During the 1970s and the 1980s the developing world faced a number of economic shocks and crises: severe fluctuations in the exchange rates for leading currencies, major oil shocks, deterioration in the world market conditions for primary product exports, and in some cases, natural or manmade disaster such as famine and war. The severity and persistence of the deterioration in the world economic climate forced the governments of developing countries to address the question of how to adjust to the new economic realities. The Adaptive Economy is an informal textbook on the principles of adjustment policy with special reference to small, low-income countries. It starts from the premise that all economies need to adapt constantly to changing circumstances if they are to achieve reasonable rates of development. In this respect, adjustment is not viewed simply as a phenomenon of the late twentieth century nor a preliminary step in the struggle for economic development. The book seeks to identify some common elements of adjustment: the forces to which economies must respond in the adjustment process; the attributes that increase an economy's capacity to adjust; the major problems associated with adjustment and, above all, how policy initiatives can help facilitate the adjustment process. The book covers a wide range of subjects: the relationships between economic development and structural flexibility; the determinants of economic flexibility; the strategies and principles of adjustment policy; and the socioeconomic context in which adjustment policies operate. Specific chapters cover: the use of exchange rates; adjustment policies in agriculture and industry; and policies for adjustment in the financial sector.