sectoral policies have exacerbated degradation problems. The ending of ujamaa, poor agricultural extension, poor enforcement of land clearing, ambiguous land tenure, and inappropriate energy pricing have all reduced incentives to conserve. Structural adjustment has also differentially hurt the poorer farmers because pricing schemes have caused cultivation of marginal lands. Thus, a positive feedback loop has been created causing a downward spiral of economic and environmental well being.

    The authors propose that if the current programs continue, deforestation and soil erosion will increase causing siltation and related problems with hydropower and water quality. Also, air pollution will likely rise, biodiversity will decrease, and per capita GDP will increase, but accompanying it, growing income disparity.

    The proper pace of any structural adjustment program depends on the conditions existing at the start of the process. Important conditions to take into account include degree of local government control, market and policy distortions, and design and implementation and capacities. Adjustment moved slowly in Tanzania for these reasons. The authors contend however, that the sequencing of adjustment may be the cause of many problems. For example, potential export earnings were lost because prices were reformed before the institutional barriers to exports had been removed.

    One of the biggest factors restricting Tanzania's implementation of more sustainable policies is its dependence on foreign aid. By 1996, when this study was published, development assistance accounted for 75% of GDP. External debt was 285% of GDP. Unfortunately, future policies must conform with current SAP guidelines so that this necessary aid is not cut off as it has been in the past.
  2. Kichuguu

    Kichuguu Platinum Member

    Jan 2, 2010
    Joined: Oct 11, 2006
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    I guess "No;" our problems need more than plans and programs. We need leadership more than anything else.