week 05

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Information about week 05
Business-Finance

Published on April 13, 2008

Author: Simo

Source: authorstream.com

Neoliberalism:  Neoliberalism Many names: Thatcherism Reaganism Rogernomics Rejection of three models: Keynesian welfarist model Soviet model National-Capitalist model Emphasises: Minimising role of state in market Increasing role of private sector – expanding markets, privatisation, individual choice Debt Crisis:  Debt Crisis Range of factors contributed to debt crisis of 1980s Keynesianism: Legitimate role for state in the economy Deficit financing to overcome economic slumps Legitimisation of indebtedness Keynesianism as enabling factor Developing country governments borrowed extensively to spur economic growth Availability of loans: Oil Shock (1973) Huge OECD profits recycled as lending by Western banks Latin American debt burden - $75 billion in 1975 to $315 billion in 1983 Owed to US, European and Japanese banks (top 25 US banks = 80% of lending) Debt Crisis:  Debt Crisis Economic Structure of Developing Countries: Dependence on primary exports – declining terms of trade Need to borrow more at same time as less able to service debt Debt Servicing: 1979 restrictions on US money supply; interest rate rise from 9% to 17% Catalyst: Iranian Revolution (1979) – rise in oil prices – fuel to fire of economic recession Increased costs reduce profitability of DC exports August 1982 – Mexico defaults on loans, Brazil follows Panic among Western governments and banks – fear collapse of financial sys. Structural Adjustment:  Structural Adjustment Bretton Woods institutions took lead in managing debt crisis Explanation for crisis failed to recognise critical role of huge rise in interest rates, and irresponsible lending by banks Crisis blamed on developing countries – corrupt government, inefficient bureaucracy, state interventionism, poor policy Debt rescheduling and a small amount of debt forgiveness offered conditional upon implementation of Structural Adjustment Programme (SAP) SAPs rooted in neoliberal discourse on markets and role of state Two components – stabilisation and adjustment Stabilisation: IMF-led programme designed to halt economic decline as foundation for further reform Fiscal austerity – wage freezes etc. to cut spending Currency devaluation – cheaper exports Price liberalisation – reductions in subsidies Structural Adjustment:  Structural Adjustment Adjustment: World Bank-led, longer-term reform of economy and state Privatisation of state-owned enterprises, limitations on public sector investment Liberalisation – removal of quotas, tariffs, price-fixing, restrictions on repatriation of profits etc. Rationalisation of public sector – slashing bureaucracies, privatisation of social programmes Structural Adjustment:  Structural Adjustment ‘Washington Consensus’ (John Williamson, 1990) Adoption of SAP prerequisite for financial support Essentially all developing countries underwent reforms designed to completely restructure state, society and market Delegitimisation of state as development actor: But state still necessary component of SAP implementation ‘Shock therapy’ – allows no time for domestic dissent to form Why are SAPs Controversial?:  Why are SAPs Controversial? Neoliberal reform – increased opportunity But also dramatic increases in poverty UNICEF – Adjustment with a Human Face (1987) Austerity (incl. privatisation) = mass unemployment Accountability: Key policy choices removed from the remit of developing country governments Lasswell – politics = ‘who gets what, when, where and how’ – state can no-longer decide How do citizens hold government accountable for externally imposed policy? What is government for?

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