POSC311:Politics of Developing Nations
THE NEOLIBERAL APPROACH TO ECONOMIC DEVELOPMENT
This approach is now (1999) dominant in the world, although there is criticism of the results of applying neoliberal policies indiscriminately in Third World countries.
Reasons for Dominance of Neoliberal Approach
Success of West in achieving growth and "development"
Marxist model discredited: Cold War over; Communism fails in USSR
Model emphasizing state intervention in the economy (ISI) fails to bring hoped-for economic development to Third World, discrediting idea of state-managed or state-directed development
The Neoliberal Model Remove
Remove State from control, regulation, and ownership of economic system
Terminateor reduce State Enterprises: Push for Privatization (sell off state-owned assets) (cement, telephones, airlines)
Admit private sector investors (national and international) to all sectors of the economy
Decrease employment in the public sector (A potential problem in that some cultures view the provision of jobs to citizens/friends as being a basic function of government)
Make productivity a condition of employment (railroad workers in Argentina an example of non- productive state workers)
Decrease government spending: (reduce public spending on social services, health, education, infrastructure)
Charge user fees for social services (medical, health, education, communication)
End food and transportation subsidies (dangers seen in ending bread, bus, [Venezuela])
Integrate national economy into world economy: Emphasize exports (comparative advantage)
Devalue national currency
The general neoliberal argument is that only "free market" policies will foster economic development in the Third World. There is an implication that political democracy will be facilitated. The neoliberal model calls for growth based on full integration into the world market, with a reliance on export-led development.
IMF, World Bank, MNCs, and US support neoliberal model
CRITICISM OF NEOLIBERAL APPROACH
Supports continued core dominance of Third World, working through IMF, World Bank and other international mechanisms (Has strong assumption that stability is good for all) [This is the core of the Dependency Criticism: ie. neoliberalism promotes continuing inequality]
New loans are used to pay off old loans, and even then the conditions for getting new loans are that Third World leaders carry out "structural adjustments." This situation definitely benefits and enriches lenders, but doesn't necessarily bring development.
Structural adjustments have led to (permanent?) increased inequality within the Third World nations. (Economic Growth is pursued at cost of social equity.)
Accepts short term worsening of gap between those at the top and those at the bottom of society. This is considered acceptable because it will better the economic position of those most likely to invest, and investment is the key to growth. (Those at bottom of society are not likely to be major capital investors in the economy in any case.)[may lead to political demand probs.]
Has led to failed development projects, feminization of poverty, environmental destruction
Approach is ethnocentric. But conditions today are different from those when West was developing (much stronger demand for equality, and much more participation). Ignores and devalues indigenous cultural and historical factors.
Assumption that economic growth and free enterprise policies will automatically be accompanied by political democracy has not proved to be correct.
Although neoliberalism stresses the private sector, it sometimes seems dependent on strongly authoritarian governments for implementation.
Neoliberalism at times seems to reward extreme individualism, while neglecting possible social costs.
Institutionalist criticism of economic neoliberalism is that it ignores cultural and historical factors: factors which have a crucial impact on political, social, and economic change in every country