Question 1
- Currency devaluation– Currency devaluation is introduced to raise the prices at which producers sell. For example, in Ghana, the policy was introduced in the 1980s. It led to a substantial increase in exports. However, the neoclassical view is that the policy does not always yield the desired results. For example, in Ghana, the devaluations led to a reduction in gains (Rapley, 1996). The policy created more problems than it first appeared on the surface. The events that followed can be explained by the failures of currency devaluation. Despite its advantages, it hurts the industries that rely on imports and sell their products to the local market.
- Trade Liberalization– Trade liberalization refers to the reduction or elimination of trade barriers between countries. It is implemented to increase exports, enhance the efficiency of local firms, and improve the allocation of resources. The outdated neoclassical view was that it is strongly linked to growth. However, recent researches indicate ambiguity in the relation. It only results in growth if applied with discrimination (Rapley, 1996). For example, empirical evidence indicates that third-world countries lose ten times more when first-world countries institute protectionism than they gain from the donations offered. The developing countries lose because they import cheap goods that discourage local entrepreneurship.
- Privatization- Countries privatize their industries to improve the efficiency and productivity of their industries. However, the neoclassical view of privatization is that it is the weakest structural adjustment (Rapley, 1996). It is selectively effective. Amongst the main reasons for its failure is the tendency of private firms to be selective on the industries in which they wish to invest. Private firms are hardly willing to invest in the production of goods and services that do not promise substantial profits in the future. Various sectors of the economy benefit from the activities of public firms as opposed to private organizations. For example, the Banque Ivorienne de Development funded several successful private firms, although it suffered bankruptcy (Rapley, 1996). It would have been a different case if the firm was private.
Question 2
The moral critique of structural adjustment draws its conclusions on the effects of neoclassical policies on the poor. Rapley posits that structural adjustments result in suffering amongst the poor instead of improving the quality of their lives (Rapley, 1996). One of how the poor suffer is the reduction of living standards. In most cases, poverty proliferates amongst the poor in the developing countries that implement structural policies. For this reason, they suffer the consequences of increased poverty. For example, the poor can hardly afford a balanced diet and enough food potions due to the reduction in purchasing power that emanates from currency devaluation. The little they earn from various economic activities cannot purchase the right quality and quantity of food they need. Some structural adjustments also increase unemployment, further lowering poor people’s living standards.
Rapley considers it immoral to intentionally subject people to suffering. He explains that structural adjustment programs reduce the welfare of some people in society. Some worsen wealth distribution, thereby resulting in increased suffering. For example, Mexico’s peasantry suffered more after the implementation of structural adjustments in the 1990s (Rapley, 1996). The fact that the programs subjected some people to suffering makes them questionable from the perspective of morality. Some people argue that the programs are worthy in that they secure the welfare of future generations. However, it may be considered immoral to make some people suffer at the expense of others.
Reference
Rapley, J. (1996). Neoclassical Reform in Practice. Understanding development: Theory and practice in the third world. Psychology Press.
