Self Assessment / DIRT improvements in Green Pen

Neo-Liberal (New-Right) Theory on Development LO – to understand Neoliberal views of development ALL: To identify and explain different elements of the theory and apply it to the topic of development. MOST: To apply contemporary examples to the theory and show analysis through links to the use of aid. SOME: To evaluate positive and negative aspects of the theory.

Intro Video https://www.youtube.com/watch?v=ewlKH5WXb_A BASSETT Cornell Notes

1990s and the New Right In the 1980s Modernisation theory and Dependency Theory appeared dated in a rapidly changing world due to: The decline in usefulness of the concept of First, Second and Third world due to the increased diversity between countries in developing world. The decline of Marxism in sociology. The collapse of Soviet Union.

Key Names and arguments in the New Right Milton Friedman and Peter Bauer influenced economic policy of Thatcherism This emphasised laissez-faire (leave economic forces to do what they will or the economy will be damaged) and Reaganism

The New Right say that: Government interference in the market place will distort the balance of supply and demand. (E.g. the regular giving of aid upsets the price of goods and supply of labour)

Friedman argues that: Governments should not be involved in the economy except four main functions: Defence Law and Order The provision of the necessary public works that private enterprise does not find profitable to provide Protection from members of the community who ‘cannot be regarded as ‘responsible individuals’

Peter Bauer (British development economist) Bauer advocates a wider range of functions for governments: The basic provision for health and education The management of the monetary and fiscal (taxation/spending) system

Friedman and Bauer argue that: The production, distribution and trade of goods and services are best left to private (profit making) rather than public (government owned and regulated) organisations The free market will regulate itself and lead to increased economic growth e.g. as in Hong Kong. Government central planning fails to raise living standards But critics say this is not the case with Sweden and former Soviet Union which have been successful.

New Right say that regular aid does not assist development as it distorts the free market process because: if a development project is economically viable then private enterprise would be willing to invest in it on a commercial basis. If not then the project should not be undertaken. regular aid often end up up in the wrong hands and benefits the wealthy rather than the country’s needy criticism of modernisation

Impact of Friedman and Bauer Their approach has had little support even by conservatives, as regular aid is still given However: It is increasingly linked to the acceptance of democratic and free market reforms. EG. Multi-lateral and lateral aid providers link aid in return for certain economic conditions such as ‘structural adjustments’ Aid in return for certain conditions is known as conditionality

Problems caused by conditionality It shows that a countries national security is open to outside power (The donor countries can influence strategic decisions) Really poor people are just as likely to be in countries with regimes which do not meet the conditions as those who do. (Yet they will not receive aid) US aid is increasingly linked to cultural and political conditions

Evaluation of the New Right The New Right uses the Asian Tigers as an example of how the free market is successful. But it is possible that cultural and historical context also played a part in their success. It is similar to the Modernisation Approach in that if focuses on economic development, yet against Aid. And it’s ‘trade liberalisation’ approach claims to make the world economy fairer, which was a barrier to development indicated by Dependency theorists. Tiger economies are vulnerable to economic crisis. NR policies have increased inequality both within and between countries.

Chomsky (1999) argues that - “The neo liberal (New Right) global order is concerned with minimising the role of the state” by doing this: Power is transferred from democratically elected representatives towards financial and business elites. The conditionality of aid could be seen as morally unacceptable as well as counterproductive.

Article Questions Summarise the main ideas of traditional ‘liberalism’. What world event caused the world to shift away from liberalism? What are the 5 main areas of Neo-liberalism? Name the current institutions that enforce neoliberalism. How does this link to dependency theory? Highlight Criticisms that are starting to arise.

Criticisms that are arising… Reduction in workers rights (de-unionisation) Reduce / eliminate benefits, reduce spending on core / essential public services. Reduce environmental safety laws / restrictions to ensure more profit. Privatisation: make the public pay more for services and concentrate wealth in a fewer number of people. Individualism -> Collectivism SAPs, conditions widen international class divisions, and can have cultural or political conditions, e.g. Aid for Military Bases. Increasing economic capital of business / financial institutions makes them more powerful than democratically elected representatives – the end of democracy?

Homework Watch Naomi Klein ‘The Shock Doctrine’ DVD – to highlight negative effects of imposing Neoliberalism on the developing world, i.e. ‘Exploiting shock and conflict situations’. https://www.youtube.com/watch?v=soYQsecd-_U Make notes on two Case Studies to highlight this: South America, and Iraq.