Beyond adjustment : the Asian experience

In discussing structural adjustment, we may ask the following questions: Adjustment for what? To what? Of what? By whom? and How? The first question is adjustment for what purpose? Any adjust ment must have some end in view. Sometimes constraints are consid ered as if they were objectives of policy, and, of course, they can take the form of intermediate objectives. Thus the elimination of a deficit in the balance of payments or in the budget or in public enterprises, though a constraint, can become an overriding short-term objective. Or we may wish to adjust from a strategy of import substitution to one of export orientation, or to growing debt service, or to more food production. Or we may wish to correct other distortions in order to improve the allocation of resources. Or we may wish to reduce high rates of inflation. These are, at best, intermediate objectives.

Among the objectives of structural adjustment are usually cited (1) the reduction or elimination of a balance of payments deficit, (2) the resumption of higher rates of economic growth, and (3) the achievement of structural changes that would prevent future pay ments and stabilization problems. One of the most important pur poses of structural adjustment is to make the economy less vulnerable to future shocks. This can be done by increasing flexibility and adaptability. The success of a structural adjustment program depends largely on the absence of rigidities. But it may also be its aim to reduce such rigidities. Unless they can be removed, structural adjust ment can be very costly, or altogether out of reach. Growing flex ibility is therefore both a condition for and an objective of adjustment policy.