NEOLIBERALISM

Neoliberalism

'Trade not aid' approach

Structural Adjustment Plans (SAPs)

A set of conditions imposing neo-liberal policies on governments used by the IMF and attached to World Bank loans. The conditions usually focus on these core ideas: • Trade liberalisation - an agreement not to subsidise producers and to reduce import tariffs • Privatisation of public services • Deregulation to reduce labour and environmental laws and business taxes The aim is to create conditions which attract outside investment from TNCs that will create new businesses inside the country and export in the global market.

Economic Protectionism

A term used to describe economic policies such as tariffs, quotas and subsidies which aim to protect domestic companies from foreign competition. It is the opposite of free trade.

Neo-Liberalism/The New Right

A theory that takes the view that the free market is the best way of organizing and developing societies; against government intervention in society. This perspective has been the dominant perspective on international development since the 1980s. This approach is associated with William Easterly but has its roots in 'The Wealth of Nations' 1776 by Adam Smith

Free trade

Allows traders to trade across national boundaries without interference from the respective governments. It is the opposite of economic protectionism.

Free Market (market forces)

An economic system in which government interference is minimised and all activity is governed only by laws of supply and demand

Ha Joon Chang

Countries that are the most enthusiastic about free trade are a case of 'do as I say, not as I did'

Live Aid 1985

Do they know it's Christmas - was done to raise money for famine in Ethiopia but there was also a horrific civil war and doctors without borders say money went to the dictator and military and kept war going for 6 more years killing potentially more people than the famine.

Infant Industry Argument

First US treasury secretary Alexander Hamilton created this

Noam Chomsky

Free market doctrine comes in two varieties. The first is the official doctrine imposed on the defenseless. The second is what we might call 'really existing free market doctrine': market discipline is good for you, but not for me.

The International Monetary Fund

Get loans when no one else will give you one - Greece

The World Bank

Gives grants, loans to poorer countries for long term development

Infant Industry Argument

Ha Joon Chang argues that the government of economically less developed nations need to protect and nurture 'industries in their infancy' against superior foreign competitors until they grow up. This is a key argument in favour of economic protectionism.

Increase in demand

Happens following a successful advertising campaign usually causes an increase in price

Increase in supply

Happens when a new business opens usually causes a fall in price

Bolivia

IMF told them they had to privatise their water. An American company took control. It was illegal to collect rain water. Bolivia protested. Became a violent stand off. SAPs were forced on Bolivia. Forced the price of water up and that's why they protested so much. People died and the government gave way and made the water free again.

Ha Joon Chang

If you just have free trade, the only things poorer countries can specialise in are crops and minerals because they can't compete against established countries in other industries where they are already successful.

The invisible hand

Is a metaphor used by Adam Smith to describe unintended social benefits resulting from individual actions. This has come to capture his notion that individuals efforts to pursue their own interest may frequently benefit society more than if their actions were directly intending to benefit society

Market

Is any place where buyers and sellers meet to trade products

Central idea of Neoliberalism

Is that developing countries should follow the rich world's path to development, but it disagrees on the nature of the path. Most notably it rejects aid as a central process and questions how countries such as Britain were able to develop without a rich nation to provide cash. They see trade as the crucial process in development and global inequalities. It advocates hold that growth can only occur in an environment where trade is encouraged by limiting barriers and increasing incentives for wealth creation and entrepreneurialism. They argue that this should be achieved by creating a free market in which governments minimise their interference in the economy and reduce red tape and taxation wherever possible. 'The state that does least is best'

Trickle down economics

Is the Neoliberal idea that economic benefits provided to businesses and upper income levels will indirectly benefit poorer members of society when the resources inevitably trickle down to them

Supply

Is the amount of a product businesses are prepared to sell at different prices. Some products are in such high demand that customers are prepared to queue for them.

Demand

Is the amount of a product customers are prepared to buy at different prices

Aid charities

NGOs and charities are more interested in themselves spending money on administration and ads. There is also a problem with the style of advertising - emotional manipulation and guilt trip. Made to feel these people are helpless and need to be pitied. Creates a bad mental image of Africa - not good for trade and tourism.

Is it right that celebrities have become the spokespersons of development in Africa?

NO: • Can feel frustrating when celebrities ask us to donate • Celebrities avoid tax payments - then the aid budget shrinks • Stereotype of Africa • People assume Africa is one country - same standard of living • Were no African artists (Live Aid)

World Trade Organisation

Organises conferences between countries. Tries to remove tariffs. Biased in favour of rich countries since they can send more delegates and attend more meetings.

Subsidies

Payments given by governments to companies in their own country to make them more competitive in the global market

Sachs

Poor countries are poor because they are hot, infertile, malaria infested, often landlocked; this makes it hard for them to be productive without a large investment to deal with these problems i.e. aid

Poverty Reduction Strategy Papers

SAPs acquired such a bad reputation that they were rebranded by the world bank

SAPs - 'The Washington Consensus'

SAPs have gained such a bad name that the World Bank has replaced them with Poverty Reduction Strategies Papers (PRSP), although these contain similar economic prescriptions.

Tariffs

Taxes on imports to protect a country's own industries

What do critics argue about SAPs?

That SAPs have not worked and can be deeply harmful to people in poor countries who may lose their job as a result of trade liberalisation or see their working conditions underminded as a result of deregulation. Privatisation may also make public service more effective.

Economic Protectionism

The USA in the 1880s was one of the fastest growing - and rapidly becoming one of the richest - countries in the world. So the economic superstars of the late 19th C (USA) and of today (China) have both followed policies that almost go completely against the Neo-liberal prescription.

Market price

The amount customers are charged for items and depends on demand and supply. They change when supply and demand patterns change.

Specialisation (Adam Smith)

The key the wealth of the nation was the right type of specialisation * Should produce better and more efficient things * Should be far more productive

Trade Liberalisation

The neoliberal process of removing barriers to free trade such as tariffs, quotas and subsidies

The Washington Consensus

This is a phrase used to describe the influence of neo-liberalism on the world bank and IMF (both have headquarters in DC)

Red Tape

This refers to state regulations on businesses. Neo-Liberals argue that deregulation can stimulate the economic growth

David Ricardo - Comparative Advantage

What is it that enables each country to get ahead? What is distinctive to what it is able to produce and contribute? Britain 21st C: Finance & Cultural Industries. This is because Britain's comparative advantage today isn't cheap labour and the textiles, it isn't the presence of the wool that is for the textiles or cotton shipped from former colonies. Britain's comparative advantage is in the production of advertising, global finance & a whole host of industries that depend on highly educated creative population fluent in English.

Goods market

Where everyday products such as DVDs are sold

Commodities market

Where raw materials such as wheat are traded

Quotas

Where the government puts strict limits on the number of foreign goods it allows to be imported into the country

Is it right that celebrities have become the spokespersons of development in Africa?

YES: • Spreading awareness • Celebrities seen as role models • Celebs/business people can donate - Bill Gates

Trade Liberalisation - arguments in favour

• Increasing competition - specialise and innovate • Bigger exports to bigger markets • More choice for consumers in price and quality • Cultural and economic links and political • Avoid isolation