Privatization and civil-service reform

Privatization and civil-service reform usually resulted in large job losses. In Guinea, the civil service was reduced in size from 104,000 in 1985 to 71,000 in 1989 (Arulpragasam and Sahn 1994, 91). In The Gambia, government em- ployees were reduced by 25 percent in 1985–1986, and wages and salaries of those retained in the government sector were frozen (Jabara 1994, 312, 318). In pursuing structural adjustment, therefore, governments redistributed income: Export-oriented producers benefited from the successful implementa- tion of these policies, whereas people employed in the import-competing and nontraded-goods sectors saw their incomes fall.

The economic consequences of structural adjustment drove the domestic politics of reform (see Nelson 1990; Remmer 1986; Haggard and Kaufman, 1992; Oatley 2004). Groups that would lose from structural adjustment attempted to block the reforms, whereas those who stood to gain attempted to promote reform. Governments were forced to mediate between them, and in many countries governments were heavily dependent upon political support from the import-competing and nontraded-goods sectors. Thus, reforms were hard to implement.

Over time, however, the economic crisis triggered a realignment of inter- ests, discrediting groups associated with the old policies and giving greater in- fluence to groups that proposed an alternative approach (Krueger 1993a). By weakening key interest groups and by forcing many to redefine their interests, the crisis gradually eroded many of the political obstacles to far-reaching re- form. Yet, this process took time, as reforms could be implemented only after new governments responsive to new interests had replaced the governments that presided over ISI.

Economic performance under the neoliberal regime has been uneven. In Latin America, average growth rates have been substantially higher since the early 1990s, however, and in 2004 Latin American growth rose to 5.5 percent. The picture in Africa is a bit more mixed. African governments struggled


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