Overview of Neoliberalism
Key Writer=Milton Friedman
Wealth accumulates when individuals are left to pursue their self-interests, free from government restraints.
Neoliberals emphasise upon free market forces=without government intervention.
Influenced by 18th century economist Adam Smith, who advocated for a laissez-faire economy; with little or no government intervention.
Structural Adjustment Plan (SAP)
World Bank loans are only given if the recipient country agrees to follow a programme of reform drawn up by the International Monetary Fund. Their themes includes:
- Export cash crops
- Remove trade barriers
- Privatise servies e.g. health/education
SAPs encourage the developing world to change their economies so they are better integrated into the global market.
Also makes countries attractive to Transnational Corporations and increases Foreign Direct Investment
Criticism of aid
Peter Bauer: Aid-centred initiatives have hindered, rather than boost, development.
Politically-Props up corrupt regimes.
Negative Effects of SAPs
Negative effects of Structural Adjustment Plans:
- Overcompetition=poor countries producing the same crops results in price drops.
- Deregulation=Leads to exploitation of workers and environmental damage.
- Privatisation=Ordinary people cannot afford education and healthcare
- Neoliberalism highlights how development is not solely the responsibility of the developed world-requires two way action.
- Challenges the basic assumptions of aid-centred initatives=aid does not have a intrinsically positive effect.
- Use the success of the Four Asian Tigers to support their arguments. These are the highly developed economies of Taiwan, Hong Kong, South Korea and Singapore.
- Neoliberals adopts a romanticised view of the free market it aims to create.
- International trade is not a level-playing field. First world countries have an advantage in the global marketplace and third world countries cannot compete.
- Neoliberals misattribute the causes of economic growth. They ignores exploitation and Colonialism.