SOCI 423: THEORIES OF SOCIAL DEVELOPMENT

Transcription

1 SOCI 423: THEORIES OF SOCIAL DEVELOPMENT SESSION 10: NEOLIBERALISM Lecturer: Dr. James Dzisah College of Education School of Continuing and Distance Education 2014/ /2017

2 SESSION OVERVIEW This session examines the ideology, assumptions and the main elements of Neoliberalism. Goal/Objective: By the end of the session, students will able to: Distinguish the types of Liberalism Provide the core principles underlying Liberalism and Keynesianism Define Neoliberalism and the logic of Neoliberalism Identify the various elements of Neoliberalism Explain some of the basic criticisms leveled against Neoliberalism

3 SESSION OUTLINE Types of Liberalism Principles of Liberalism From Liberalism to Keynesianism What is Neoliberalism The logic of Neoliberalism Neoliberal ideology Assumptions of neoliberalism The Return of neoliberalism Elements of Neoliberalism Basic Criticisms of Neoliberalism Activity References

4 TYPES OF LIBERALISM It is easier to provide a core statement in Realism and Marxism than in Liberalism, why? Because Realists and Marxists place more emphasis on developing theories that rely on a small number of concepts and variables. Realists who focus on the rational unitary state Marxists view the world in terms of class relations Liberals deal with a wider range of actors and levels of analysis.

5 TYPES OF LIBERALISM There are three types of liberalism: Orthodox liberals promote negative freedom, or freedom of the market to function with minimal interference from the state. Interventionist liberals support some government involvement because of the belief that negative freedom is not sufficient, that market does not always produce widespread benefits Institutional liberals also view some outside involvement as necessary to supplement the market, and they favour strong international institutions such as the WTO, IMF, and World Bank.

6 TYPES OF LIBERALISM Liberals see development in bottom-up or pluralist terms, in which individuals and groups seek to achieve their goals. Liberals therefore give primacy of place to the individual consumer, firm, or entrepreneur. They place more emphasis on individuals as having inalienable rights that must be protected from collectivities such as labour unions, churches, and the state.

7 THE PRINICPLES OF LIBERALISM Thus, the orthodox liberal Adam Smith ( ) argued in his discussion of the invisible hand, that the welfare of society depends on the individual s ability to pursue his or her interests: Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society (Adam Smith, The Wealth of Nations, vol. 1 (London: Dent, Everyman s Library no. 412, 1910), bk. 4, p. 398). Because the invisible hand of the market performs so efficiently, society can regulate itself best with minimal interference from the state.

8 THE PRINCIPLES OF LIBERLISM Adam Smith and David Ricardo considered that any constraint on free competition would interfere with natural efficiency of market mechanisms, inevitably leading to social stagnation, political corruption, and the creation of unresponsive state bureaucracies They also advocated the elimination of tariffs on imports and other barriers to trade and capital flows between nations British sociologist Herbert Spencer ( ) added to this doctrine a twist of social Darwinism by arguing that free market economies constitute the most civilized form of human competition in which the fittest would naturally rise to the top.

9 FROM LIBERALISM TO KEYNESIANISM Despite the persistence of orthodox views, most Western leaders followed interventionist liberal policies during the expansive years of the 1950s and 1960s. In the decades following the WWII, even the most conservative political parties in Europe and United States rejected those laissez-faire ideas They instead embraced a rather extensive version of state interventionism propagated by British economist John Maynard Keynes, the architect of Bretton Woods system.

10 FROM LIBERALISM TO KEYNESIANISM Keynes believed that free market decisions can lead to inefficiencies and poor distribution. As a result, government intervention in the economy is sometimes required. But the oil crisis, stagnation and inflation of the 1970s resulted in many economists questioning the value of Keynesian economics.

11 WHAT IS NEOLIBERALISM Scholars often use the term neoliberalism to differentiate this new liberal orthodoxy from the liberalism of Adam Smith and David Ricardo. Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade (Harvey 2005: 2).

12 THE LOGIC OF NEOLIBERALISM Neoliberal economics, the logic of which is tending today to win out throughout the world owes a certain number of its allegedly universal characteristics to the fact that it is rooted in a system of beliefs and values, an ethos and a moral view of the world, in short, an economic common sense, linked, as such, to the social and cognitive structures of a particular social order (Bourdieu 2005: 10).

13 NEOLIBERAL IDEOLOGY Neoliberal ideology attempts to improve the well-being of the earth s population. How is well-being measured? Increased per capita GDP. Why is this metric problematic? Utility and increased consumption. Why is this problematic? Other forms of well-being that are not examined under this ideology. Human Development Index.

14 ASSUMPTIONS OF NEOLIBERALISM People have rational preferences about the outcomes they would like; Individuals maximize utility (satisfaction) and firms maximize profits People act on the basis of full information. The underlying argument is simple: "let the market work"; "Supply and demand"; "Get the prices right" The "Washington Consensus": a package of reforms and conditionalities required for developing countries to access IMF and WB loans.

15 THE RETURN OF neoliberalism The writings of Frederick Von Hayek and Milton Friedman had more influence on government policies in the late 1970s and 1980s They argued that the government should play no significant role in the economy as governments are inefficient, wasteful and bureaucratic. Milton Friedman ( ):"If you put the federal government in charge of the Sahara Desert in five years there'd be a shortage of sand. Markets should be completely free and liberalized. Foremost among political leaders pushing for the revival of Orthodox Liberalism were British Prime Minister Margaret Thatcher and U.S. president Ronald Reagan.

16 THE MAIN ELEMENTS OF NEOLIBERALISM Privatization of public enterprises Deregulation of the economy Liberalization of trade and industry Massive tax cuts Monetarist measures to keep inflation in check, even at the risk of increasing unemployment Strict control of organized labour The reduction of public expenditures, particularly on social services The down-sizing of government The expansion of international markets The removal of controls on global financial flows

17 CRITICISMS OF NEOLIBERALISM The "Post-Washington Consensus": incorporates a greater role for the state to address market imperfections evident in the failure of purely market based growth approaches. Poverty Reduction Strategy Papers (PRSPs): A World Bank and IMF strategy that moves beyond the Structural Adjustment Programs of the 1980s and 1990s to include a greater role for local participation in planning for the use of WB and IMF loans. to put it in old-fashioned Marxist terms, the main task of the ruling ideology in the present crisis is to impose a narrative that will not put the blame for the meltdown on the global capitalist system as such, but on its deviations (overly lax legal regulations, the corruption of financial institutions, and so on) (Žižek, 2009: 19).

18 ACTIVITY Examine the policies of Structural Adjustment, Poverty Reduction Strategy Papers I and II, HIPC initiative, MGDs and SDGs and point out the influence of neoliberalism on those policies.

19 References Clarke, Simon The Neoliberal Theory of Society. Pp in A. Saad-Filho and D. Johnston (eds), Neoliberalism: A Critical Reader. London: Pluto Press. Harvey, David A Brief History of Neoliberalism. Oxford: Oxford University Press. (Read pages 1-86.) Harvey, David Neoliberalism as Creative Destruction. The Annals of the American Academy of Political and Social Science vol. 610: Peet, Richard Globalism and Neoliberalism. Pp in Unholy Trinity: The IMF, World Bank and WTO. London and New York: Zed Books.