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Mike Davis (1946-2022) was an American writer, activist, urban theorist, and historian best known for his work on class and power. He authored works such as City of Quartz, Late Victorian Holocausts, and Planet of Slums. Davis was the recipient of the MacArthur Fellowship and the Lannan Literary Award. 

For issue #84 of The Internationalist, we draw from his seminal work, Planet of Slums. In this extract he explains how in the 1970s and 1980s, the IMF and World Bank imposed harsh structural adjustments on the Third World that prioritized debt repayment over social welfare. This led to severe economic and social consequences, exacerbating poverty and inequality, particularly in urban areas of Africa and Latin America.

In 1974–75, the International Monetary Fund, followed by the World Bank, shifted focus from the developed industrial countries to a Third World reeling under the impact of soaring oil prices. As it increased its lending step by step, the IMF ratcheted up the scope of the coercive “conditionalities” and “structural adjustments” it imposed on client nations. As economist Frances Stewart emphasizes in her important study, the “exogenous developments that necessitated adjustment were not tackled by these institutions – the major ones being falling commodity prices and exorbitant debt servicing,” but every domestic policy and public program was fair game for retrenchment. By August 1982, when Mexico threatened to default on its loan repayments, both the IMF and the World Bank, in synchronization with the largest commercial banks, had become explicit instruments of the international capitalist revolution promoted by the Reagan, Thatcher, and Kohl regimes. The 1985 Baker Plan (named after then Secretary of Treasury James Baker but drafted by his deputy secretary, Richard Darman) bluntly required the 15 largest Third World debtors to abandon stateled development strategies in return for new loan facilities and continued membership in the world economy. The Plan also pushed the World Bank to the fore as the longterm manager of the scores of structural adjustment programs that were shaping the brave new world of the so-called “Washington Consensus.” 

This is, of course, a world in which the claims of foreign banks and creditors always take precedence over the survival needs of the urban and rural poor; it is a world in which it is taken as “normal” that a poor country like Uganda spends twelve times as much per capita on debt relief each year as on healthcare in the midst of the HIV/AIDS crisis. As The Challenge of Slums emphasizes, SAPs [Structural Adjustment Programs] were “deliberately antiurban in nature,” and designed to reverse any “urban bias” that previously existed in welfare policies, fiscal structure, or government investment. Everywhere the IMF and World Bank – acting as bailiffs for the big banks and backed by the Reagan and George H. W. Bush administrations – offered poor countries the same poisoned chalice of devaluation, privatization, removal of import controls and food subsidies, enforced cost-recovery in health and education, and ruthless downsizing of the public sector. (A notorious telegram from Treasury Secretary George Shultz to overseas USAID officials commanded: “In most cases, public sector firms should be privatized.”) At the same time SAPs devastated rural smallholders by eliminating subsidies and pushing them sink or swim into global commodity markets dominated by heavily subsidized First World agribusiness.

Debt – as William Tabb reminds us in his recent history of global economic governance – has been the forcing-house of an epochal transfer of power from Third World nations to the Bretton Woods institutions controlled by the United States and other core capitalist countries. According to Tabb, the Bank’s professional staff are the postmodern equivalent of a colonial civil service, and “like the colonial administrators they never seem to go away except to be replaced by a fresh adviser team with the same outlook and powers over the local economy and society.” 

Although the debt-collectors claim to be in the business of economic development, they seldom allow poor nations to play by the same rules that richer countries used to promote growth in the late nineteenth or early twentieth centuries. Structural adjustment, as economist Ha-Joon Chang points out in a valuable article, hypocritically “kicked away the ladder” of protectionist tariffs and subsidies that the OECD nations had historically employed in their own climb from economies based on agriculture to those based on urban high-value goods and services. Stefan Andreasson, looking at the grim results of SAPs in Zimbabwe and self-imposed neoliberal policies in South Africa, wonders if the Third World can hope for anything more than “virtual democracy” as long as its macro-economic policies are dictated from Washington: “Virtual democracy comes at the expense of inclusive, participatory democracy and of any possibility of the extension of public welfare provision that social democratic projects elsewhere have entailed.” 

The Challenge of Slums makes the same point when it argues that the “main single cause of increases in poverty and inequality during the 1980s and 1990s was the retreat of the state.” In addition to the direct SAP-enforced reductions in public-sector spending and ownership, the authors stress the more subtle diminution of state capacity that resulted from “subsidiarity”: defined as the devolution of sovereign power to lower echelons of government, and especially NGOs, linked directly to major international aid agencies. 

“The whole, apparently decentralized structure is foreign to the notion of national representative government that has served the developed world well, while it is very amenable to the operations of a global hegemony. The dominant international perspective [i.e., Washington’s] becomes the de facto paradigm for development, so that the whole world rapidly becomes unified in the broad direction of what is supported by donors and international organizations.” 

Urban Africa and Latin America were the hardest hit by the artificial depression engineered by the IMF and the White House – indeed, in many countries the economic impact of SAPs during the 1980s, in tandem with protracted drought, rising oil prices, soaring interest rates, and falling commodity prices, was more severe and long-lasting than the Great Depression. Third World cities, especially, were trapped in a vicious cycle of increasing immigration, decreasing formal employment, falling wages, and collapsing revenues. The IMF and World Bank, as we have seen, promoted regressive taxation through public-service user fees for the poor, but made no counterpart effort to reduce military expenditure or to tax the incomes or real estate of the rich. As a result, infrastructure and public health everywhere lost the race with population increase. In Kinshasa, writes Theodore Trefon, “the population refers to basic public services as ‘memories.’” 

The balance sheet of structural adjustment in Africa, reviewed by Carole Rakodi, includes capital flight, collapse of manufactures, marginal or negative increase in export incomes, drastic cutbacks in urban public services, soaring prices, and a steep decline in real wages. Across the continent people learned to say “I have the crisis” in the same way one says, “I have a cold.” In Dar-es-Salaam, public-service expenditure per person fell 10 percent per annum during the 1980s, a virtual demolition of the local state. In Khartoum, liberalization and structural adjustment, according to local researchers, manufactured 1.1 million “new poor,” most out of the decimated ranks of the public sector. In Abidjan, one of the few tropical African cities with an important manufacturing sector and modern urban services, submission to the SAP regime punctually led to deindustrialization, the collapse of construction, and a rapid deterioration in public transit and sanitation; as a result, urban poverty in Ivory Coast – the supposed “tiger” economy of West Africa – doubled in the year 1987–88. In Balogun’s Nigeria, extreme poverty, increasingly urbanized in Lagos, Ibadan, and other cities, metastasized from 28 percent in 1980 to 66 percent in 1996. “GNP per capita is about $260 today,” the World Bank reports, “below the level at independence 40 years ago and below the $370 level attained in 1985.” Overall, geographer Deborah Potts points out, wages have fallen so low in African cities that researchers can’t figure how the poor manage to survive: this is the so-called “wage puzzle.”19 

In Latin America, beginning with General Pinochet’s neoliberal coup in 1973, structural adjustment was closely associated with military dictatorship and the repression of the popular Left. One of the most striking results of this hemispheric counter-revolution was the rapid urbanization of poverty. In 1970, Guevarist foco theories of rural insurgency still conformed to a continental reality where the poverty of the countryside (75 million poor) overshadowed that of the cities (44 million poor). By the end of the 1980s, however, the vast majority of the poor (115 million) were living in urban colonias, barriadas, and villas miserias rather than on farms or in rural villages (80 million). 

According to ILO research, urban poverty in Latin America rose by an extraordinary 50 percent just in the first half of the decade, 1980 to 1986. The average incomes of the working population fell by 40 percent in Venezuela, 30 percent in Argentina, and 21 percent in Brazil and Costa Rica. In Mexico informal employment almost doubled between 1980 and 1987, while social expenditure fell to half its 1980 level.23 In Peru the 1980s ended in an SAP-induced “hyper-recession” that cut formal employment from 60 to 11 percent of the urban workforce in three years and opened the doors of Lima’s slums to the occult revolution of Sendero Luminoso. 

Meanwhile, broad sections of the educated middle class, accustomed to live-in servants and European vacations, suddenly found themselves in the ranks of the new poor. In some cases, downward mobility was almost as abrupt as in Africa: the percentage of the urban population living in poverty, for example, increased by 5 percent in a single year (1980–81) in both Chile and Brazil. But the same adjustments that crushed the poor and the public-sector middle class offered lucrative opportunities to privatizers, foreign importers, narcotrafficantes, military brass, and political insiders. Conspicuous consumption reached hallucinatory levels in Latin America and Africa during the 1980s as the nouveaux riches went on spending sprees in Miami and Paris while their shantytown compatriots starved. 

Indices of inequality reached record heights in the 1980s. In Buenos Aires, the richest decile’s share of income increased from 10 times that of the poorest in 1984 to 23 times in 1989. In Rio de Janeiro, inequality as measured in classical GINI coefficients climbed from 0.58 in 1981 to 0.67 in 1989.26 Indeed, throughout Latin America, the 1980s deepened the canyons and elevated the peaks of the world’s most extreme social topography. According to a 2003 World Bank report, GINI coefficients are 10 points higher in Latin America than Asia; 17.5 points higher than the OECD; and 20.4 points higher than Eastern Europe. Even the most egalitarian country in Latin America, Uruguay, has a more unequal distribution of income than any European country.

Excerpted from Planet of Slums by Mike Davis, published by Verso Books. Copyright © 2006 by Mike Davis. Used with permission. All rights reserved.

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