Structural adjustment programs and housing affordability in Accra, Ghana

Introduction Since April 1983, the government of Ghana has been implementing Structural Adjustment Programs (SAPs) following a long period of economic decline that manifested itself in low or negative GDP (Gross Domestic Product) growth, falling export revenue, and deteriorating infrastructure. Crafted by the World Bank and the International Monetary Fund (IMF), SAPs are imposed on developing countries as a pre-condition for debt relief, acquiring new loans, as well as attracting foreign investment (Watkins 1995; Oxfam 1999) Structural Adjustment programs are multifaceted and involve the implementation of economic policies that aim at improving resource allocation, increasing economic efficiency and increasing the economy's resilience to changes in its domestic or global market. This process is normally supported by policies designed to achieve sustainable deficit reduction and to reduce the rate of price inflation (Gilpin 1994, 547). Structural Adjustment Programs often consist of two parts: shorter-term stabilization and longer-term adjustments. While stabilization measures are primarily designed to reduce short-term imbalances between demand and supply, structural adjustments seek to address a wider range of obstacles to growth, many of them limiting the ability of the economy to increase supplies (Duncan and Howell 1992,5). Since stabilization and structural adjustments programs are intrinsically linked, SAPs is used here as general term to cover all of them. Among other things, countries undergoing structural adjustments must agree to devalue their currencies, raise interest rates, downsize the public service, privatize public enterprises and drastically cut back on government expenditure on education, health, housing and welfare. The reasoning behind these demands is rooted in neoclassical economics and the modernization theories of the 1950s and 1960s that attributed the underdevelopment of third world countries to endogenous factors or obstacles (see Rostow 1961). These `obstacles' are said to include unwarranted state interference in the workings of the price mechanism, an over-bloated public service, exchange controls, investments in social welfare, and state ownership of business enterprises. The only path to the elimination of economic bottlenecks -- so it is argued -- and hence fostering of development, is to allow the invisible hands of market forces to determine economic activities unfettered (Ould-Mey 1996), and incorporate the country into the global economy. Indeed, Structural Adjustment Programs, comprise a major component of globalization (Aina 1996), and represents an effort by the IMF and the World Bank to push reluctant developing countries into the global economy, which is basically controlled by the G-7 nations, the key shareholders of the Bretton Woods Institutions. As Ghai (1994) correctly points out, structural adjustment and global integration are interdependent and mutually reinforcing, for while the process of globalization gave birth to structural adjustment as a response to the world economic crisis, the adoption of reform programs have in turn widened and deepened the thrust towards global integration. Globalization may be broadly defined as a process of rapid economic integration driven by the liberalization of trade, investment and capital flows, as well as by rapid technological changes. Globalization is multifaceted, with many important dimensions that range from economic and social, political and environmental, cultural and religious matters. Everybody is affected by globalization in one or more ways. Its implications range from the trade and investment flows that interest economists, to changes that we see in out everyday lives. Under globalization, it is often argued the poor countries not only lose control over their resources, but also their financial systems, interest rates, and the exchange rates of their currencies (Oxfam 2000). Furthermore, it is contended that international corporations who raise their capital from the international market, and seek to make profits at all costs for the benefits of their shareholders determine production and distribution of goods and services. …