New Right (Neo-Liberal) Theory on Development

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New Right (Neo-Liberal) Theory on Development

• 03d New Right theory
• Adapted from Kirby and Haralambos

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1990s and the New Right

• In the 1980s Modernisation theory and
  Underdevelopment
• Theory appeared dated in a rapidly changing world
  due to
• The decline in usefulness of the concept of
  First, Second and Third world due to the
  increased diversity between countries in
  developing world
• The decline of Marxism in sociology
• The collapse of Soviet Union

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Key Names and arguments in the New Right

• Milton Friedman and Peter Bauer influenced
  economic policy of Thatcherism
• This emphasised laissez-faire (leave economic
  forces to do what they will or the economy will
  be damaged)

and Reaganism
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The New Right say that

• Government interference in the market place will
  distort the balance of supply and demand. (E.g.
  the regular giving of aid upsets the price of
  goods and supply of labour)

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Friedman argues that

• Governments should not be involved in the
• economy except four main functions
• Defence
• Law and Order
• The provision of the necessary public works that
  private enterprise does not find profitable to
  provide
• Protection from members of the community who
  cannot be regarded as responsible individuals

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Peter Bauer (British development economist)

• Bauer advocates a wider range of functions
• for governments
• The basic provision for health and education
• The management of the monetary and fiscal
  (taxation/spending) system

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Friedman and Bauer argue that

• The production, distribution and trade of goods
  and services are best left to private (profit
  making) rather than public (government owned and
  regulated) organisations
• The free market will regulate itself and lead to
  increased economic growth e.g. as in Hong Kong.
• Government central planning fails to raise living
  standards
• But critics say this is not the case with Sweden
  and
• former Soviet Union which have been successful

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New Right say that regular aid does not assist
development as it distorts the free market
process because

• if a development project is economically viable
  then private enterprise would be willing to
  invest in it on a commercial basis. If not then
  the project should not be undertaken.
• regular aid often end up up in the wrong hands
  and benefits the wealthy rather than the
  countrys needy

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Impact of Friedman and Bauer

• Their approach has had little support even by
• conservatives, as regular aid is still given
• However
• It is increasingly linked to the acceptance of
  democratic and free market reforms. EG.
  Multi-lateral and lateral aid providers link aid
  in return for certain economic conditions such as
  structural adjustments
• Aid in return for certain conditions is known as
• conditionality

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Problems caused by conditionality

• It shows that a countries national security is
  open to outside power (The donor countries can
  influence strategic decisions)
• Really poor people are just as likely to be in
  countries with regimes which do not meet the
  conditions as those who do. (Yet they will not
  receive aid)
• US aid is increasingly linked to cultural and
  political conditions

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Evaluation of the New Right

• The New Right uses the Asian Tigers as an example
  of how the free market is successful. But it is
  possible that cultural and historical context
  also played a part in their success
• Tiger economies are vulnerable to economic crisis
• NR policies have increased inequality both within
  and between countries

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Chomsky (1999) argues that -

• The neo liberal (New Right) global order is
  concerned with minimising the role of the state
  by doing this
• Power is transferred from democratically elected
  representatives towards financial and business
  elites
• The conditionality of aid could be seen as
  morally unacceptable as well as counterproductive
  

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For more about Asian tigers click below for
Wikipedia entry

• http//en.wikipedia.org/wiki/East_Asian_Tigers