Even before the news about the arrest of IMF chief Dominique Strauss-Kahn, there has been mounting concern about the future of the institution. Consequently, we turn to one of my favorite historical arguments relating to the IMF’s role in development, the highly contested Structural Adjustment Programs (SAPs) and it’s effect on the Mozambique cashew nut industry in 2000.
The debate was in the high profile lime light through the NY Times and Washington Post’s articles in 2000. The NY Times ran a series of opinion segments airing the debate between Paul Krugman and Center for Economic and Policy Research’s former senior policy analyst Robert Naiman. Naiman ran an article claiming the detriments of the SAP policies of the IMF and it’s coercive restrictions on third world development, focusing on the cashew industry as the example. The Washignton Post article that adds an emotional connection the American public with an interview with a former cashew nut factory worker supported this opinion. Krugman refutes the “anti-globalist” view in his Op-Ed piece, focusing on the sound motivations of the IMF to protect the best interests of the ¼ of the entire nation’s impoverished farmers who were being suppressed by state monopolies and decreasing sale prices.
Who’s right? Is it Naiman, claiming the failure was a motivation for MNC and international companies to capitalize at the African expense, or Krugman’s idea that the failure was the unwillingness to accept the motivations of the IMF and the correct implementation of policy measures to protect farmers, not state monopolies?
The IMF envisioned the entire adjustment program to span from 1993 to 2008, a period of 15 years. The program however, was already being criticized as a failure by 1995, a full 13 years before the projected effects to finalize. To put that in perspective, that is the equivalent of an umpire in baseball calling a pitch a ball 52 feet before it gets to the plate. The determinants for premature views of failure are of great debate. The most convincing comes from the geographical economist’s viewpoint that the lack of infrastructure drove trade to be simply unavailable to the masses. And yet, the argument will persist between the anti-capitalists and the IMF and World Bank supporters. It is as staged and clear-cut as the Republican and Democratic debates over solely ideological issues such as gay marriage and abortion: just as unproductive, but just as loud.
What can be productive from the IMF SAP arguments are the lessons learned about why SAP programs can fail, to weed out the layers of development burdens, and getting closer to the roots For example, farmers in Mozambique rarely saw their profits because of the middleman’s exploitation of the transportation of capital and goods. So maybe now policies can be redirected to creating more of a direct link between farmers and the trade centers. Evidence of rooted problems can be used to elevate any ideological argument, but where they are truly productive is in solving where the limited funds should be directed in an economy needing short-term solutions and long-term growth.