Neoliberal Revolution. What is neo-liberalism? Development agenda focused on switching economies towards free-markets with minimal role for the state.

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Presentation transcript:

Neoliberal Revolution

What is neo-liberalism?

Development agenda focused on switching economies towards free-markets with minimal role for the state. 1) Trade liberalization 2) Reduce public spending 3)Privatization 4)De-regulation of economy 5)Foreign investment 6)Property rights and market-based interest rates 7) Capital market liberalization

Why did it emerge?

 Stag-flation in the west  Critique of Keynesian economics: 1.Depression is not due to structural crises 2.Nanny state and problem of getting prices right 3.Development economists mis-diagnosed the problem 4.Development economics is intellectually corrupt 5.Developing economies are not special

Why did it become dominant in LDCs?

OPEC prices of oil jump from $3 to $12 in 1973 Expensive development projects Petro-dollars in private banks Loans to LDCs Defaulting by Mexico in 1980, debt crisis

What is the Washington Consensus?

Policies and reforms imposed on debtor nations in the form of cross-conditionality Three components of Econ Reform Programs 1)Economic liberalization 2) Macro-economic stabilization 3)Privatization Shock therapy in Russia

What are the problems with neoliberal policies according to Stiglitz?

Privatiztaion in context of monopoly State withdrawal without presence of market substitute Markets are not perfect esp in LDCs. Lack of adequate social safety net Timing and sequence (eg new jobs are not created over night after losses due to privatization).

Problem of corruption and how reforms are administered Trade liberalization has not served interests of LDCs( agriculture, maritime, construction) Does not acknowledge that development requires systemic transformation of society Overlooks important reforms (land reforms, financial market regulations, poverty alleviation) and over-emphasis on inflation