New Right Neo-Liberal Theory on Development

1. New Right (Neo-Liberal) Theory on Development 03d New Right theory Adapted from Kirby and Haralambos

2. 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

3. 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)

4. 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) The New Right say that:

5. 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�

6. 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

7. 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

8. 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 country�s needy

9. 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

10. 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

11. 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

12. 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

13. For more about Asian tigers click below for Wikipedia entry http://en.wikipedia.org/wiki/East_Asian_Tigers