Theories of development 2.0 07.12.18- Neo-liberalism and SAP's (Neo…
Theories of development 2.0 07.12.18- Neo-liberalism and SAP's
Neo-liberalism- Draws on the work of Adam Smith (1774) The wealth of nations.
Liberalism of the markets
laisser-faire marks- economic system whereby transactions between private parties are free from government intervention e.g. tariffs, regulation etc.
The invisible hand of the market.
Based on free market economies
Basic characteristics of Neo-liberalism
The market as the arbiter (determines) of economic decision.
No state/ government intervention (or at least the absolute minimum).
Failure to develop not because no enough (or not good enough) state intervention, but because there was too much.
Emergence of Neo-liberalism
Election of Ronald Reagan in the USA in 1982.
The rise of the new right (New conservatives in the USA)
Election of Margaret Thatcher UK 1979
Election of Helmut Kohl in West Germany.
All of these elected too the view that:
The state had failed as a driver of the economy. Only free market economies could drive the world economy.
The world had been conceptualised as a global economy.
post WW2 stagnation and deepening economic crisis of the 1970's.
Free trade and access market crucial.
The era of "Reagonics" and "Thaterism".
Key factors to the rise of Neo-liberalism.
The weakening of Keynesianism.
Importance of public works in the national economy.
Investment in infrastructure.
Public sector employment.
Importance of economic regulation by the state/ government
The weakening (subsequent collapse) of the USSR (soviet, socialist, Republics State ownership) economy.
The role of the "Arms race" negotiation. (competition between the US and the soviet Union for supremacy in nuclear warfare).
no economic alternative from centrally planned, state driven economics.
Cancun conference (1981)
22 countries, 5 continents. Only North and South summit in history.
Direct attach by Reagan and Thatcher on that "fallacies" of Keynesian economics (theory abut how in the short run- especially during economic recessions- economic output is strongly influenced by aggregate demand (demand for goods at a given time)
deepening world economic crisis
Inflation of the 1970's
Instability of world commodity markets.
"Boom and bust" business cycles.
Mounting debt crisis
Especially Brazil, Mexico and Nigeria.
The problem of "petro" dollars (unit of currency earned by petroleum export).
The 81-82 debt crisis.
The threat of Brazilian bankruptcy.
The collapse of the world banking system.
The emergence of the Washington consensus.
World bank- international monetary fund; united stated government.
Sometimes refered to as the "new realism".
Set of 10 economic policies for crisis-wracked developing countries (financial crisis).
Impact of neoliberalism
On the advance economies
Withdrawal of the state/ government on the economy.
Privatisation of state controlled industry and business. e.g. British tele communications, British gas, British railway.
Relaxation of international movement on capital.
Deregulation- reducing state regulations.
Shaking out of overstaffed industries.
Causes conflicts with TRADE UNIONS e.g. 1984-85 miners strike.
Impacts in the South
Debt and poverty in the Global South increasing in the 1970's and early 80's.
Rising oil prices- 1st oil shock of 73-74.
2nd oil shock of 78-79.
Rising interest rates on borrowing.
Reduced global demand for commodities.
Growth of protectionism (e.g. important tariffs)
Modernisation not delivering because of perceived state intervention.
This lead to the introduction of structural adjustment policies
For countries wishing to be bailed out of their debt problem.
Main elements of SAP's
Reduction in the size of the state budget.- impacts on health and education provisions.
Reduction in public sector employment. (Retrenchment)- cutting down of public expenditure.
Privatisation of industry and business.
Removal of state controlled marketing boards (granted control over the purchasing or sale of agriculture commodities).
Encouragement of exporting crops.
Abolition of currency control. (restrictions on the amount of currency being imported and exported).
Unimpeded market access to importers.
By the end of the 1980's, virtually every country in the Global South was under the IME (international monetary fund's) structural adjustment programmes. - no SAP- no international credit status.
Impact of SAP's on the Global South
Increased inward investment.
Also freed up (some) domestic capital
Encouraged agricultural production.
Reduction/ elimination in parallel markets (unofficial markets- especially in a country with a controlled economy).
Squeeze on urban living standards.- mass reductions in weekly budgets.
Reduction in welfare (health, happiness and fortune) provisions.
Reduction in food security because there is a larger emphasis on export crops.
Widening social inequalities- especially gendered inequalities.
Impact of SAP's on healthcare
Willis and Khan 2009: SAP's were imbued (infused) witt neo-liberal ideology, so that "provisions of healthcare was increasingly incorporated into the market, where it was a commodity that was bought and sold, rather than a service which was provided to individuals as citizens of the state.
Yates 2009: "we should have known that in the context of improvements of healthcare outcomes and reduction of poverty that taking money from poor people when they are sick is not a good idea".