Neo-Liberalism as a Policy Regime for Development - Essay Example

Running head: NEOLIBERALISM Introduction In order to get better understanding of neo-liberalism, this paper seeks to critically assess neoliberalism as a policy regime for development. I have used enough illustrations to further comprehend neo-liberalism. Neo-liberalism is an ideological situation founded on strong thinking in the endorsement of the all-purpose good by adhering on the philosophy of open competition and free market, restricted state involvement and wellbeing, individualistic self-interest, rational utility-maximization, and comparative advantage in free trade. Supposedly, the assumptions of neo-liberalism are in line with the principles of neoclassical economics, except for the fact that the former purportedly pays less attention to market failures (Colclough, 1991) Neo-liberalism as a Policy Regime for Development Features of neoliberalism Among the most important widespread features of neo-liberal thinking is its emphasis on maximizing the role of the market and minimizing the interventionist role of the state. Regarding this kind of pro-market, Colclough mentions that the neoliberal thinkers have constructed a theoretical framework which explains and justifies their case for private property. And the free market at each point of civilization, from individuals to the global economy. For neo-liberals, the market is “the optimal space for the sharing and production of affluences and as the optimal vehicle for social mobility. In the case of developing countries, neo-liberal ideology requires the replacement of the interventionist developmental state by a more non-interventionist state, and encourages the expansion of market forces by undertaking various market-friendly policies. Second, related to this relatively anti-state and pro-market position is the neoliberals’ advocacy of policies such as deregulation and privatization. Under the leading neo-liberal ideological influence, nearly all countries have been occupied in selling state owned ventures, deregulating the industrial sectors and agricultural, and contracting out government services. This has become a global policy stance in recent years. Third, neo-liberals strongly believe in the principle of comparative advantage and free trade, while opposing protectionist policies for domestic industry and tying economic growth more closely to export expansion (Colclough, 1991: 8–12). This belief in free international exchange, strongly advocated by the major international agencies, has replaced the previous protectionist tradition in most developing countries. Fourth, this belief in the principle of comparative advantage is more concretely evident in the liberalization of trade, facilitation of foreign investment, and elimination of export controls and import licensing. Since the early 1980s, free-trade policies have become a dominant trend all over the world. Such policies in favor of free trade have significant implications for the integration of world markets, globalization of the capitalist system, and expansion of export-led production and import-led consumption. Fifth, in opposition to the major objectives of structuralism thinking, such as economic development, income distribution, and poverty alleviation through state intervention—the neo-liberals tend to place an overwhelming emphasis on economic growth, in some instances even endorsing inequality as a prerequisite for growth (Colclough, 1991). This preference for economic productivity and growth, with a disregard for issues such as income distribution and equality, is evident in policy preferences to reduce welfare subsidies and abolish anti-poverty programs. The neo-liberal advocates of pro-market policies thus wish not only to revive market forces, but to dismantle the basic economic and welfare rights of citizens such as in education, economic security, and health provision. In sum, neo-liberal beliefs in market principles, a minimalist state, comparative advantage, and economic growth are evident in and expressed through concrete policy preferences such as the privatization of state enterprises, deregulation of state controls, liberalization of trade, elimination of import restrictions, encouragement of foreign investment, withdrawal of subsidies, and reduction of welfare programs. These pro-market policies are often advocated in the name of efficiency, competitiveness, innovation, individual freedom, deficit reduction, and revenue generation. In the advanced capitalist nations, these neoliberal assumptions and policies have come to constitute the basic policy agendas of governing parties in the United Kingdom, the United States, and Canada (Martin, 1993). Neo-liberal Regimes in Developing Countries In recent times, neo-liberal tendencies have as well come to characterize the prevailing ideological situation of various regimes. The worldwide trend toward neo-liberal cost-effective restructurings has affected approximately all countries that are developing. Even though the main economic achievement tales of Eastern Asia were initially founded on a state-centered viewpoint, they have more and more moved towards neo-liberal, pro-market way. In Africa, the perspective of neo-liberal, relating to a cutback in the responsibility of the state and its wellbeing functions, has achieved reputation. The majority African governments have harnessed neoliberal restructuring packages, mainly to guarantee the accessibility of external aid. Likewise, in Latin America, neo-liberal values are being progressively sanctioned by several affiliates. There has been a substantial move from state-centered, pre-election agendas to post-election, neo-liberal transformations like in the cases Argentina, Bolivia, Venezuela and Peru. Nevertheless, the more tangible features of newly rising neo-liberal regimes in developing countries are their pro-market policy options. First, under the pressure of international organizations such as the World Bank and the IMF, nearly all of the existing administrations in developing countries have conceptualized the alleged “structural modification schemes” consequential from theories of neo-liberal. Second, the character of neo-liberal administrations in developing countries can be signified by an evaluation of the extent of their favored neo-liberal strategies such as deregulation, privatization, and freedom. Privatization, for case in point, has been accepted in various developing countries that have seen it increase over the years in these countries. Another marker of neo-liberal situation of these administrations is their lively responsibility in facilitating trade liberalization, drawing overseas investment, and facilitating fresh public-private affiliation. Encouraged by global agency and predisposed by the conditionality involved to structural modification loans, most governments in developing countries have relaxed trade, particularly by receding a substantial proportion of trade in tariffs and through funding export oriented sectors. There is an escalating involvement of alien financiers in privatization dealings and in mounting foreign possession of privatized resources in developing countries. In terms of public private dealings, liberalism sets down an apparent limit amid the public and private areas (Lafferty, 1984: 123), in the neo-liberal governments; such a limit has become unclear due to the increasing public-private affiliations. In numerous instances, provisions for education and health-care for the poor have been cut back. Critical inferences of Neo-liberal strategies for Sustainable Development The present neo-liberal policy ambiance has evidently added to a major move in development philosophy. In the 1970s, the main development worries were to carry out state-initiated plan to achieve reorganization with growth, to guarantee the contentment of essential needs, to boost people’s involvement. This mode of “human-centered development” has been replaced or overtaken by neo liberal programs such as stabilization and structural adjustment (ibid., p. 48). In the past two decades, neo-liberalism has progressively established itself as the prevailing example of growth (Onis, 1995:97). Aligned with this neo-liberal notional move, there have materialized realistic neoliberal strategies that have serious inferences for sustainable growth in countries that still develop (Reid 1995). This section understands a scrutiny of how the neo-liberal schemes and policies carried out have shaped results, including increases in inequality and poverty, reduction in state capacity, an increase of export overseas investment and oriented production, and a growth of consumerism and industrialization, which have grave inferences for both sustainability and environment. The Expansion of Market Under neo-liberal governments in developing countries, the function of state has reduced, and market determinants have gradually taken over prevailing socioeconomic responsibility. The detractors of neo-liberal strategies uphold, that market determinants are not only inappropriate for supporting the environment, but are, a main reason of environmental damage. The detrimental result of market structure on nature is mostly due to rigorous competition among forces of the market for further profit accumulation. More outstandingly, within the neo-liberal situation, as a role of the government in anti-poverty schemes and wellbeing subsidies has reduced, there have existed worsening states of affairs on inequality and poverty in several developing countries, and these pessimistic transformations have had repulsive effects on environment and sustainability. Several of these consequences are directly attributable to neo-liberal strategies of stabilization and structural alteration, under which administrations have conceptualized strictness actions, lessen subsidies, dismiss workers, and remove welfare benefits. Moreover, reductions in financial support and the removal of antipoverty and welfare schemes have facilitated inequalities amid diverse income grouping, and that it has aggravated the poverty condition more. Away from poverty, inequalities in economy imply the growth and further enhancement of the new rich classes that leads to unnecessary spending and environmental deprivation. Such increases in the proceeds of the rich is expected to reinforce the yearning for an over-utilization of resources which are nonrenewable, foodstuffs, building resources and other comfort items and automobiles, which might have unpleasant inferences on the environment (Redclift, 1987). Deregulation and Privatization Neo-liberal strategies of privatization and deregulation can as well have an unpleasant result on sustainability and environment. First, due to privatization and deregulation, the value of items that are vital to low-income group, have amplified, placing larger heaviness on environment and the natural materials. The value of agricultural inputs such as fertilizer, for example, have amplified in the developing countries dropping the ability of small-scale farmers to efficiently use the inputs and forcing them to increase production in agriculture by cultivating unimportant lands (Reed, 1996). Moreover, as deregulation results amplifies the prices of marketable fuel, low-income earners start to use extra firewood for cooking and heating, leading in further deforestation in nations such as Cameroon (Reed, 1996: 69). Second, budget cuts and deregulation cuts have lessened the ability of the nation to enforce laws related to environmental protection. In developing countries, there exists a major reduction in the managerial ability of environmental institutions or agencies. Privatization and Deregulation have also facilitated to amplified FDI (Foreign Direct Investment) in the countries that are still developing, which frequently emphasizes ecological problems. In several of these nations, main sectors such as manufacturing and mining have been under direct power of foreign investors, particularly due to acquirement of the lately privatized nation ventures. The current rise of FDI in developing countries is due to the convenience of their underestimated privatized property and low-priced labor, as well as their negligible environmental requirements standards: it is cheaper and greatly easier for overseas firms to reduce restoration and pollution costs in developing countries in the course of manufacturing industrial items. The Trade Liberalization Within the neo-liberal strategy structure, there exist general partiality for freeing trade and extending overseas sells to hasten economic growth (Colclough, 1991: 8). In developing nations, such an export-oriented growth has led to an expansion of agricultural sector under cash-crop production in. Recently, owing to the liberalized trade system, there are additional incentives for wealthy farmers to expand this export-led production of money crops (Reed, 1996: 309). However, its been observed that the growth of agricultural exports supported trade alleviation has typically been harmful to native ecological systems (Redclift, 1987). Export-led production conjointly includes the mining and producing sectors. Trade alleviation has conjointly contributed to enhanced international economic difference between advanced capitalist nations and developing countries. This increasing international difference isnt isolated from neoliberal policies. Trade alleviation especially has semiconductor diode to large shifts of capital from developing nations to developed capitalist countries (Martin, 1993). This worldwide difference implies that whereas individuals in affluent industrial nations expand their over-consumption even additional, individuals in low-income countries suffer from economic condition and hunger, thus mounting negative stresses on the environment at each ends of the event spectrum (Cooper, 1995). Over-emphasis on economic process As outlined, the primary objective of neo-liberal policy to reinforce economic process and productivity supported the philosophy of marketplace competition. In understanding development, the neo-liberals are inclined to overstress on the financial process whereas underestimating the importance of economic equality, environmental considerations, and property. Therefore, in its current statement, the UNDP recognizes totally different classes of market-based economic process, for instance, “jobless growth” that indicates a growth path that has did not expand employment in several developing countries, and “ruthless growth” that, significantly in Latin American countries, has resulted in enhanced economic condition despite higher growth rates (UNDP, 1996: 57–60). This enhanced economic condition below the pretense of economic process is probably going to possess adverse impacts on the atmosphere owing to excessive use or exploitation of forests, lands, and alternative resources. Second, the spirit of economic process, as articulated in structural adjustment programs, is harmful to the atmosphere and property, as a result of it tends to justify any programs and comes that enhance growth despite their environmental implications. In addition, structural adjustment programs did not internalize environmental prices related to production and disposal of commodities and made goods (Reed, 1996: 17). Redclift (1987: 59) suggests that below structural adjustment programs, “the pursuit of economic process, uncontrolled by environmental concerns, will accelerate, among alternative things, soil losses, the deficiency of water, the deterioration of piece of ground and deforestation.” Third, economic process is commonly pursued through a fast growth of industrialization that, below conditions of weak governmental regulation, ends up in the well-known consequences of fast resource depletion, emission of dangerous gases, and pollution of air and water. French (1990: 104) points out that the institution of additional industries in developing countries is probably going to extend the mobile toxic-chemical emissions at a fast pace. In Taiwan, a powerful rate of economic process supported large industrialization has caused serious water contamination and pollution in Republic of Venezuela theres an increasing degradation of inland waters owing to the growth of the organic compound trade (Reed, 1996). These and similar experiences in varied developing countries have semiconductor diode to widespread criticism of the expanded shortsightedness underlying the present neo-liberal policy. Stokke (1991) views market-based economic process as the awfully root of the environmental calamity, and, for Redclift, (1987), it is resource exhaustion and defenseless growth on the spot consequence of growth itself”. With reference to the link between economic process and property, Daly (1990) as well mentions that it is exactly the non-sustainability of growth that provides urgency to the idea of property development. Globalization of Consumerism As outlined, the consumerist culture of commercial capitalism which has been related to industrial growth, production, mechanized agriculture, toxic chemicals, and also the excessive use of fossil fuels—has been thought of one in every of the most causes of environmental disorders. The spread of consumerism on a world scale constitutes a serious ecological threat. It is observed that if the whole humankind populace would conceptualize on the western way of utilization and industrial manufacturing, it might be necessary to possess 5 to 6 additional planets for resource plundering and waste disposal (Ullrich, 1992). Such views havent, however, hindered a substantial growth of market-oriented consumerism everywhere the planet. The extension of consumerism to developing nations isnt isolated from the recent upsurge of trade alleviation and foreign investment below the neo-liberal regimes in these countries. Transnational capital and international trade are indivisible from the worldwide consumption tradition. The worldwide growth of this culture has conjointly been assisted by the unprecedented proliferation of world industrial media, due partially to the recent freeing of media in developing countries. In conclusion, Neoliberalism is a philosophy in which the subsistence and procedure of a market are appreciated and it has been assessed as a policy regime for development. References Colclough, C. (1991). “Structuralism versus Neo-Liberalism: An Introduction.” In States or Markets? Neo-liberalism and the Development Policy Debate. N.p Cooper, P.J. (1995). “Inside-Out Management: Public Administration, Sustainable Development, and Environmental Policy.” In Implementing Sustainable Development (United Nations Department for Development Support and Management Services, ed.). New York: UNDDSMS. French, H.F. (1990). “Clearing the Air.” In State of the World, 1990. (Worldwatch Institute). New York: W.W. Norton & Company. Onis, Z. (1995). “The Limits of Neo-liberalism: Toward a Reformulation of Development Theory.” Journal of Economic Issues, 19 (1): 97–119. Martin, B. (1993). In the Public Interest: Privatization and Public Sector Reform. London: Zed Books. Redclift, M. (1987). Sustainable Development: Exploring the Contradictions. London: Methuen Reed, D. (1996). Structural Adjustment, the Environment, and Sustainable Development. London: Earthscan. Reid, D. (1995). Sustainable Development: An Introductory Guide. London: Earthscan. Stokke, O. (1991). “Sustainable Development: A Multi-Faceted Challenge.” European Journal of Development Research, 3 (1): 8–31. Ullrich, O. (1992). “Technology.” In The Development Dictionary: A Guide to Knowledge as Power (W. Sachs, ed.). London: Zed Books. UNDP (United Nations Development Programme) (1997). Human Development Report, 1997. New York: Oxford University Press. Read More