Development, Neoliberalism, and Structural Adjustment

The Development Discourse

The emergence of development economics as its own field coincided with the post World War II era and the identification of the majority of the world as “underdeveloped”.(1)  The rapid expansion of the world economy after WWII has been referred to as the economic Golden Age.  “During this period, industrialized economies grew at almost five % annually, bringing prosperity to many citizens of established industrial powers, and even in certain parts of the world where economic modernization was more recent.”(2)

The emerging development ideology centered on the idea that increasing development was an economic incentive for the whole world— that “a rising tide lifts all boats” despite the inequalities that may result.  In other words, from the start of the development movement it was predicted that inequalities would worsen as a result of market-based policies, but ultimately the quality of life for all would improve. “Neoliberals advanced a highly optimistic conception of ‘the market’—the mechanisms of which, if allowed to operate unfettered, purportedly would lead to optimal outcomes for society as a whole.” (3)  The goals of this economic dream were echoed in one of the most influential documents of this period, prepared by a group convened by the United Nations:

 “There is a sense in which rapid economic progress is impossible without painful adjustments.  Ancient philosophies have to be scrapped; old social institutions have to disintegrate; bonds of caste, creed and race have to burst; and large numbers of persons who cannot keep up with progress have to have their expectations of a comfortable life frustrated.  Very few communities are willing to pay the full price of economic progress.”(4)

Present in this excerpt is the idea that improvements in development must “flatten the world.”  In other words, the development ideology held both the implicit and explicit goal of a globalized, modern world that left behind “ancient philosophies, bonds of caste, creed and race” in pursuit of economic progress.  The idea that development necessitates a form of social and cultural upheaval contains traces of imperialistic and colonial sentiments:

“From the perspectives of anthropology and social history this positivist value orientation is obviously more than a little problematic…The particularities of social change in a region or series of local contexts must be ironed out to fit the universal metric. The process of ‘ironing out’ is one of aggregating data at ever higher levels, ultimately ending up in a comparison of the ‘developed’ and ‘developing’ societies… Aggregated data are also ‘cleaned’ so that what is particular to a context is removed from what is shared and therefore generalizable.”(5)

In addition, the development discourse of the past revolved around conceptions of the “third world”.  In his book, Encountering Development, Arturo Escobar argues that this discourse created the construct of the third world in which the legitimating forces of the “first world” served the interests of the powerful rather than the powerless.  Today, the goals of the development movement remain ambitious—high levels of industrialization and urbanization, modernization of agriculture, rapid growth of material production and living standards, and the widespread adoption of modern education and cultural values.(6) While the development agenda still continues, the importance of cultural sensitivity and the pitfall of ethnocentrism have been recognized.

Neoliberalism and Structural Adjustment

In the late 1970s to mid-1980s, it became apparent that a substantial number of third world countries would be unable to continue making payments on their debts to commercial banks in wealthier developed countries.  Because of this, an economic recession began as inflation rates rose throughout the world.  It was feared that if many countries defaulted on their loans, the entire global financial system would collapse.  This major crisis and potential collapse was averted by the intervention of major financial institutions such as the World Bank and International Monetary Fund.  In order to stabilize the world economy, these institutions promoted “structural adjustment policies” informed by neoliberal ideals.

Neoliberalism is defined as a set of market-based, liberal economic policies.(7)   Neoliberalism is often linked to the so-called ‘Washington Consensus’, a term coined by John Williamson to summarize key economic policy commonalities between IMF, World Bank and U.S. Treasury Department.(8)  These policies argued that aggregate economic growth would benefit the impoverished majority as well as wealthier minority in developing countries, and presented the “free-market” as a better tool for growth than government intervention.(9)

Structural adjustment policies emphasized the market allocation of resources, decreased public sector spending, liberalization (reduction of barriers that inhibit free trade), deregulation (reduction of state control over flow of goods and services), and privatization (sale of state-owned enterprises, shifting provision of many social services to private sector). Within the doctrine of structural adjustment, individuals in a society were viewed as autonomous, rational producers and consumers whose decisions were motivated primarily by economic concerns.

Despite the good intentions of many structural adjustment policies, they often propagated more harm than good.  Today, structural adjustment is largely regarded as a failure that has not only failed to bring third world countries out of the “poverty trap”, but has also resulted in injuries to the poor.  The poorest of the poor were often forced further into poverty due to lower incomes, increased inequality, and less access to social services.

“The idea that robust economic growth will automatically lead to a better life for everybody is comforting.  Unfortunately, it is also wrong.  Specific growth-oriented policies have not only failed to improve living standards and health outcomes among the poor, but also have inflicted additional suffering on disenfranchised and vulnerable populations.”(10)

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(1) JY Kim, JV Millen, A Irwin and J Gershman, Dying for growth: global inequality and the health of the poor, Common Courage Press, Monroe (2000).

(2) Ibid.

(3) Shakow, Aaron and Alec Irwin. “Terms Reconsidered: Decoding Development Discourse,” from Dying for Growth: Global Inequality and the Health of the Poor. Monroe: Common Courage Press, 2000: 44-61. p. 52-53.

(4) United Nations, Department of Social and Economic Affairs, Measures for the Economic Development of Underdeveloped Countries, 1951.

(5) Kleinman, Arthur. “Critique of Objectivity in International Health,” from Kleinman, Arthur. Writing At the Margins. Berkeley: University of California Press, 1995.

(6) Escobar, Arturo. Encountering Development. Princeton: Princeton University Press, 1995.

(7) A Sen, Development as freedom, Alfred A Knopf, New York (1999).

(8) Rodrik, Dani. “Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform,Journal of Economic Literature 44 (2006): 973-987.

(9) Williamson, John. “The Washington Consensus as Policy Prescription for Development,” from Development Challenges in the 1990s: Leading Policymakers Speak from Experience. Eds. Timothy Besley& Roberto Zagha. Washington, D.C.: World Bank, 2005.

(10) JY Kim, JV Millen, A Irwin and J Gershman, Dying for growth: global inequality and the health of the poor, Common Courage Press, Monroe (2000).