New Right (Neo-Liberal) Theory on Development

New Right (Neo-Liberal) Theory on Development

03d New Right theory

Adapted from Kirby and Haralambos

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New Right (Neo-Liberal) Theory on Development

1990s and the New Right

In the 1980s Modernisation theory and Underdevelopment Theory appeared dated in a rapidly changing world due to:

i.The decline in usefulness of the concept of First, Second and Third world due to the increased diversity between countries in developing world.

ii.The decline of Marxism in sociology.

iii.The collapse of Soviet Union.

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New Right (Neo-Liberal) Theory on Development

Key Names and arguments in the New Right

• Milton Friedman and Peter Bauer influenced economic policy of Thatcherism

and Reaganism.

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• This emphasised laissez-faire (leave economic forces to do what they will or the economy will be damaged).

New Right (Neo-Liberal) Theory on Development

The New Right say that:

• Government interference in the market place will distort the balance of supply and demand (e.g. the regular giving of aid upsets the price of goods and supply of labour).

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New Right (Neo-Liberal) Theory on Development

Friedman argues that:

Governments should not be involved in the

economy except four main functions:

i. Defence

ii. Law and Order

iii. The provision of the necessary public works that private enterprise does not find profitable to provide

iv. Protection from members of the community who ‘cannot be regarded as ‘responsible individuals’

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New Right (Neo-Liberal) Theory on Development

Peter Bauer (British development economist)

Bauer advocates a wider range of functions for governments:

i. The basic provision for health and education.

ii. The management of the monetary and fiscal (taxation/spending) system.

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New Right (Neo-Liberal) Theory on Development

Friedman and Bauer argue that:

• The production, distribution and trade of goods and services are best left to private (profit making) rather than public (government owned and regulated) organisations.

• The free market will regulate itself and lead to increased economic growth e.g. as in Hong Kong.

• Government central planning fails to raise living standards.

But critics say this is not the case with Sweden and former Soviet Union which have been successful.

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New Right (Neo-Liberal) Theory on Development

New Right say that regular aid does not assist development as it distorts the free market process because:

• if a development project is economically viable then private enterprise would be willing to invest in it on a commercial basis. If not then the project should not be undertaken.

• regular aid often end up up in the wrong hands and benefits the wealthy rather than the country’s needy.

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New Right (Neo-Liberal) Theory on Development

Impact of Friedman and Bauer

Their approach has had little support even by conservatives, as regular aid is still given.

However:•It is increasingly linked to the acceptance of democratic and free market reforms. EG. Multi-lateral and lateral aid providers link aid in return for certain economic conditions such as ‘structural adjustments’.

Aid in return for certain conditions is known as Conditionality.

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New Right (Neo-Liberal) Theory on Development

Problems caused by conditionality

• It shows that a countries national security is open to outside power (the donor countries can influence strategic decisions).

• Really poor people are just as likely to be in countries with regimes which do not meet the conditions as those who do (yet they will not receive aid).

• US aid is increasingly linked to cultural and political conditions .

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New Right (Neo-Liberal) Theory on Development

Evaluation of the New Right

• The New Right uses the Asian Tigers as an example of how the free market is successful. But it is possible that cultural and historical context also played a part in their success.

• Tiger economies are vulnerable to economic crisis.

• NR policies have increased inequality both within and between countries.

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New Right (Neo-Liberal) Theory on Development

Chomsky (1999) argues that -

“The neo liberal (New Right) global order is concerned with minimising the role of the state” by doing this:

•Power is transferred from democratically elected representatives towards financial and business elites•The conditionality of aid could be seen as morally unacceptable as well as counterproductive

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New Right (Neo-Liberal) Theory on Development

For more about Asian tigers click below for Wikipedia entry

• http://en.wikipedia.org/wiki/East_Asian_Tigers

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