Chapter 16 mentioned problems of economic adjustment, including structural or sectoral adjustment, macroeconomic stabilization, and economic liberalization and reform. Adjustment often requires developing and transitional countries to borrow from and meet conditions set by the World Bank and IMF as a last resort. Chapter 5 examined the policies that form the Washington consensus of the World Bank, IMF, and United States government.

In this chapter, we discuss adjustment and stabilization programs of third-world countries of Asia, Africa, and Latin America, with particular emphasis on World Bank and IMF adjustment programs. After that, we analyze public enterprises, looking at public enterprises and the role of public goods, the importance of government sector, the concept of the state-owned enterprises, the size of the state-owned sector, arguments for public enterprise, the performance of private and public enterprises, the determinants of public enterprise performance, privatization, some pitfalls of privatization, and public enterprises and multinational corporations. The third section of this chapter examines adjustment, stabilization, and liberalization in the economies of transition, especially Russia, China, and Poland. A final section looks at lessons third-world countries can learn from the Russian, Polish, and Chinese transitions to the market.

The World Bank

In 1975, the World Bank established an interest subsidy account (a “third window”) for discount loans for poorest countries facing oil price increases (Stanford 1988:787–796). In 1979 to 1983, structural adjustment loans (SALs) comprised only 9 percent of Bank lending and had little impact on the most highly indebted countries.