An incumbent part of modernisation theory was to make available international aid through the World Bank and IMF as a catalyst for the economic development of poorer countries. The general principle of aid involves the transfer of resources, including loans, grants and technical advice on terms that are more generous than is available in the world’s capital markets. During the 1950s and 1960s, aid was typically channelled into industrial development, the technological advancement of agriculture to improve crop yields, and large- scale infrastructure projects such as dam construction, road and bridge building (Willis, 2005). Despite aid
programmes, economic growth in developing countries was lower than expected, leading some economic analysts during the 1970s to begin to dispute the Keynesian theories that were driving international policies for economic growth in developing countries and that had dominated post- war development thinking.
The Keynesian model followed the philosophy of the economist John Maynard Keynes, whose theories were highly infl uential for international development policy in the post-Second World War era. He rejected the ideas of free markets and classical economics as the best route for economic growth. Instead he stressed that governments had a key role for promoting economic growth, through govern-ment expenditure as a stimulus and effective control of monetary policies; for example, interest rates. In the 1970s doubts were raised over the ability of govern-ment planning to solve the problems of under developgovern-ment and poverty. The consensus of neo- liberal economists was that the control and interference of the state in economic development was causing ineffi ciency and resulting in growth at a slower rate than if resource allocation was left primarily to the market mecha-nism. It was also argued that foreign aid was contributing to ineffi ciencies and that this type of market intervention should be reduced.
This re- evaluation of development took place in the context of a debt crisis as many developing countries failed to meet their debt repayment requirements on loans taken to fi nance large- scale infrastructure projects. These loans had been taken from various sources including private banks, foreign governments and the World Bank. The failure of developing countries to meet debt repayments was a consequence of a fall in the late 1970s of commodity prices in world markets that led to a decline in import earnings. Developing countries’ reliance on primary industries, especially agricultural and mining products as their chief exports and earners of recognised foreign currencies, meant a decline in world commodity prices was catastrophic for them.
The advocacy of markets was supported by a re- vitalised form of classical economic thinking, ‘neo- liberalism’, which became favoured in infl uential policy decision- making circles. Developed in the USA by infl uential philosopher–
economists such as Milton Friedman (Power, 2004), it purports an ultimate belief in the economic rationalism and effi ciency in the free market as a path to develop-ment. Integral to neo- liberalism is market liberalisation, the privatisation of state assets and a minimum role for state intervention in the market. Key components of these themes included recognition of the private sector as the engine of economic growth vis-à-vis the state, whilst simultaneously shrinking state bureaucracy and public expenditure; removing barriers to foreign investment and resource ownership; privatising state- owned industries through open interna-tional competition; and increasing exports of services including health care and education.
Essentially the implementation of this set of measures could theoretically inte-grate a country’s resources, including human and natural capital into an open and free global market. In terms of the relationship between the developed and the developing worlds, this agenda was forced onto developing countries as a pre- condition for the continuation of loans from the IMF and World Bank, in part a response to the vicious cycle of indebtedness that had been created between the rich and the poor worlds (Maathai, 2009). The dominance of the market system and neo- liberalism was given further credence as the pathway for development following the collapse of the socialist statist systems of the Soviet Union. A mix of political coercion and bureaucratic ineffi ciency had led to their collapse, an event that was seized upon by the West (Seabrook, 2007), as being indicative proof that it is only via the operation of free markets and the integration of the global economy through trade and information sharing that poor countries can be lifted out of the economic doldrums (Maathai, 2009).
Key drivers of neo- liberal policy were the World Bank, the USA and Britain, through the personas of President Ronald Reagan and Prime Minister Margaret Thatcher respectively, the new direction being captured in Regan’s ‘magic of the market’ speech at the 1981 North–South Conference in Mexico. The package of neo- liberal measures recommended by USA, Europe and the World Financial Institutions including the World Bank, IMF and World Trade Organisation are referred to as the ‘Washington Consensus’.
Integral to the implementation of neo- liberal measures has been the use of struc-tural adjustment programmes (SAPs), which have been adopted by national governments in return for continued fi nancial support from the World Bank and IMF (Willis, 2005). SAPs were based upon free market economic principles, the aim being to improve a developing country’s propensity for attracting foreign inward investment through stabilising its economy, typically being implemented in stages. The fi rst step involved a structural change in the economy by diminishing the role of the state in the running of the national economy and reducing government defi cits through spending cuts, including ones on health, education and welfare. Once stabilised, adjustment measures are then introduced into the economy to lay the foundations for long- term changes that should contribute to a more prosperous future (ibid.). These adjustment measures typically include the privatisation of government- owned enterprises, business deregulation, wage suppression and, if appropriate, currency devaluation to boost exports. According to neo- liberal theory, through removing restrictions on the ownership of resources and introducing wage suppression in the public sector, a country should become more attractive for foreign inward investment. This in turn should lead to economic development and a comparative advantage in specialised economic sectors which should boost exports.
The imposition of SAPs on developing countries during the 1980s and 1990s raised substantial controversy over their impacts and demonstrates how economic policies contrived in the North can be imposed in countries in the South in the absence of the acknowledgement of cultural differences (Burns, 2004; Power, 2004), forcing governments to pursue ‘specifi c policies not of their own design’
(Mowforth and Munt, 2009: 303). Commenting specifi cally on the effects of the range of measures enforced on African countries under the aegis of SAPs, Maathai (2009) views them as having had a range of highly negative impacts on the poor, including a cutting of essential services in infrastructure development, health and education. The sum effect has been that the quality of the lives of the majority of Africans has declined and the governance of many states failed to improve. The effects of SAPs are also evident in the tourism industry as described in Box 2.2 .
BOX 2.2 THE INFLUENCE OF SAPS ON KENYA’S TOURISM INDUSTRY
The infl uence of SAPs on the tourism industry is illustrated through Dieke’s (1994, 2000) analysis of changes to the Kenyan tourism industry during the 1980s. Since political independence in the 1950s, the resources for tourism, including national parks, transport and accommodation suppliers, were all under state control. The subsequent privatisation of these tourism assets beginning in the 1980s meant that a cadre of elites who were able to purchase them within the terms of the SAP. Acquisitions included hotels and trans-port companies, which were then either sold or the new owners went into partnerships with foreign- owned chains. There was a subsequent switch from an industry that was too controlled by government to one that was largely unregulated and lacked local ownership. This transfer of Kenya’s tourism resources to foreign control, combined with increased levels of foreign inward investment, effectively shifted hegemonic control of the industry and the bulk of revenue earnings to outside the country.
Alongside increased economic leakages, the environmental effects on Kenya’s tourism resources of the desire to maximise foreign exchange earnings as part of Kenya’s Structural Adjustment Programme are reported by Hawkins and Mann (2007), citing a World Bank (1990) report entitled the ‘Wildlife and Tourism Project’. Whilst the report acknowledges the role of the development of wildlife
tourism in improving foreign exchange earnings, it emphasised that little attention had been given to environmental planning and manage-ment, leading to natural resource degradation and threatening the sustainability of both the environment and the tourism. Within ten years of the report, the Kenyan government had to request World Bank support for a ‘Protected Areas and Wildlife Services Project’ to mitigate the environmental problems caused by tourism.
SAPs have encouraged LDCs to develop their natural and cultural resources for tourism as a component of the neo- liberalism emphasis on market- orientated growth and increased levels of exports, specifi cally in industries in which coun-tries have a comparative advantage in world markets. This emphasis on export- led production has led to a shift in development strategy away from an inward perspective towards an outward orientation (Brohman, 1996). This includes the expansion of previously ignored economic sectors such as international tourism, which can be grouped with other new ‘growth’ sectors; for example, non- traditional agricultural exports to Western countries. It is these sectors which are believed by the World Bank and IMF to show much promise for stimulating rapid growth using the comparative advantages of developing countries. The emphasis on tourism as an export industry and foreign exchange earner, combined with a simultaneous reduction in state protection to fl edgling industries such as tourism, has led to increased interest from multinationals as they continue to attempt to secure new markets for their products. They also wish to have unimpeded access to resources (Scheyvens, 2002), including the natural, cultural and human. Some developing countries have also wanted to increase tourism arrivals as a consequence of falling world commodity prices during the 1980s and 1990s, and the requirement to fulfi l debt repayments to the IMF and World Bank.