NEO-LIBERALISM (THE NEW RIGHT)

Question 1

When do they argue development occurs?

Answer 1

They emphasise that development occurs when trade is allowed to be conducted freely. (Free Trade)

Question 2

Key theorists?

Answer 2

Peter Bauer and Milton Friedman.

Question 3

Two key arguments?

Answer 3

• They argue that is this method which allowed wealth in the Northern Hemisphere - disagrees with modernisation theory ‘cycle of poverty’ - no explanation how rich countries ever developed without an injection of capital.
• Rose to dominance under the Thatcher & Reagan governments of 1980’s - argues that corruption and economic mismanagement are key reasons for under-development.

Question 4

What did Peter Bauer argue?

Answer 4

• Argues that aid has stopped development as it stops social and economic changes which are necessary (e.g propping up corrupt regimes)

Question 5

What would happen if the majority world increased its share of international trade by 5%?

Answer 5

• it would generate 350 billion dollars, 7 times it receives in aid.

Question 6

What do Neo-liberals argue the key to development is?

Answer 6

To remove trade barriers and corruption in the third world.

Question 7

What are SAP’s?

Answer 7

Structural Adjustment Plans;
these are sets of conditions attached to aid payments which oblige nations to take a number of actions:

• cutting back on subsidies and eliminating import tariffs
• Re-regulation - remove laws surrounding labour, health and safety, and environment.
• Reducing the tax burden by cutting down spending on public services.
• These policies have been very controversial, however they continue to be attached to many World Bank/IMF loans.

Question 8

Strengths of neo-liberalism? (3)

Answer 8

• It highlights the negative impact of corruption; it makes important observations on the responsibilities of majority world governments - highlights that development is not the job of the rich world, but it requires action taken by poor world governments e.g addressing corruption and taking steps to reform economic/political organisations.
• It has raised important questions about the usefulness of development aid - they highlight that aid does not necessarily have a positive effect and demonstrate that, unless carefully planned, can actually hinder growth.
• Free trade may boost economic development by encouraging competition and specialisation (Ricardo’s theory of comparative advantage).

Question 9

Weaknesses of Neo-liberalism? (5)

Answer 9

• It fails to consider the advantages of economic protectionism (e.g infant industry argument; alexander hamilton)
• Neo-liberal policies like SAPs have failed to promote economic growth.
• Rich countries that promote neo-liberalism are hypocrites (do as I say, not as I did)
• De-regulating the economy may lead to exploiting the workers and environment.
• Ignores external factors.