1980s Economic Reforms in Africa Didn't Hurt Poor [Lang]- 8/18/94

1980s Economic Reforms in Africa Didn't Hurt Poor [Lang]- 8/18/94

Cornell Chronicle

The process of major economic reforms, known as structural adjustment programs, launched in sub-Saharan Africa in the 1980s has not had a negative impact on the poor, contrary to widespread perceptions, concludes a six-year research project at Cornell.

"Although these programs have not been sufficient to relieve poverty or produce rapid growth, there is no evidence that they have harmed the poor either," said David Sahn, director of the Cornell Food and Nutrition Policy Program, a social science research institute and one of the largest institutes in the world doing economic policy research on Africa, according to its sponsor, the U.S. Agency for International Development (USAID).

"In fact, our evidence shows that the poor have benefited in countries with fully adopted adjustment programs which we believe are necessary preconditions to restoring economic growth and stability in Africa."

The study is the result of collaboration of Cornell staff with dozens of African researchers working in Cameroon, The Gambia, Ghana, Guinea, Malawi, Madagascar, Mozambique, Niger, Tanzania and Zaire. The researchers examined the impact of trade policy reforms and exchange rate devaluations, agriculture and food market reforms and fiscal policy reforms by conducting and analyzing survey data of households, farms and markets, as well as national accounts and government budgets, and thereafter developing appropriate economic models.

The work was of such importance that USAID sponsored conferences at the State Department for 200 officials from the U.S. government and private voluntary organizations in November 1993 and one in Ghana in March to disseminate the findings to multilateral and bilateral donors and to more than 100 African economists and policy makers from two dozen countries.

According to independent evaluators at Tufts University, "The collection and analysis of the data, coupled with sophisticated economic models undertaken by CFNPP, has resulted in the largest body of high quality, quantitative research on African economies produced by any institution in the world."

Sahn, a development economist, said the major focus of the project was to determine how the complex and highly controversial policies of state disengagement and liberalization of markets affected economic and social welfare.

In the face of severe economic and social crises in the mid-1980s, many African nations started the process of structural adjustment, funded largely by the International Monetary Fund, the World Bank and bilateral donors, to establish market-based economies. Many officials believed, however, that this process was inappropriate, ineffective and inequitable and would have deleterious consequences on the poor since such reform initiatives were expected to result in falling wages, higher unemployment, higher prices for staple goods and fewer services.

"Africa remains in crisis. However, without policy reform, the well-being of the poor would be worse," concluded Sahn, editor of the just-published book, Adjusting to Policy Failure in African Economies (Cornell University Press, 1994). The reforms, for example, improve incentives to small agricultural producers and eliminate economic policies that disproportionately benefited the elite and urban middle class. Furthermore, many analysts make the erroneous assumption that the reforms should be evaluated on a "before" and "after" basis.

"Instead, where possible and for many questions, the counterfactual - using models to explore growth and distributional outcomes with and without policy change - is the correct approach to examining the impact of economic reforms on poverty," Sahn said.

Many analysts also assume that declining living standards in countries receiving loans from the World Bank and IMF is a failure of policy; instead, the failure to institute reform, due to political environments that prevent elimination of excess state controls, is the most serious impediment to economic recovery in Africa, Sahn pointed out.

The CFNPP conducts research and training on economic development and social policy. Recently, particular emphasis has been on economic and social welfare encountered as nations shift to market economies in Asia, Eastern Europe and the former Soviet Union, as well as in Africa.

Date: Tue, 23 Aug 94 21:12:46 -0400
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Editor: Ali B. Ali-Dinar
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