Describe four ways in which Structural Adjustment Policies (SAPs) Impact development within

the Caribbean.

Development can be defined as the positive, sustained, and gradual improvement of the standard
of living. Development within the Caribbean can be impacted by various factors. One such factor
comes from rules/policies originating from International financial organizations, such as the
International Monetary Fund (IMF) and the World Bank. These organizations enforce Structural
Adjustment Policies (SAPs) to help stabilize an economy that is experiencing a crisis. SAPs can
be difficult and unpopular for a government who has to break the bad news to the population.
SAPs tend to have a negative impact on development in the short run but long term is actually
dealing a great benefit to the Country under its policies. SAPs devalue the currency of a country
so that imports are more expensive, causing privatization of public companies and services and
resources within the region which could in turn impact development in the Caribbean, employ
austerity measures so debts and loans can be paid off but at the expense of tax increase and
lowered government spending and lastly, product price control as their is a spike in food prices.

Firstly, the SAPs have an impact on the currency of countries within the Caribbean. SAPs tend
to devalue the currency in a country so that imports are more expensive and so locals are
forced to do without the product of interest or find other alternatives within the country to
substitute. With this, the allotted money that would be used to buy the imports would now be
used to reduce balance on payment deficits. Despite this strict policy affecting
individuals/companies who need these imports, it in turn helps with the debt burden that the
country would be in and helps with the development in the future. However, this also means the
cost of living in the Caribbean would increase as well as the alternatives would tend to be more
expensive and as such the individuals would migrate to another country whose cost of living is
cheaper. This brings about the term brain drain and loss of human labor within the country of
origin and reduction in not only growth but development as well.

Secondly, the SAPs will cause privatization of public companies and services and resources
within the region which could in turn impact development in the Caribbean. Privatization can
promote economic growth by increasing investment and improving efficient resource use. With a
change to private ownership, assets become tradable, the discipline of hard budgets and
commercial capital markets is imposed, a market develops for managers, and the managers
thus respond to new signals and incentives. Efficiency will improve as managers maximize their
profits. Despite this, it may also reduce growth where private investment is not forthcoming and
key sectors of the economy under perform following the state sell-off. The bridge between the
rich and poor people continues to expand as the division of the area and people in higher and
lower sectors. This means that poverty will be evident and poor health care facilities built in
these areas.

Furthermore, SAPs will employ austerity measures which could negatively affect development.
Austerity measures involve the increase of taxes and decrease in government spending.Though
this would reduce the payments to be paid off from the loans and debts, this would also mean
that individuals have a harder time in buying goods and services as the tax burden would be too
great of a deal for them.This would mean that the cost of living once again is too high for the
natives of the country and would further seek to migrate. Not to mention, a decrease in
government spending can result in higher unemployment. It also results in the government
freezing taxes, cutting back on government programs, such as programs for veterans, people
experiencing homelessness, and national parks and the freezing of pensions for the elderly.

Finally, SAPs can cause removal of subsidies and an increase in food prices. A subsidy is a
payment made to firms or consumers designed to encourage an increase in output. A subsidy
will shift the supply curve to the right and therefore lower the equilibrium price in a market.The
removal of the subsidy will drive up the price of premium motor spirit, resulting in higher
transportation fares, increased inflation rate, reduced buying power and a surge in poverty.
Hardship will inevitably intensify due to this, especially given the current level of inflation.

In conclusion, SAPs are used to stabilize economies in countries that are going through
economic crises and to spur economic growth, but they are regarded as negative since they
frequently do more damage than good for the development of these countries. As the currency
of the country is devalued and the imports are more expensive, cost of living also increases as
well and as such cause the migration of individuals to other countries with a cheaper cost of
living. Privatization of public sectors also expands the bridge between rich and poor since the
area will be divided into people who live in the higher and lower sectors. Austerities can help
pay off debts and loans but this also means that the government would cease/ lower spending
on programs such as national parks, programs for veterans, and people experiencing
homelessness. Lastly, SAPs can result in the rise in food prices and make it harder for
individuals to attain food.