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
What is the neoliberal consensus on the state’s organisation, ability and failures?
organisation of self-seeking politicians and bureaucrats
limited ability to collect information, limited ability to execute policy, under pressure from interest groups
government failures include regulatory capture, rent seeking, corruption (costs of “government failure” always greater than the costs of “market failure”)
What are the challenges of the “neoliberal doctrine” according to Chang?
defining the free market and state intervention
defining market failure
assumptions of market primacy
relation between markets, states and politics
What was the neoliberal diagnosis of Africa’s problems?
balance of payments crises
fiscal crises
crisis of neglect of agriculture
One of the neoliberal diagnoses of Africa’s problems was balance of payments crises, what did this involve?
due to trade and exchange rate policies
One of the neoliberal diagnoses of Africa’s problems was fiscal crises, what did this involve?
due to over-extended public sector
One of the neoliberal diagnoses of Africa’s problems was crisis of neglect of agriculture, what did this involve?
export crop production had stagnated for two decades, population growth faster than food production, income decline for majority
What were the prescriptions for SSA in the Berg Report?
trade and exchange rate policy
increase efficiency in public sector
improvement in agricultural policy
One of the prescriptions for SSA in the Berg Report was trade and exchange rate policy, what did this involve?
end protection of industry, devaluation
One of the prescriptions for SSA in the Berg Report was increase efficiency in public sector, what did this involve?
privatisation of state assets, user fees for services
One of the prescriptions for SSA in the Berg Report was improvement in agricultural policy, what did this involve?
private corporations and technology, abolish marketing boards, price incentives for agriculture
What did the prescription for all developing countries according to the IMF and what did this involve?
restore macroeconomic stability vy cutting fiscal deficit to control inflation, reducing current account deficit, devaluing exchange rate
When will debt relief by the IMF be considered?
debtor writes letter of intent (macroeconomic targets) –> stabilisation loans (standby agreement disbursement when targets met) –> Paris Club (commercial banks) (only after agreement with IMF will debt relied be considered)
What did the World Bank Structural Adjustment involve?
price liberalisation, trade liberalisation, privatisation, deregulate banking (market allocated credit), abolish marketing boards, remove agricultural subsidies, privatise agricultural extension services
What was the prescription for Latin America according to the Washington Consesus an expression of?
an expression of the neoliberal paradigm
What did the prescription for Latin America according to the Washington Consesus include? (10)
1) reduce/eliminate fiscal deficits
2) reduce public expenditure through eliminating subsidies (through safeguarding spending on health and education)
3) tax reform (to expand the tax base and lower the marginal rate) VAT
4) interest rates (market determined and positive)
5) exchange rates (competitive, with a preference for market determination)
6) import liberalisation
7) liberalisation of foreign direct investment
8) privatisation of much of what is owned and run by the state
9) deregulation of most economic activities
10) sanctity of property rights
What did the prescription for Latin America according to the Washington Consesus lead to?
there is a safety net and labour market flexibility
What was the adjustment impact in Latin America (from the Washington Consesus)?
inflation soared, GDP growth sharply declined
incomes, private consumptions, investment, wages all declined
by end of 1990s current account deficits were huge
What was the adjustment impact in Latin America on unemployment (from the Washington Consesus)?
unemployment larger than 20% in some countries
What was the adjustment impact in Latin America on net transfers abroad (from the Washington Consesus)?
net transfers abroad $650 billion between 1982-1990
What was the adjustment impact in Latin America on exports (from the Washington Consesus)?
exports increased by 30% in volume but 5% drop in value
What was the adjustment impact in Latin America on manufacturing growth, commodity exports growth and debt service as a percentage of exports (from the Washington Consesus)?
from 1950-1981 to 1981-1990 manufacturing growth declined by 5.5%, commodity exports growth declined by 3.2% and debt service as a percentage of exports was 50% in 1981-1990
What was the adjustment impact in Argentina (from the Washington Consesus)?
at start of 20th century one of the richest in the world, at the start of 21st century, half the population below the poverty line
What was the adjustment impact in Chile (from the Washington Consesus)?
Chile was a ‘success’ story
“poster child” of neoliberal reformers in Latin America
success in promoting ‘outward orientation’ during the Pinochet regime involved significant state intervention
What was the adjustment impact in SSA on FDI (from the Washington Consesus)?
1980 to 2000 the promise of increased FDI never materialised, share of FDI fell by 2/3, LDCs in Africa received 0.9% of all FDI to developing countries in 2000 (most of this was investment to support out almost 50% to Nigeria and Angola)
What was the adjustment impact in SSA on terms of trade (from the Washington Consesus)?
terms of trade against Africa until 1999, by 1998 13% lower than 1980
What was the adjustment impact in SSA on real per capita income (from the Washington Consesus)?
real per capita income fell by 39% between 1980-2000
What was the adjustment impact in SSA on per capita daily calorie supply (from the Washington Consesus)?
1997 per capita daily calorie supply below 1970 and 16% below average for developing countries
What was the adjustment impact in SSA on gross national savings and investment (from the Washington Consesus)?
gross national savings and investment 4% lower than East Asia in 1965-1970, 17% lower in 1990s
What did Easterly argue about the policy reforms of the Washington Consesus?
argues that policy reforms generally successful, growth period of 1960-1979 was anomalous and stagnation of 1980-1998 was a return to the norm
What did Mkandawire argue about the policy reforms of the Washington Consesus?
ideologically-driven structural adjustment undermined possibilities for development
investments follows growth (need a “bigger push”, phase of industrial policy too short (less than 10 years))
trade liberalisation (deindustrialisation)
no effort to shift industries to export
WTO caused African countries to be restricted in adopting industrial policy (when WTO allowed exemptions, World Bank and IMF conditionalities often did not)
Why did neoliberal policies remain dominant? (5)
idea of TINA (“there is no alternative”)
globalisation
power of TNCs
power of finance in the rich countries
political freedom and democracy
One of the reasons why neoliberal policies remained dominant was idea of TINA, what did this involve?
saying state centred policies were proven wrong
One of the reasons why neoliberal policies remained dominant was idea of globalisation, what did this involve?
gains made from global economic integration required implementation of the neoliberal agenda to allow prices to determine resource allocation
One of the reasons why neoliberal policies remained dominant was idea of power of TNCs, what did this involve?
commanded the resources to bend governments of north or south to their will (to facilitate global integration)
One of the reasons why neoliberal policies remained dominant was idea of power of finance in the rich countries, what did this involve?
finance capital required lifting all barriers to the moment of capital
One of the reasons why neoliberal policies remained dominant was idea of political freedom and democracy, what did this involve?
first required economic freedom (free markets) (Friedman)
What was a notable occurrence in the late 1970s?
problems resulting from “big push” strategies in developing countries amplified by crises in the economies of the wealthy countries
What does Washington refer to?
both the political Washington of Congress and senior members of the administration and the technocratic Washington of the international financial institutions, the economic agencies of the US government, the Federal Reserve Board, and the think tanks
What are the Washington concerns with its relationship with other countries?
include the promotion of democracy and human rights, suppression of the drug trade, preservation of the environment, and control of population growth
play little role in determining Washington’s attitude toward the economic policies it urges
What is the “Keynesian” view of fiscal discipline?
“Keynesian” view is that a balanced budget should be a minimal medium-run norm, but that short-run deficits and surpluses around that norm should be welcomed insofar as they contribute to macroeconomic stabilisation
Is a small deficit or surplus evidence of fiscal discipline?
a smaller deficit, or even a surplus, is not necessarily evidence of this (its adequacy needs to be examined in the light of the strength of demand and the availability of private savings)
How is the budget deficit measured and why is it misleading in high-inflation countries?
traditionally measured in nominal terms, as the excess of government expenditures over receipts
misleading in a high-inflation country where most of the nominal interest payments in government debt are not truly an interest expense, but payment adjusting the debt’s real worth)
What is “operational” deficit?
includes in expenditure only the real component of interest paid on government debt
What is “primacy” deficit?
excludes all interest payments from the deficit, as it then only includes items that are in principle directly controllable by the authorities (however real interest payments do not have implications for aggregate demand and the evolution of the real debt of the public sector
Why is there often an understatement of true deficits?
contingent expenditures are rarely included in reported budget outlay
privatisation proceeds are sometimes recorded as revenues rather than means of financing a fiscal deficit
buildup of future liabilities of the social security system is not included in budget outlays
What are fiscal deficits the primary source of?
fiscal deficits primary source of macroeconomic dislocation in the forms of inflation, payment deficits, capital flight
result from a lack of political courage or honesty to match public expenditures and the resources available to finance them
What did the Reagan administration create?
created a preference in Washington for reducing expenditures rather than increasing tax revenues (not clear that this preference is strong outside right-wing political circles=
What are the public expenditure priorities according to Washington?
subsidies
education and health
public investment
One of the public expenditure priorities according to Washington is subsidies, what does this involve?
regarded as prime candidates for reduction of deficits, however too much can drain on the budget and lead to resource misallocation
One of the public expenditure priorities according to Washington is education and health, what does this involve?
have character of investment (human capital) and consumption, and help the disadvantages (latter depends on expenditure’s composition and level, e.g. primary education and health is more relevant to disadvantaged) (most in Washington believe in the importance)
One of the public expenditure priorities according to Washington is public investment, what does this involve?
public infrastructure investment
What is tax reform seen as according to Washington?
increased tax revenues are alternative to decreased public expenditures to remedy fiscal deficit
tax base should be broad and marginal tax rates should be moderate
What should interest rates be according to Washington?
should be market-determined to avoid resource misallocation
should be positive to avoid capital flight and, according to some, increase savings
many would say should be positive but moderate, to promote productive investment and avoid the threat of an explosion in government debt
What should exchange rates be according to Washington?
dominant view is that achieving a “competitive” rate is more important than how it is determined (test of whether it is appropriate is whether it is consistent in the medium run with macroeconomic objectives) (sustainable, yet competitive)
What should real exchange rates be according to Washington?
competitive one if first essential element of an “outward-oriented” economic policy, where the BoP constraint is overcome primarily by export growth rather than by import substitution
What should trade policy be according to Washington?
ideal is a situation in which the domestic resource cost of generating or saving a unit of foreign exchange is equalised between and among export and import-competing industries
access to imports of intermediate inputs at competitive prices is regarded as import to export promotion
has to be protection, however against foreign competition ends up impoverishing the domestic economy
What should free trade ideal be according to Washington?
infant industries may merit substantially but strictly temporary protection and a moderate general tariff might provide a bias toward diversifying the industrial base without threatening serious costs
highly protected economy is not expected to dismantle all protections overnight (views on how to do this differ, specific timeline or context specific)
What should foreign direct investment be according to Washington?
restrictive attitude (economic nationalism, discouraged) is regarded as foolish, as such investments can bring needed capital, skills, and know-how for producing domestic market goods or contributing to new exports
can be promoted by debt-equity swaps and is strongly advised (promotes FDI and reduces debt)
What should privatisation be according to Washington?
may help relieve the pressure on government budget (short run by revenue produced from side of enterprise and long run as investments no longer need to be financed by the government)
private industries are managed more efficiently than state enterprises, as managers fare more direct incentives (e.g. personal stake in profits)
threat of bankruptcy places a floor under inefficiencies (many state enterprises seem to have unlimited access to subsidies)
nationalistic motivation behind not doing it
What should deregulation be according to Washington?
way of promoting competition and was successful in the U.S.
potential for corruption is large under regulation
How did regulation lead to corruption in Latin America?
Latin America where regulation is administered by underpaid administrators and discriminates against small/medium-sized businesses which seldom have access to higher reaches of the bureaucracy, yet are important creators of employment
How are property rights viewed by Washington?
general acceptance that they matter
What is a summary of the economic policies Washington urges?
prudent macroeconomic policies, outward orientation, and free-market capitalism (all stem from classical mainstream economic theory)
What is a Washington agenda criticism?
whether it can be relied on to restore growth once stabilisation has been achieved
whether all those reforms together would lead to prompt return of flight capital
dismissal of the development literature (e.g. big push, (un-)balanced growth, surplus labour, two-gap model)
What does Washington fail to do?
fails to apply the same recommendations domestically, especially regarding fiscal discipline and corruption
What did Latin America’s economic challenges in 1980s-1990s lead to?
led to a push for structural reforms as part of the “Washington Consensus” to stabilise economies and promote market-led growth (often did not address deeper social issues like poverty and inequality)
What is globalisation?
a process whereby national and international policy-makers proactively or reactively promote domestic and external liberalisation
What was the promise of trade during liberalisation in Africa?
through liberalisation, African economies would become more competitive and allow African exporters to capitalise on opportunities in foreign markets
increase the ‘traditional exports’ of individual countries and enable them to diversify their exports to include manufactured goods assigned to them by the law of comparative advantage
permit the importation of goofs that make up an important part of investment goofs (e.g. plant and equipment) in which technology is usually embodied
What did the trade policy reforms in Africa during liberalisation lead to?
by end of 1990s little had changed, no general increase in number of industries in which most African countries have a ‘revealed’ comparative advantage and no major expansion occurred in the diversity of products exported by most of the countries (product composition because more concentrated for many)
decline in African share of non-oil exports (now less than one-half what they were in early 1980s)
What was the promise of additional resources during liberalisation in Africa?
liberalisation of markets would lead to positive real interest rates which would encourage savings
would raise domestic investment through increased domestic savings
relaxing foreign exchange constraints leading to higher levels of investment
financial liberalisation would lead to increased capital inflows and stem capital flight
What were additional resource reforms during liberalisation in Africa?
high country concentration of investment (most to South Africa)
sectoral concentration on mining
attraction of the least desirable form of foreign capital
African governments do not deal with these risks or suggest foreign investment preferences (desperate effort to attract foreign investment)
How was capital flight in Africa during liberalisation?
much higher in Africa than other developing country groups and effects of liberalisation were “very small”
Did the promise of growth during liberalisation in Africa materialise?
globalisation has not produced rates of growth higher than 1960-1970s in Africa (largely due to deflationary bias in orthodox stabilisation programmes)
Why did Africa have poor performance during liberalisation?
readily implemented the macroeconomic policies recommended by lack of ‘good governance’ and ‘good institutions’
Why was there slow growth and limited resource mobilisation?
investors had no confidence that the countries’ growth performances would improve and that the potential returns on their investments would fully materialise (greatest ‘risk’ for investors is investing their money in economies under policies that aim to achieve stabilisation)
What is the Kaleckian ‘flexible accelerator’ view?
capital needs are essentially determined by expected output (i.e. investment demand is driven by expected growth)
When do private savings rise?
private savings wise with the level and growth rate of real per capita income (influence is larger in developing countries)
Why was there a failure of trade in Africa during liberalisation?
linked to failure in the structural transformation of African economies
decline of Africa’s world trade share is closely related to low levels of growth, which is related to deindustrialisation
as other countries have grown, their trade volumes have expanded more than proportionately (when other countries were implementing ISI, Africa was under colonial rule)
Industrial stagnation and globalisation in Africa link
globalisation in Africa has been linked to industrial stagnation and deindustrialisation leading to decline in TFP, sluggish growth in exports and failure to diversify
after colonial rule Africa was reluctant to borrow for industrialisation
What is ‘path dependence’?
past policy errors (before-adjustment) have a lasting effect through hysteresis
What leads to successful export drives?
strong relationship between structural change rates and growth rates in value added in manufacturing and growth of export rates
principal means for effecting export diversification is investment
Why were the Structural Adjustment Policies (SAPs) introduced?
introduced to stabilise African economies by reducing fiscal deficits, controlling inflation, and encouraging foreign trade and investment
What dod the Structural Adjustment Policies (SAPs) lead to?
led to “maladjustment”, placing economies on low-growth trajectory due to their deflationary impact (stifled demand, discouraged private investment, reduced government-spending on developmental activities)
What did the Structural Adjustment Policies (SAPs) lack
lacked a development-focused approach, which would involve creating structural changes to support industrialisation and economic diversification rather than short-term, financial stabilisation
What was the link between globalisation and marginalisation in Africa?
weakened local industries that could not compete with imports, leading to deindustrialisation rather than diversification and remain highly dependent on a limited range of privacy exports
financial liberalisation did not yield expected increases in FDI in sustainable sectors (investment was concentrates in extractive industries, e.g. mining, with little impact on manufacturing or technology sectors)
How was capital flight affected in Africa during liberalisation?
capital flight remained high as local investors sought returns abroad (reforms attracted speculative foreign capital that was not intended for productive ventures and was often tied to short-term profit-driven investments)
What was Mkandawire’s criticism of the SAPs?
SAPs focus solely on liberalisation without considering the structural adjustments needed for growth, e.g. building infrastructure, supporting education
SAP-driven focus on fiscal austerity linked state’s ability to invest in long-term development projects
What is neoclassical economics?
ideology involving “rationally motivated” individuals
model behaviour of perfect competition and not against state intervention
What is the Austrian Libertarian Tradition?
anti-planning and free market reigns
What was the conceptual origin of neoliberalism?
“unholy alliance” between neoclassical economics and the Austrian-Libertarian tradition
Why was the neoclassical economics and the Austrian-Libertarian tradition seen as an “unholy alliance”?
objective vs subjective theory of value
different conceptualisation of the state (intervention)
How was there a neoliberalism global spread?
via IMF and World Bank (SAPs in developing countries, Bretton Woods Institutions)
What is the timeline of the spread of neoliberalism?
1970s US crisis (recession)
1980s IMF SAPs rolled out (agreements signed, development model dismantled)
1990s hope and defeat (initial outcome and disappointments)
2000s to now uncertain futures and more SAPs
1970-1980 rise in economic (stagnation in the west led to neoliberalism adopted by leaders like Thatcher in the UK and Reagan in the US)
What is the 1970s debt crisis often attributes to in Latin America?
to petro-dollar narrative (trade surplus from small major oil exporting countries deposited in Western banks were transferred to developing countries in need after rising oil prices)
What did oil-exporting countries in Latin America (e.g., Mexico and Venezuela) borrow money for in the 1970s and 1980s?
They borrowed money to fuel consumption and, in some cases, for investment
How did international bank loans benefit Latin American borrowers?
International bank loans helped avoid restrictions placed by the IMF and World Bank and reduced tensions caused by the expansion of multinational corporations (MNCs) in LAC.
By how much did commercial bank lending increase in LAC from 1961–65 to 1976–80?
Commercial bank lending increased from 1.6% to 58.3%
What contributed to the enormous increase in dollars deposited in international banks between 1965 and 1980?
The US’s rising trade deficits
Why were unregulated offshore banks significant for international loans?
They weren’t required to hold cash relative to loans, increasing their lending capacity
By the 1980s, how much had large US banks loaned to LAC relative to their capital?
They had loaned 200% of their capital
How did international banks mobilize capital and minimize risks in the post-WWII era?
They increased overseas branches, used adjustable interest rates (LIBOR), and utilized loan syndicates to spread risk
How did the number of overseas bank branches change from 1960 to 1980?
It increased from 8 to 139
What was the role of the London Inter-Bank Interest Rate (LIBOR) in LAC lending?
LIBOR placed the burden of debt on borrowers through adjustable interest rates
How did loan syndicates help banks manage risk?
By increasing the number of banks involved in loans, spreading risk among multiple institutions
What change occurred to the LIBOR rate between 1974-77 and 1981?
LIBOR went from being negative in real terms to 6%
How did the decline in export commodity prices impact LAC economies?
It reduced export revenues, leading to capital flight and a drain on foreign reserves
Which LAC countries faced severe capital flight, and why?
Mexico and Venezuela, due to their open capital accounts
What made lending to LAC risky in the 1980s?
Declining export revenues, capital flight, and the drain on foreign reserves made countries unable to borrow
What event in 1982 marked the beginning of the Latin American debt crisis?
Mexico declared it would be unable to repay its loans
What were the consequences of Mexico’s 1982 loan repayment declaration?
It triggered fears that other LAC countries would follow, leading to increased capital flight and reduced lending
What steps were taken to prevent US banks from going bankrupt due to Mexico’s debt crisis?
The US Treasury, Federal Reserve, and OECD member countries provided emergency rescue funds to Mexico
What was the IMF’s role in Latin America before 1982?
The IMF played a minor role, and countries avoided its intervention
What changed after Mexico’s default in 1982 regarding the IMF’s involvement?
The IMF intervened, requiring austerity measures and coordinating between banks to prevent small creditors from defaulting
Why did emergency funding after the 1982 debt crisis fail to resolve the issue?
It provided a short-term solution but failed to address root causes, leading to long-term economic stagnation
What was the Baker Plan, and who proposed it?
Proposed by James Baker, it involved USD 20,000 million in new lending from private banks, the IMF, and the World Bank, alongside structural adjustment policies like trade liberalisation, deregulation, and privatisation
What was the goal of the Baker Plan?
To generate repayment capacity for Latin American countries
Why did the Baker Plan fail?
Private banks were unwilling to lend to LAC due to high risk
What was the Brady Plan, and who proposed it?
Proposed by Nicholas Brady, it aimed to reduce debt overhang by asking private lenders to loan new money, reduce outstanding debt, or lower interest rates on existing debt
How did the Brady Plan implement debt reductions?
Loans were converted into bonds that served as collateral for the reduced debt
What were the outcomes of the Brady Plan in the 1990s?
LAC reached new agreements with creditors, loans were converted to bonds, and capital inflows returned after adopting neoliberal economic policies
How did loans in the 1990s differ from earlier loans to LAC?
They were largely portfolio investments with short-term bonds (“hot money”) that could be withdrawn quickly
Why did short-term loans in the 1990s make LAC vulnerable?
Dependence on volatile capital flows exposed the region to external economic shocks, leading to crises in Mexico (1994-95), Brazil (1998-99), and Argentina (2001-02)
Did neoliberal policies reduce vulnerability in LAC?
No, neoliberal measures failed to reduce economic vulnerability
According to Shadlen, how has dependence on capital inflows and tight monetary policy affected LAC?
It has hindered growth, reduced investment in education, infrastructure, and poverty reduction, and led to low growth, high unemployment, and inequality
Why do countries in LAC stock up on foreign exchange reserves, and what are the consequences?
They stock up on reserves to reduce volatility, but it diverts resources from critical investments, worsening long-term development issues
What cyclical pattern does Shadlen identify in LAC’s economic crises?
Increased external lending, followed by crisis and debt burdens on debtor countries
What was the initial ideological response to the 2008 crisis regarding neoliberalism?
The crisis was expected to challenge neoliberalism, with premature announcements of its decline, but neoliberalism proved resilient and adapted, reinforcing its practices
How did post-neoliberal alternatives fare after the 2008 crisis?
They did not gain significant traction, leaving neoliberalism largely unchallenged
How did the EU’s role change after the 2008 crisis?
It shifted from a civic alternative to US-style capitalism to a transnational debt collection agency, imposing austerity measures on Mediterranean economies
What were the public reactions to EU austerity measures post-crisis?
Austerity and social program cuts led to widespread public opposition
What measures did the US government implement after the 2008 crisis?
Tax cuts and deregulation, with reduced government intervention
What movement arose in the US in response to post-crisis policies?
The Occupy movement protested socioeconomic inequality, financial sector predation, public-sector cuts, and union busting
How was neoliberalism impacted in Western countries after the 2008 crisis?
While tarnished, neoliberalism remained intact as governments defended it as the only practical path to growth restoration despite public opposition
What characteristic of neoliberalism allowed it to persist after the crisis?
Its adaptability, enabling it to absorb shocks and criticism while maintaining foundational principles
What challenges did developing countries face after the 2008 crisis?
They needed to oppose market dominance while promoting public sphere alternatives and redefining the role of the state
How did neoliberalism respond to the 2008 crisis?
Governments doubled down on neoliberal policies, implementing stringent fiscal discipline and austerity measures
Why does neoliberalism persist despite its challenges?
It is deeply embedded in global financial, corporate, and political systems
How do structural approaches define neoliberalism?
As a coherent ideological framework influencing macroeconomic policies and governance
How do poststructural and ethnographic approaches view neoliberalism?
As localized and diverse, acknowledging its contradictions and context-specific applications
What is a recurring issue with neoliberal theory and practice?
Neoliberal theory often fails to recognise the socially embedded nature of the capitalist economy, leading to contradictions and uneven realisation
What are “mongrel formations” in neoliberal practice?
Hybrid strategies where neoliberal elements coexist with other ideologies, such as public-private partnerships
What is attenuated neoliberalism?
A focus on unique local cases as exceptions to the usual market rule, highlighting differences in local contexts
What are varieties of neoliberalism?
Distinct local versions shaped by historical and institutional legacies, sharing traits but influenced by unique paths
What are hybrid neoliberalisms?
Different intensities of market rule, loosely connected by global influences but adapted locally
What is variegated neoliberalisation?
The dynamic interplay between local and global neoliberal practices
Why is it problematic to oversimplify neoliberalism?
It risks attributing all global changes to neoliberalism, ignoring context-specific variations and interactions with other forces
What approach does the author advocate for studying neoliberalism?
Balancing macro-structural analysis with localized, context-rich investigations
What role do grassroots movements play in challenging neoliberalism?
They must engage with broader neoliberal frameworks to develop cohesive, scalable alternatives
What challenge do alternative movements face?
Moving beyond isolated acts of resistance to enact meaningful systemic change
Who was F.A. Hayek, and what was his primary intellectual focus?
F.A. Hayek was a 20th-century intellectual who championed classical liberalism and individual freedom, critiquing socialism and the expansion of state power
What influential organization did Hayek establish in 1947, and who were some notable members?
Hayek established the Mont Pelerin Society (MPS), which included figures like Karl Popper and Milton Friedman
What was the primary focus of the Mont Pelerin Society (MPS)?
The MPS focused on advocating free markets and minimal government intervention, becoming central to the rise of neoliberalism
How did the MPS influence global policy?
MPS members shaped policies in the U.S., U.K., Germany, and other countries
Which political leaders’ policies were significantly influenced by Hayek’s ideas?
Margaret Thatcher in the U.K. and Ronald Reagan in the U.S.
What are the core principles of neoliberalism?
Neoliberalism emphasizes free-market economics, reduced government intervention, and privatisation
Which economic school influenced Hayek’s views, and who were its key figures?
The Austrian School of Economics, including Ludwig von Mises and Carl Menger
What were Hayek’s key theoretical beliefs?
The importance of private property, individual freedom, the limitations of state power, and the concept of spontaneous market order
How did Hayek’s neoliberalism affect public discourse?
It led to the privatisation of public discourse, commodifying public goods and services and prioritising profit over democratic discussion
What are some criticisms of neoliberalism’s impact on democracy?
It has caused economic inequality and social fragmentation, weakened democratic discourse, and contributed to the rise of populism by failing to address citizens’ moral and economic concerns
What do critics like Michael Sandel argue about market-driven policies?
They argue that such policies have eroded the moral and social foundations of democracy
How has digital media been affected by neoliberalism, according to the article?
Digital media, initially seen as a democratic tool, has been commercialized by large corporations, limiting its potential as a public space
What challenges in the digital public sphere hinder democratic engagement?
Issues like fake news and privacy concerns
What does Peters suggest to rejuvenate democratic discourse?
Society must address neoliberalism’s impact on public spaces and advocate for policies respecting social welfare and public interest over purely economic objectives
