From 1980 to 2004, structural adjustment was imposed on 129 countries.
In 1979, the World Bank introduced a new instrument called the structural adjustment loan. The idea emerged during a flight that Bank president Robert McNamara and operations chief Ernest Stern took together to the Bank-Fund annual meeting in Belgrade.1 The loans would provide finance over several years in return for reforms in trade protection and price incentives.
From 1980 to 2004, structural adjustment programs were imposed on 129 countries, representing 83 percent of the world population.4
The second oil shock that same year provided the immediate rationale. Developing countries faced collapsing export prices, rising interest rates, and vanishing access to commercial credit.2 The Bretton Woods institutions offered a lifeline, but it came with conditions.
Borrowing governments were required to cut public spending, privatize state-owned enterprises, devalue their currencies, liberalize foreign trade, and open domestic markets to foreign investment.3 These policies became known collectively as the Washington Consensus, because they reflected the priorities of the U.S. Treasury, the IMF, and the World Bank, all headquartered in Washington, D.C.4
In the 1980s, the World Bank committed over $27 billion across more than 190 adjustment lending operations in 64 countries.5 The average number of conditions attached to each loan exceeded 30 in the late 1980s.
SAPs were introduced in over 40 countries in sub-Saharan Africa during the 1980s and continued through the 1990s.4 Critics argued the programs cut the social spending that the poorest populations depended on most, while opening markets to multinational corporations on terms that favored the lending nations. The conditions under which industrialized countries had themselves developed, behind protective tariffs and subsidies, were now forbidden to borrowing nations.3
By the late 1990s, the World Bank began streamlining loan conditions, reducing the average from over 30 per program to roughly 8 by the mid-2000s.5 In 1999, the IMF and World Bank replaced structural adjustment loans with Poverty Reduction Strategy Papers, requiring borrowing countries to develop their own reform plans. The number of conditionalities declined, but the basic architecture of liberalization, privatization, and fiscal austerity remained.6