lecture 2: neoliberalism & privatisation

Question 1

Define Neoliberalism

Answer 1

Neoliberalism is a theory of political economic practices that proposes that human well-being can be best advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, a free market, and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. Thus, in must set up those military, defense, police, and functions required to secure private property rights and guarantee, by force if needed, the proper functioning of markets. Outside of these tasks, state intervention must be kept at a bare minimum.

Question 2

what are the key pillars of neoliberalism?

Answer 2

1. deregulation
2. privatization
3. liberalization

Question 3

Summarize the historical context that allowed for neoliberalism to take over

Answer 3

1970s
- wealth crush
- the crisis of capital accumulation
- 1973 and 1979 oil shocks due to the OPEC embargo on oil
- 1973 bombing of La Moneda presidential palace in Santiago Chile and the subsequent power given to the Chicago boys
- Yom Kippur Arab-Israeli war
- In 1979 the Volcker shock led to a recession
- In 1979 Thatcher was elected
- In 1980 Regan was elected

Question 4

What is the Wealth Crush of the 1970s?

Answer 4

significant and rapid decline in the value of assets due to the increasing price of energy as well as the transition to floating exchange rates, resulting in a substantial loss of wealth for individuals or entities holding those assets. The share of assets held by the top 1% of the US population crushed between 1979 and 1980.

Question 5

Explain the crisis of capital accumulation

Answer 5

The crisis of capital accumulation in the United States during the 1970s was characterized by a slowdown in economic growth, high inflation, and rising unemployment, which led to economic stagnation and challenges in capital accumulation

Question 6

What did the Volcker shock do?

Answer 6

To combat high inflation in the United States, the Fed raised interest rates significantly, reaching levels above 20%. This action curbed inflation but also led to a recession, with high unemployment and significant economic hardship. The policy marked a major shift in economic strategy, prioritizing inflation control over full employment.

Question 7

What is the Washington consensus and when was it adopted?

Answer 7

The Washington Consensus is a set of economic policy prescriptions promoted in the late 1980s and 1990s, primarily by Washington D.C.-based institutions like the International Monetary Fund (IMF), the World Bank, and the U.S. Treasury Department. It advocates for the liberalization of economies, promoting policies such as free trade, open capital markets, fiscal discipline, privatization of state-owned enterprises, and deregulation. Initially aimed at Latin American countries facing economic crises, it became a blueprint for developing countries seeking financial support from international lenders.

Question 8

What are SAPs?

Answer 8

Structural adjustment programs were economic policies implemented in developing countries as a condition for receiving loans from the IMF & WB. They were designed to promote neoliberalisation. They led to economic hardship, increased poverty and unemployment, and reduced public services. Their implementation, however, benefitted the US.