Structural Adjustment, Global Integration and Social Democracy

During the 1980s there was rapid growth of trade in goods and services, foreign investment, technology transfer, foreign exchange transactions and telecommunications. Transnational enterprises were a crucial vehicle for many of these processes. This thrust of global economic integration, along with other forms of globalization - scientific, technological and cultural - has been reinforced by structural adjustment policies, which themselves were a result of post-war dynamics of global integration and the post-1973 economic crisis. However, if the areas in which liberalization has taken place are many and varied, the countries benefiting from it are less so. Discrimination in patterns of liberalization has tended to shrink the global role of developing countries.

In the industrialized countries where they originated, adjustment policies are elements of both continuity and rupture with the economic and social policies pursued in the post-war period, while in the developing countries they constitute a sharp break with earlier state-directed policies. In Third World countries, the pace and pattern of liberalization show considerable variation reflecting socio-economic structures, the severity of the crisis, the intensity of foreign pressure and the interplay of contending social groups.

Globalization and liberalization have had wide-ranging political and social consequences that imply shifts in power both nationally and internationally. Internationally, during the 1980s, power shifted further out of the reach of developing countries toward foreign creditors and investors, international financial institutions and the industrialized countries. Globalization and liberalization have undermined the social alliance and national consensus on economic and social goals and policies established in the post-war period in both developing and industrialized countries. Incidence of poverty has increased in most countries, accentuating social conflicts world-wide.

The power of nation states has eroded, decreasing their willingness and ability to cope with the expanding social crisis. At the same time, the economic power wielded by the new dominant forces has not been matched by a corresponding shift in their political and social responsibilities for global welfare. These changes pose serious threats to political stability and sustainable growth.

This UNRISD Discussion Paper presents globalization and liberalization as interdependent and mutually reinforcing processes, and considers their origins, context and social consequences for industrialized and developing countries.