igh money supply growth, and very high real interest rates. Although most stabilization programs address each of the four factorsùbudget, exchange rate, money supply growth, and interest rates, the relative emphasis placed on each of them tends to vary, depending upon the theoretical orientation of the program developed and implemented for a specific nation.
According to Harvard economist Jeffrey Sachs, three major kinds of measures dominate the policy initiatives of the IMF's structural adjustment programùliberalization, stabilization, and privatization. Economic liberalization, according to Sachs, means introducing market competition and creating a legal framework for private property and privately owned businesses.
Stabilization fosters a climate in which enterprise of any kind can survive. Stabilization involves limiting budget deficits, reducing the growth of the money supply, and establishing a realistic, uniform currency exchange rate to promote stable prices and foreign trade. Privatization transfers existing state property, such as factories, to the private sector. Sachs and Larrain contend that the solution to the debt crisis should include a permanent reduction of the debt burden, a correlation between the size of this reduction with actual ability to pay, and the granting of debt relief only to those debtors who are prepared to engage in significant policy reform under international supervision.
Dornbusch stated that structural adjustment involves seven aspects: macroeconomic stability, deregulation, privatization, openness to trade, financial efficiency, a poverty program, and solid institutions. Williamson divides policy reform into ten areas: fiscal discipline, public expenditure priorities, tax reform, financial liberalization, exchange rates, trade liberalization, foreign direct investment, privatization, deregulation, and property rights.
Privatization to most members of the general public mea...