I witnessed the effects of structural adjustment first hand in Nicaragua in 2005. Nicaragua's history is somewhat different than that of many other countries subject to structural adjustment. Throughout the 1980's, Nicaragua was governed by an initially popular socialist government that came to power through a revolution that overthrew dictator Anastasio Somoza. The government made massive gains in improving the standard of living, including implementing innovative education reforms that brought the literacy rate above 90%. But a decade of a U.S.-orchestrated insurgency that ravaged the country wore the Nicaraguan people down and they voted a pro-U.S. government into power. That government began dismantling the public sector to finance the debt Somoza had run up. By 2005 the literacy rate had plummeted, with 35% of the population unable to read or write.
Writing for Counterpunch, in June of 2005, I described what I found in Managua:
Achualinca sprawls out from the edge of the dump on the shores of Lake Managua, a barrio of improbably well cared for houses thrown together from whatever materials people could scavenge--tin, plywood, tar paper, cardboard, plywood. In the all but forgotten language of the first people who lived here, Achualinca means sunflower. Today scattered banana trees grow out of the mercury-laden soil, contaminated by a U.S. battery company that dumped its waste into the lake for decades.
This is the last stopping place for people with nowhere else to go in a country where farmers are losing their land as the prices for their crops fall on the global market and where massive unemployment creates fierce competition for a handful of jobs in textile factories that barely pay their workers enough money to feed a family a meager diet of rice, beans, tortillas, and the occasional vegetable. According to the United Nations Development Program, 79.9% of the population of Nicaragua lives on less than $2 a day. 45% live on less than $1 a day. Most of the residents of Acuhalinca are part of the informal economy--salvaging and washing plastic from the dump for recycling, washing windshields at stop lights, panhandling, selling fruit and water and pastries on the street.
This is the kind of community that the leaders of the G-8, the world's most powerful nations, say they are trying to help by writing off the debt that Nicaragua and the rest of the world's 18 poorest nations owe to the International Monetary Fund (IMF) and the World Bank. But the devil is in the details, and the debt forgiveness plan will actually lock in place many of the conditions that created this poverty, and put conditions on the Nicaraguan government that will make it virtually impossible to use any of the savings from debt payments to help the poor.
For over a decade, Nicaragua has labored under "structural adjustment" plans imposed by the IMF and the World Bank designed to insure that it would pay off its debts. Nicaragua will have to continue to comply with IMF dictates to qualify for debt forgiveness. Under "structural adjustment" the government was pressured to cut spending across the board and privatize public services, leading to the collapse of the nation's public sector and a growing gap between rich and poor. According to sociologist Cirilo Otero "Structural adjustment has produced greater inequality in our society--there are less people with more wealth. In the 1970's there still existed in Nicaragua an upper class and a middle class, but effectively that whole section of the middle class has disappeared, so now there are a very few people in the upper class and a very large lower class. One of the elements that has determined this is that various sectors have lost their access to essentials--electricity, potable water, health care, and education."
Otero's words came back to me this week as I watched the Obama administration propose cuts to Head Start and to heating assistance for the poor in order to reduce the deficit and Wisconsin's Governor attempting to eliminate workers' right to collective bargaining for state and municipal workers in order to push through drastic cuts to social services.
This country's debt was not racked up by social spending, which makes up a tiny fraction of the federal budget -- it was racked up by 40 years of cold and hot wars and fiscal policies tailored toward benefiting a handful of very wealthy people at a time when the gap between rich and poor grew to proportions similar to that in . . . well, a country like Nicaragua.
But the poor are expected nonetheless to pay the brunt of the cost of servicing this debt -- just as they are in Nicaragua.
The only difference here is that the debt is owed not to the IMF or the World Bank but to a hodgepodge of banks, investors, and foreign governments -- with the largest share owned by China. And the austerity programs are being pushed not by the creditors themselves but by Wall Street and its allies in the leadership of the Democratic and Republican parties.
As a global economy guided by an absurd belief in the possibility and desirability of infinite economic growth comes up against its real world limits, it is collapsing inward, and the wealthy, in order to hold on to what they have a little longer, are implementing the same policies domestically that they impose on poorer nations. Structural adjustment has come home.