1. Neoliberalism Introduction – Rise of Neoliberalism Introduction – Rise of Neoliberalism Neoliberal tradition Neoliberal tradition Neoliberal diagnosis Neoliberal diagnosis Neoliberal prescription Neoliberal prescription Fiscal austerityFiscal austerity PrivatizationPrivatization Trade liberalization, currency devaluation, abolition of marketing boardsTrade liberalization, currency devaluation, abolition of marketing boards Retrenchment and deregulationRetrenchment and deregulation Conclusion Conclusion

2. Neoliberal tradition Individuals rational utility maximizers Individuals rational utility maximizers Self-interested Self-interested Act rationally and efficiently Act rationally and efficiently Left to pursue their own narrow self- interests, society as a whole benefits Left to pursue their own narrow self- interests, society as a whole benefits The less state the better The less state the better

3. Hayek and the Chicago school Monetary policy Monetary policy Governments tighten money supply during high inflation Governments tighten money supply during high inflation Loosen it during times of recession Loosen it during times of recession Task of government – stabilize monetary growth Task of government – stabilize monetary growth

4. Neoliberal political theory Stressed individualism, saw individuals as building blocks of society Stressed individualism, saw individuals as building blocks of society Minimalist state produced better economy and society Minimalist state produced better economy and society Modern liberalism = society contained many historical inequalities; only state could level the playing field to give all people the same degree of freedom and opportunity Modern liberalism = society contained many historical inequalities; only state could level the playing field to give all people the same degree of freedom and opportunity

5. Neoliberal political economy People behave according to self-interest; they seek out opportunities to maximize gains People behave according to self-interest; they seek out opportunities to maximize gains If opportunities are in market, self-interested behavior creates spin-off benefits, including new jobs, products, etc. If opportunities are in market, self-interested behavior creates spin-off benefits, including new jobs, products, etc. Solution: reduce size, role of state; free up market and make it attractive to entrepreneurs; remove opportunities for corruption, rent- seeking, and other economically harmful behaviors Solution: reduce size, role of state; free up market and make it attractive to entrepreneurs; remove opportunities for corruption, rent- seeking, and other economically harmful behaviors Policy recommendations: less government intervention, more freedom in the market, abandon ISI in favor of outward orientation Policy recommendations: less government intervention, more freedom in the market, abandon ISI in favor of outward orientation

6. Neoclassical prescription Structural adjustment seeks to make state and market more efficient to accelerate growth and eliminate waste Structural adjustment seeks to make state and market more efficient to accelerate growth and eliminate waste Places market at the center, relies on individual initiative, creativity, and ingenuity Places market at the center, relies on individual initiative, creativity, and ingenuity Structural-adjustment programs (SAPs) Structural-adjustment programs (SAPs) fiscal austerityfiscal austerity privatizationprivatization trade liberalization, currency devaluation, and abolition of marketing boardstrade liberalization, currency devaluation, and abolition of marketing boards Retrenchment and deregulationRetrenchment and deregulation

7. Fiscal austerity Reductions in government spending Reductions in government spending Tends to promote inflation Tends to promote inflation “Crowds out” private investors “Crowds out” private investors Inhibits investment Inhibits investment Private investment becomes cheaper, and environment for business more attractive Private investment becomes cheaper, and environment for business more attractive Lowers costs of borrowing, which should encourage investment Lowers costs of borrowing, which should encourage investment Reduces overall consumption Reduces overall consumption More goods for export More goods for export Foreign exchange should flow in, stimulating economic growth Foreign exchange should flow in, stimulating economic growth

8. Privatization Abuses and inefficiencies often associated with public firms Abuses and inefficiencies often associated with public firms Private firms have greater interest in maintaining efficiency and profitability Private firms have greater interest in maintaining efficiency and profitability Raises money for cash-starved governments, enhances operation of market economy, improves efficiency and performance of privatized firms Raises money for cash-starved governments, enhances operation of market economy, improves efficiency and performance of privatized firms

9. Trade liberalization, currency devaluation, marketing boards Maximizing free flow of goods and services Maximizing free flow of goods and services Trade liberalization -- eliminate/reduce restrictions on imports; devaluation Trade liberalization -- eliminate/reduce restrictions on imports; devaluation Domestic market liberalization – eliminate price controls and marketing boards; devaluation gives producers of export goods incentive to increase production Domestic market liberalization – eliminate price controls and marketing boards; devaluation gives producers of export goods incentive to increase production Firms have to find ways to lower costs Firms have to find ways to lower costs Comparative advantage Comparative advantage Devaluation boosts agriculture by giving export- crop farmers increased income; farmers increase output Devaluation boosts agriculture by giving export- crop farmers increased income; farmers increase output

10. Retrenchment and deregulation Free market and entrepreneurs; enable market to function more effectively; encourage efficient resource allocation Free market and entrepreneurs; enable market to function more effectively; encourage efficient resource allocation Retrenchment addresses problem of corruption; reduces chances for abuse Retrenchment addresses problem of corruption; reduces chances for abuse Opportunities for rent-seeking diminishOpportunities for rent-seeking diminish Less patronage appointmentsLess patronage appointments Fewer chances to use public firms or marketing boards to skim resourcesFewer chances to use public firms or marketing boards to skim resources

11. Conclusion Losers = large, protected industries producing for home market, inefficient state firms Losers = large, protected industries producing for home market, inefficient state firms Winners = export industries, smaller firms, and farmers, especially export-crop farmers Winners = export industries, smaller firms, and farmers, especially export-crop farmers 5/3, strengths and weaknesses of neoliberalism in practice 5/3, strengths and weaknesses of neoliberalism in practice