NEOLIBERALISM

Question 1

What does it argue?

Answer 1

• inequalities faced by developing countries are a result of internal factors.
• Argues corruption and economic mismanagement are the key factors that cause many poor countries to lag behind richer countries.
• Neoliberal thinkers such as Bill easterly and Dambisa Moyo are sceptical that aid will lead to a reduction in equalities. They argue that aid hinders development as it props up corrupt regimes and inefficient producers.
• Advocates of this perspective argue that the best long term solution to the inequalities faced by countries in the developing world is for them to adopt free trade policies by removing trade barriers (trade liberalisation) and reducing the role of the state in economic affairs ‘the state that does least is best’.
• Peter Bauer argues aid has hindered development - stops social and economic changes which are necessary.

Question 2

What do neoliberalists argue about structural adjustment plans?

Answer 2

• SAP’s are one of the most common methods of meeting these ends. These are sets of conditions attached the aid payments which oblige nations to take a number of actions:
• Cutting back on subsidies and eliminating import tariffs
• De-regulation; removing laws surrounding labour, health and safety and environment.
• Reducing the tax burden by cutting down on spending on public services
• these policies have been very controverisal - however they continue to be attached the many world bank and IMF loans.

Question 3

Weaknesses of neoliberalism?

Answer 3

• Ha Joon Change argues that the free trade policies advocated by neoliberalists have actually increased inequalities. E.g producers in developing countries are thrown unprotected into the turbulent global market - in which they cannot compete and quickly collapse or are swallowed by giant transnational corporations.
• ‘Free trade’ policies exacerbate inequalities by creating ‘a race to the bottom’ - developing countries are increasingly forced to cut prices, labour laws and public spending in order to remain competitive and recoup the same amount of export earnings - with a rise in poverty and human suffering.
• Fails to consider advantages of economic protectionism e.g infant industry argument; alexander hamilton.
• ignores external factors e.g colonialism

Question 4

Strengths of neoliberalism?

Answer 4

• It highlights the negative impact of corruption.
• Free trade may boost economic development by encouraging competition and specialisation
• Highlights negative impact of aid; how it can actually hinder growth.