Week 5 - The Rise of Neoliberalism Flashcards
What was the 1980s the era of?
the era of “market liberalism”, “stabilisation”, “structural adjustment”
How did Sub-Saharan Africa look like in terms of manufacturing by the end of 1970s?
industry still infant while agriculture stagnated and share of world manufacturing was 0.9% in 1980
How did Sub-Saharan Africa look like in terms of industry?
industry is small, in small number of countries, with few lines of production, mostly minor processing (minerals, crops), mostly consumer goods dependent on imported capital goods, high cost of technology-rich imports, lack of convergence between resource base and industrial sector, weak forward and backward linkages
What type of income distribution is seen in Sub-Saharan Africa?
skewed income distribution
What type of companies are seen in Sub-Saharan Africa?
nationalised and state owned companies due to absence of domestic and foreign private investment
Did manufacturing take off in the countries in Sub-Saharan Africa?
most stagnated at low level, those where MVA grew robustly was due to oil (Gabon, Nigeria), diamonds (Botswana) or agri-processing (Rwanda) and ISI
How did manufacturing in Latin America look like?
rise of manufacturers (steel, petrochemicals), however Oligarchs controlled protected industries
turn away fro, agriculture was extreme
debt-driven growth and debt crisis (petro-dollars lent by Western Banks at interest rates countries could not refuse)
Was manufacturing in Latin America uniform?
growth not uniform (Mexico, Brazil, Venezuela between 6-7.5%, Argentina and Chile slow)
growth with inequality
What were the causes of the Latin America crisis during the rise of neoliberalism?
Elite intransigence (internal problem)
rules of the game changes (external problem)
liberalisation of finance
One of the causes of the Latin America crisis during the rise of neoliberalism was Elite intransigence, what did this involve?
did not modify ISI and tried to keep the system going on for as long as possible as happy to seek rents in captive markets, borrowed to finance continued growth (interest rates were low and banks were awash with resources to lend)
One of the causes of the Latin America crisis during the rise of neoliberalism was rules of the game changed, what did this involve?
US FED trebled nominal interest rates and foreign debt doubled between 1976-1981
One of the causes of the Latin America crisis during the rise of neoliberalism was liberalisation of finance, what did this involve?
huge demands for investment funds (only through borrowing) (changes in structure of banking in OECD, borrowers to bear risk)
What crises were seen from the 1970s-1980s?
SSA countries had inly 15 years to begin a big push for development and then the rug was pulled out from under them
LA countries had relatively sound plans for foreign borrowing before interest rates skyrocketed overnight
What was the US’ role from 1945-1975?
was exporting goof to the world and was a major lender to the world
What was the US’ role after 1975?
became the world’s biggest debtor
What did the US wars by proxy and Arms Race lead to?
spiralling US deficit and cause of the recession in 1973-1975 (sharp rise in unemployment and inflation)
What did the shift in US and OECD policy lead to during neoliberalism?
reduction in money supply and high (“market determined”) interest rates
lower taxes for wealthy and deregulation of enterprise
What was the US’ position during the rise of neoliberalism?
started to compete for capital which led to sharp rise in interest rates, capital started to flow from south to north, US could run large deficit in trade account (LA and SSA had to compete with US for finance)
What were worldwide changes during the rise of neoliberalism?
weekend labour movements at home and internationally got rid of capital controls to allow capital outflows
What was happening in the OECD countries from 1979?
Thatcher-Reagan era of liberalisation and privatisation (“stagflation” perceived as an outcome of Keynesian approaches)
shift in balance of power to capital
trade liberalisation and moves toward financial liberalisation
public assets privatised
deregulation of markets (labour hit hard)
money supply reduced (high real interest rates)
lower taxes for wealthy
removal of regulation on capitalist enterprises
What is neoliberalism?
a political programme of the state’s role to be limited to promoting markets
more purely an ideology (“anti-statist”, “anti-Keynesian”, adopted the methodology of neoclassical economics)
Is the alliance between neoclassical economics and Austrian Libertarian tradition a natural marriage?
“unholy alliance” and not a natural marriage
(neoclassical economics not necessarily against state intervention, Austrian Libertarian rejected modelling “rational behaviour”)
What is neoclassical economics?
an approach to studying economic life, with “rationally motivated” individuals, model behaviour under assumptions of perfect competition
Is neoclassical economics the same as neoliberalism?
No