The Spirit of Manila: The Origins and Development of IMF Structural Adjustment Programs, 1968-85

Paul Kershaw, Wayne State University

Since the 1970s, debt crises in the global South have periodically destabilized the international financial system, most recently in Greece. Beginning with the Mexican debt crisis of September 1976, International Monetary Fund (IMF) “structural adjustment programs” became the first-line response to those crises. The Mexican program reflected a strategic shift away from traditional IMF stabilization programs, which deployed exclusively demand-side policies, toward structural adjustment programs, which according to the IMF’s executive board would combine demand-side policies with supply-side policies in “comprehensive programs … to correct structural imbalances in production, trade, and prices.” Scholars generally locate the origins of structural adjustment not in the mid 1970s but instead in the early or mid 1980s. Indeed, they typically identify the first structural adjustment instrument as the World Bank’s Structural Adjustment Loan, established in 1980, or the IMF’s Structural Adjustment Facility, not established until 1986. But the IMF management and staff began explicitly using the term in 1973 and then succeeded in cultivating a consensus among IMF members in favor of structural adjustment programs at the IMF/World Bank Annual Meeting in Manila, Philippines, in 1976. This paper demonstrates that shift by showing how supply-side policies were virtually absent from IMF programs prior to 1976 and charting how over the following decade those policies became increasingly prevalent. To that end, the paper is based on an investigation of 360 IMF programs negotiated between 1968 and 1986, demonstrating that structural adjustment policies were, in fact, increasingly apart of those programs after 1976. My case selection of IMF programs includes all Extended Fund Facilities, which were created explicitly for the purpose of structural adjustment, as well as all Stand-by Arrangements with financial requests that extended into the “upper credit tranches,” which demanded the strictest conditionality be imposed on the member country.

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 Presented in Session 212. Global Money, Finance, and Neoliberalism