Transcript Understanding development in a global era I:

Understanding Development
II:
The neo-liberalization
of development
Aims of seminar
• 1) Define and identify the origins of NL
• 2) Explore how NL was exported to the
countries of the GS via SAPs
• 3) Identify the key components of SAPs
• 4) Examine how SAPs were remade into
PRSs
• 5) Consider the key differences between
SAPs and PRSs
Defining NL
• ‘In the first instance [neoliberalism is] a
theory of political economic practices that
proposes that human well –being can best
be advanced by liberating individual
entrepreneurial freedoms and skills within an
institutional framework characterised by
strong private property rights, free markets
and free trade.’ (David Harvey, 2005).
• NL is a “term that generally refers to a new
political, economic, and social arrangement
emphasizing market relations, minimal
states and individual responsibility (Springer,
2010)
Broad principles
• Re-define role of state
• Recognise link between free market/trade and individual prosperity
• Focus on the individual and specifically entrepreneurial individual
Broad policies
• Permit free markets to flourish
• Privatise state-owned enterprises
• Promote free trade and expansion
• Welcome foreign investors
• Eliminate government regulations and protectionism
2) NL in time and space
• Represented as homogenous monolithic condition which
produces the same results everywhere
• ‘Ubiquitous set of market-oriented policies...largely
responsible for a wide range of social, political,
ecological and economic problems’ (Springer 2010)
• Important to recognise that it is geographically variable
(mediated through local social and political structures)
and has a distinct history
Historical evolution
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From relative obscurity, by late 1980s, NL
is dominant
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Recognition that it has a historical lineage
- 1938 meeting of 26 prominent liberal
thinkers (Polanyi, Hayek), discuss
importance of reviving liberal thinking re
importance of individual economic
freedoms
- Influence on key thinkers (Michael
Freidman, Chicago School of Business)
and politicians (Margaret Thatcher)
- Establishment of think tanks
- NL ideas cross over from academic
debates to business, politics and media
From obscurity to dominance
• Springer argues that despite
this until 1970s, NL remains
relatively obscure
• Attributable to Great
Depression, rise of far right,
Fascism, WWI, and the
subsequent faith in Kenysian
economics
• Strong state control, creation
of international governance
system based upon these
ideals (including Bretton
Woods Organisations)
From 1970s onwards
- Tickell and Peck (2003) identify 3 periods
in the evolution of neo-liberalism:
– proto neo-liberalism in the 1970s
– roll back neo-liberalism in the 1980s
– roll-out neo-liberalism in the 1990s.
Proto neoliberalism
• Influenced by economic chaos of the
1970s - oil crisis, rising inflation and
unemployment, competition from the
newly industrialised countries, growing
labour market militancy in Europe,
disillusionment with Keynesian
economics
• Growing disillusion with the state
intervention – emerging consensus that
the state was the cause of economic
failures in the 1970s, and ‘the market’
was the cure.
Chile
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Pinochet versus Salvatore Allende in 1973
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Removal of all vestiges of socialism
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Application of ‘text book neo-liberalism’ which
was overseen by Chilean academics
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Dualistic structure of violent and repressive
authoritarian rule on the one hand, and free
market principles on the other including
exposure to international competition;
privatisation; elimination of labour
movements.
•
‘Shock doctrine’ – NL enforced at time of
conflict when society disorientated and unable
to mount effective resistance
…and the UK
•
Economic recession in UK in
1970s/1980s
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Turns to IMF for help
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Emergence of a consensus that
an external solution was required
•
Neo-liberal fate of UK sealed by
victory of the Conservative party
under Thatcher in 1979 and
cemented by election of
Republican Ronald Reagan in the
US in 1980
Roll back neoliberalism
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1980s, neo-liberalism dominant state strategy.
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Structural changes in US & UK: downsizing
government; making space for competition;
enlargement of private sector; attack on trade
unions and labour movements; redistributing
wealth on market principles.
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Resulted in battles with the trade unions and
increased unemployment – both of which seen
as being necessary precondition for economic
growth.
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Changes in geo-political order & demise of
USSR state socialism
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Then rolled out to Canada, New Zealand,
Germany
..and the Global South
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Roll back NL also spreads to Global South and linked to ‘crisis in
development’
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Development theories – modernisation and dependency – discredited and
growing clamour around 1980s as ‘Lost Decade for Development’
– Between 1983-1987, the average income of poor people fell by 10-15%
– 1978, GS received 5.6% of the world's income, by 1984 this had fallen
to 4.5%
– Inequality widening: In 1960, the income ratio between the world’s
richest and poorest countries was 20:1, in 1980 it stood at 46:1 and in
1989, the ratio was as high as 60:1 (Schurrman, 1993)
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Wider context of severe economic recession brought on by Oil and debt
crisis
– FW goes into recession, SW experiences significant economic
downturn and TW enters period of debt crisis (Springer 2010)
– Mid-1950s, foreign debts of Southern nations accumulated
– 1973 formation of OPEC, oil price increase in 1973 and 1979
– Debt crisis in GS
Structural Adjustment Programmes
(SAPs)
Aid from IFIs (World Bank, IMF, OECD) increasingly subject to
conditions (key figures moved from NL think tanks to these
organisations) leading to emergence of SAPs
Aims:
• Cut govt expenditure
• Promote trade liberalisation + exports
• Reduce balance-of-payments deficit through creating foreign
exchange
• Can be summarised as:
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Deflation
Devaluation
Decontrol
Privatisation
2 stage programmes
1) Stabilisation programmes: IMF
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Short-term macro-economic adjustment
Public sector wage freeze
Reduce subsidies - food, health, education
Currency devaluation
2) Adjustment programme
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More long-term and comprehensive
Improving economic efficiency – restructuring
Export promotion
Downsize civil service
Remove economic regulation
Privatisation
+ Economic Recovery Programmes (ERPs)
Emergence of Washington
Consensus
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Trade liberalisation
Financial market liberalisation
Privatisation of production
Deregulation
Foreign capital liberalisation (i.e.
eliminating barriers to FDI)
Secure property rights
Unified and competitive exchange
rates
Public expenditure switching (to
sectors such as health, education and
infrastructure)
Tax reform (including broadening the
tax band, less progressive tax)
A social safety net (narrowly targeted,
selective transfers for the needy)
Flexible labour markets
• During the period 1980-1989, 171
SAPs were introduced in SSA,
with a further 57 initiated by the
end of 1996.
• By 1987, the World Bank had
approved 52 structural
adjustment loans and a further 70
sectoral adjustment loans.
• 1990s, World Bank disbursed
nearly a third of its total aid
package world-wide via SAPs
Roll out phase of neoliberalism
• NL becomes a political project associated
with neo-liberal state building.
• Supranational governance: Economic
decisions are so important that removed
from the realm of state to economic
institutions or structures such as the WTO,
operational independence granted to the
Bank of England, Central Bank of Europe.
From a developmental state to a
neo-liberal state
• National governance: NL has fundamental
implications for the role of the state
• Rise of ‘developmental state’ in DG
• NL state is a facilitator – it creates/sustains an
institutional framework which bolsters the market
– Sustains/creates markets where they might not exist
(eg water, education, health)
– Secures private property rights by force if necessary
– Provides a NL governance system
Impacts on GS
• GS NOT simply a ‘recipient’ of NL
– Appeals to elites who benefit enormously from de-nationalisation of
state industries related to water, infrastructure, education, health (e.g.
Stiglitz work on Russia’s neliberalisation)
• Springer (2010) argues that even while rolling out of NL presented
as uniform, it has been adopted in differing ways and to different
extents, mediated through local politics and economics
• Shift in focus from neoliberalism to neoliberalization – the latter
looking at the process influenced by ‘geographical landscapes,
historical contexts, institutional legacies, and embodied
subjectivities’ – what Adrian Smith and his colleagues have called
the ‘domesticating of neo-liberalism’
Impacts of SAPs
• Controversial
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IMF and WB - ‘no pain, no gain’
Some GNP growth, increases in exports, improved B of
P and reduction in inflation (eg SS Africa = 4% growth
1988 for those with SAPS – 2.2% for those without)
• New international division of labour - countries once seen
as part of the Global South are now identifiied as
emerging economies – BRIC nations, newly
industrialised countries of East Asia, parts of Latin
America, southern Europe and the Caribbean.
Negative impacts
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Harvey (2005) argues NL entails ‘creative
destruction’ and has adverse impact upon division
of labour, social relations, welfare provision,
reproductive activities and ways of life and
thought
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Increased poverty - new poor
Declining real wages
Cutbacks in public expenditure
Increased unemployment, erosion of workers rights
Increased prices of basic commodities and
foodstuffs
Food security undermined
Urban dwellers worst affected
Financial deregulation = volatility = 1997 East
Asian crisis
Particular gendered implications
Costs of adjustment
Public expenditure cutbacks= increased
school drop-out rates, increases in
malnutrition, disease and infant mortality
Increased poverty
• Women and children bear brunt of
adjustment
• Environmental degradation - shifts
towards agro-export crops
• Food insecurity
Resisting SAPs
• Protests against SAPs since 1970s
• Called austerity riots or IMF riots
• Involved people from all walks of life
• Violent and non-violent (riots, demonstrations and
strikes
Seoul, South Korea
Protests in India
Protests in
Philippines
Teachers and students
protested IMF austerity
plan, Argentina
Comprehensive Development Framework
(1998-1999)
Highly Indebted Poor Country (HIPC) initiative
II (1999)
1) Influence of MDGs
2) Failure of SAPs and ERPs
3) Country ownership
Source: Maxwell (2003)
HIPC and debt relief
• HIPC status = debt must =150% of exports = debt relief
• Lending linked to poverty reduction
April 2009 – 26 countries had HIPC debt relief (complete)
Poverty Reduction Strategy Papers
Core principles of PRSPs:
• Country driven
• Recognise multidimensional nature of poverty
• Long term perspective for poverty reduction
• Results orientated
• Partnership orientated
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Expected to include:
Comprehensive poverty diagnostics
Description of participatory process used
Clearly costed priorities for macroeconomic, structural, and
social policies
Targets, indicators, and systems for monitoring and
evaluating progress
> Pro-poor growth, good governance, invest in human
capital, social safety nets
Positive aspects of PRSs
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Shift away from development = economic growth
Considers most disadvantaged
Participatory, collaborative
Require monitoring of results and indicators of success
Focus on good governance
Education and health are priorities
Reflect reformulation of political project underlying PRSPs – inclusive liberalism
Criticisms of PRSs
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Changes cosmetic
Still neo-liberal and inflexible
Assume neo-liberal macroeconomic reform = promote poverty reduction
More pro-growth than pro-poor
Country-ownership contested
Many countries excluded inexplicably
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Policies from SAP era still in operation
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PRSPs address symptoms not causes of poverty
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Participation confused with consultation
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Gender issues largely neglected
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Children also neglected
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Environment often overlooked
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Sources: Panos (2002); Bell (2003); Woods (2000); Gottschalk (2005)
Bradshaw and Linneker (2003); Marcus, Wilkinson and Marshall (2002);
Zuckerman (2002)