Week 5 - The Rise of Neoliberalism

Question 1

What was the 1980s the era of?

Answer 1

the era of “market liberalism”, “stabilisation”, “structural adjustment”

Question 2

How did Sub-Saharan Africa look like in terms of manufacturing by the end of 1970s?

Answer 2

industry still infant while agriculture stagnated and share of world manufacturing was 0.9% in 1980

Question 3

How did Sub-Saharan Africa look like in terms of industry?

Answer 3

industry is small, in small number of countries, with few lines of production, mostly minor processing (minerals, crops), mostly consumer goods dependent on imported capital goods, high cost of technology-rich imports, lack of convergence between resource base and industrial sector, weak forward and backward linkages

Question 4

What type of income distribution is seen in Sub-Saharan Africa?

Answer 4

skewed income distribution

Question 5

What type of companies are seen in Sub-Saharan Africa?

Answer 5

nationalised and state owned companies due to absence of domestic and foreign private investment

Question 6

Did manufacturing take off in the countries in Sub-Saharan Africa?

Answer 6

most stagnated at low level, those where MVA grew robustly was due to oil (Gabon, Nigeria), diamonds (Botswana) or agri-processing (Rwanda) and ISI

Question 7

How did manufacturing in Latin America look like?

Answer 7

rise of manufacturers (steel, petrochemicals), however Oligarchs controlled protected industries
turn away fro, agriculture was extreme
debt-driven growth and debt crisis (petro-dollars lent by Western Banks at interest rates countries could not refuse)

Question 8

Was manufacturing in Latin America uniform?

Answer 8

growth not uniform (Mexico, Brazil, Venezuela between 6-7.5%, Argentina and Chile slow)
growth with inequality

Question 9

What were the causes of the Latin America crisis during the rise of neoliberalism?

Answer 9

Elite intransigence (internal problem)
rules of the game changes (external problem)
liberalisation of finance

Question 10

One of the causes of the Latin America crisis during the rise of neoliberalism was Elite intransigence, what did this involve?

Answer 10

did not modify ISI and tried to keep the system going on for as long as possible as happy to seek rents in captive markets, borrowed to finance continued growth (interest rates were low and banks were awash with resources to lend)

Question 11

One of the causes of the Latin America crisis during the rise of neoliberalism was rules of the game changed, what did this involve?

Answer 11

US FED trebled nominal interest rates and foreign debt doubled between 1976-1981

Question 12

One of the causes of the Latin America crisis during the rise of neoliberalism was liberalisation of finance, what did this involve?

Answer 12

huge demands for investment funds (only through borrowing) (changes in structure of banking in OECD, borrowers to bear risk)

Question 13

What crises were seen from the 1970s-1980s?

Answer 13

SSA countries had inly 15 years to begin a big push for development and then the rug was pulled out from under them
LA countries had relatively sound plans for foreign borrowing before interest rates skyrocketed overnight

Question 14

What was the US’ role from 1945-1975?

Answer 14

was exporting goof to the world and was a major lender to the world

Question 15

What was the US’ role after 1975?

Answer 15

became the world’s biggest debtor

Question 16

What was the US’ position during the rise of neoliberalism?

Answer 16

started to compete for capital which led to sharp rise in interest rates, capital started to flow from south to north, US could run large deficit in trade account (LA and SSA had to compete with US for finance)

Question 17

What were worldwide changes during the rise of neoliberalism?

Answer 17

weekend labour movements at home and internationally got rid of capital controls to allow capital outflows

Question 18

What was happening in the OECD countries from 1979?

Answer 18

Thatcher-Reagan era of liberalisation and privatisation (“stagflation” perceived as an outcome of Keynesian approaches)
shift in balance of power to capital
trade liberalisation and moves toward financial liberalisation
public assets privatised
deregulation of markets (labour hit hard)
money supply reduced (high real interest rates)
lower taxes for wealthy
removal of regulation on capitalist enterprises

Question 19

What is neoliberalism?

Answer 19

a political programme of the state’s role to be limited to promoting markets
more purely an ideology (“anti-statist”, “anti-Keynesian”, adopted the methodology of neoclassical economics)

Question 20

Is the alliance between neoclassical economics and Austrian Libertarian tradition a natural marriage?

Answer 20

“unholy alliance” and not a natural marriage
(neoclassical economics not necessarily against state intervention, Austrian Libertarian rejected modelling “rational behaviour”)

Question 21

What is neoclassical economics?

Answer 21

an approach to studying economic life, with “rationally motivated” individuals, model behaviour under assumptions of perfect competition

Question 22

Is neoclassical economics the same as neoliberalism?

Answer 22

No

Question 23

What is the neoliberal consensus on the state’s organisation, ability and failures?

Answer 23

organisation of self-seeking politicians and bureaucrats
limited ability to collect information, limited ability to execute policy, under pressure from interest groups
government failures include regulatory capture, rent seeking, corruption (costs of “government failure” always greater than the costs of “market failure”)

Question 24

What are the challenges of the “neoliberal doctrine” according to Chang?

Answer 24

defining the free market and state intervention
defining market failure
assumptions of market primacy
relation between markets, states and politics

Question 25

What was the prescription for Latin America according to the Washington Consesus an expression of?

Answer 25

an expression of the neoliberal paradigm

Question 26

What was the adjustment impact in Latin America on unemployment (from the Washington Consesus)?

Answer 26

unemployment larger than 20% in some countries

Question 27

What was the adjustment impact in Latin America on exports (from the Washington Consesus)?

Answer 27

exports increased by 30% in volume but 5% drop in value

Question 28

What was the adjustment impact in Latin America on manufacturing growth, commodity exports growth and debt service as a percentage of exports (from the Washington Consesus)?

Answer 28

from 1950-1981 to 1981-1990 manufacturing growth declined by 5.5%, commodity exports growth declined by 3.2% and debt service as a percentage of exports was 50% in 1981-1990

Question 29

What was the adjustment impact in Argentina (from the Washington Consesus)?

Answer 29

at start of 20th century one of the richest in the world, at the start of 21st century, half the population below the poverty line

Question 30

What was the adjustment impact in Chile (from the Washington Consesus)?

Answer 30

Chile was a 'success' story "poster child" of neoliberal reformers in Latin America success in promoting 'outward orientation' during the Pinochet regime involved significant state intervention

Question 31

What was the adjustment impact in SSA on FDI (from the Washington Consesus)?

Answer 31

1980 to 2000 the promise of increased FDI never materialised, share of FDI fell by 2/3, LDCs in Africa received 0.9% of all FDI to developing countries in 2000 (most of this was investment to support out almost 50% to Nigeria and Angola)

Question 32

What did Easterly argue about the policy reforms of the Washington Consesus?

Answer 32

argues that policy reforms generally successful, growth period of 1960-1979 was anomalous and stagnation of 1980-1998 was a return to the norm

Question 33

What did Mkandawire argue about the policy reforms of the Washington Consesus?

Answer 33

ideologically-driven structural adjustment undermined possibilities for development investments follows growth (need a "bigger push", phase of industrial policy too short (less than 10 years)) trade liberalisation (deindustrialisation) no effort to shift industries to export WTO caused African countries to be restricted in adopting industrial policy (when WTO allowed exemptions, World Bank and IMF conditionalities often did not)

Question 34

Why did neoliberal policies remain dominant? (5)

Answer 34

idea of TINA ("there is no alternative") globalisation power of TNCs power of finance in the rich countries political freedom and democracy

Question 35

One of the reasons why neoliberal policies remained dominant was idea of TINA, what did this involve?

Answer 35

saying state centred policies were proven wrong

Question 36

One of the reasons why neoliberal policies remained dominant was idea of globalisation, what did this involve?

Answer 36

gains made from global economic integration required implementation of the neoliberal agenda to allow prices to determine resource allocation

Question 37

One of the reasons why neoliberal policies remained dominant was idea of power of TNCs, what did this involve?

Answer 37

commanded the resources to bend governments of north or south to their will (to facilitate global integration)

Question 38

One of the reasons why neoliberal policies remained dominant was idea of power of finance in the rich countries, what did this involve?

Answer 38

finance capital required lifting all barriers to the moment of capital

Question 39

One of the reasons why neoliberal policies remained dominant was idea of political freedom and democracy, what did this involve?

Answer 39

first required economic freedom (free markets) (Friedman)

Question 40

What was a notable occurrence in the late 1970s?

Answer 40

problems resulting from "big push" strategies in developing countries amplified by crises in the economies of the wealthy countries

Question 41

What did the Reagan administration create?

Answer 41

created a preference in Washington for reducing expenditures rather than increasing tax revenues (not clear that this preference is strong outside right-wing political circles=

Question 42

What are the public expenditure priorities according to Washington?

Answer 42

subsidies education and health public investment

Question 43

One of the public expenditure priorities according to Washington is subsidies, what does this involve?

Answer 43

regarded as prime candidates for reduction of deficits, however too much can drain on the budget and lead to resource misallocation

Question 44

One of the public expenditure priorities according to Washington is education and health, what does this involve?

Answer 44

have character of investment (human capital) and consumption, and help the disadvantages (latter depends on expenditure's composition and level, e.g. primary education and health is more relevant to disadvantaged) (most in Washington believe in the importance)

Question 45

One of the public expenditure priorities according to Washington is public investment, what does this involve?

Answer 45

public infrastructure investment

Question 46

What is tax reform seen as according to Washington?

Answer 46

increased tax revenues are alternative to decreased public expenditures to remedy fiscal deficit tax base should be broad and marginal tax rates should be moderate

Question 47

What should interest rates be according to Washington?

Answer 47

should be market-determined to avoid resource misallocation should be positive to avoid capital flight and, according to some, increase savings many would say should be positive but moderate, to promote productive investment and avoid the threat of an explosion in government debt

Question 48

What should exchange rates be according to Washington?

Answer 48

dominant view is that achieving a "competitive" rate is more important than how it is determined (test of whether it is appropriate is whether it is consistent in the medium run with macroeconomic objectives) (sustainable, yet competitive)

Question 49

What should real exchange rates be according to Washington?

Answer 49

competitive one if first essential element of an "outward-oriented" economic policy, where the BoP constraint is overcome primarily by export growth rather than by import substitution

Question 50

What should trade policy be according to Washington?

Answer 50

ideal is a situation in which the domestic resource cost of generating or saving a unit of foreign exchange is equalised between and among export and import-competing industries access to imports of intermediate inputs at competitive prices is regarded as import to export promotion has to be protection, however against foreign competition ends up impoverishing the domestic economy

Question 51

What should free trade ideal be according to Washington?

Answer 51

infant industries may merit substantially but strictly temporary protection and a moderate general tariff might provide a bias toward diversifying the industrial base without threatening serious costs highly protected economy is not expected to dismantle all protections overnight (views on how to do this differ, specific timeline or context specific)

Question 52

What should foreign direct investment be according to Washington?

Answer 52

restrictive attitude (economic nationalism, discouraged) is regarded as foolish, as such investments can bring needed capital, skills, and know-how for producing domestic market goods or contributing to new exports can be promoted by debt-equity swaps and is strongly advised (promotes FDI and reduces debt)

Question 53

What should privatisation be according to Washington?

Answer 53

may help relieve the pressure on government budget (short run by revenue produced from side of enterprise and long run as investments no longer need to be financed by the government) private industries are managed more efficiently than state enterprises, as managers fare more direct incentives (e.g. personal stake in profits) threat of bankruptcy places a floor under inefficiencies (many state enterprises seem to have unlimited access to subsidies) nationalistic motivation behind not doing it

Question 54

What should deregulation be according to Washington?

Answer 54

way of promoting competition and was successful in the U.S. potential for corruption is large under regulation

Question 55

How did regulation lead to corruption in Latin America?

Answer 55

Latin America where regulation is administered by underpaid administrators and discriminates against small/medium-sized businesses which seldom have access to higher reaches of the bureaucracy, yet are important creators of employment

Question 56

How are property rights viewed by Washington?

Answer 56

general acceptance that they matter

Question 57

What is a summary of the economic policies Washington urges?

Answer 57

prudent macroeconomic policies, outward orientation, and free-market capitalism (all stem from classical mainstream economic theory)

Question 58

What is a Washington agenda criticism?

Answer 58

whether it can be relied on to restore growth once stabilisation has been achieved whether all those reforms together would lead to prompt return of flight capital dismissal of the development literature (e.g. big push, (un-)balanced growth, surplus labour, two-gap model)

Question 59

What does Washington fail to do?

Answer 59

fails to apply the same recommendations domestically, especially regarding fiscal discipline and corruption

Question 60

What did Latin America's economic challenges in 1980s-1990s lead to?

Answer 60

led to a push for structural reforms as part of the "Washington Consensus" to stabilise economies and promote market-led growth (often did not address deeper social issues like poverty and inequality)

Question 61

What is globalisation?

Answer 61

a process whereby national and international policy-makers proactively or reactively promote domestic and external liberalisation

Question 62

What was the promise of trade during liberalisation in Africa?

Answer 62

through liberalisation, African economies would become more competitive and allow African exporters to capitalise on opportunities in foreign markets increase the 'traditional exports' of individual countries and enable them to diversify their exports to include manufactured goods assigned to them by the law of comparative advantage permit the importation of goofs that make up an important part of investment goofs (e.g. plant and equipment) in which technology is usually embodied

Question 63

What did the trade policy reforms in Africa during liberalisation lead to?

Answer 63

by end of 1990s little had changed, no general increase in number of industries in which most African countries have a 'revealed' comparative advantage and no major expansion occurred in the diversity of products exported by most of the countries (product composition because more concentrated for many) decline in African share of non-oil exports (now less than one-half what they were in early 1980s)

Question 64

How was capital flight in Africa during liberalisation?

Answer 64

much higher in Africa than other developing country groups and effects of liberalisation were "very small"

Question 65

Did the promise of growth during liberalisation in Africa materialise?

Answer 65

globalisation has not produced rates of growth higher than 1960-1970s in Africa (largely due to deflationary bias in orthodox stabilisation programmes)

Question 66

Why did Africa have poor performance during liberalisation?

Answer 66

readily implemented the macroeconomic policies recommended by lack of 'good governance' and 'good institutions'

Question 67

Why was there slow growth and limited resource mobilisation?

Answer 67

investors had no confidence that the countries' growth performances would improve and that the potential returns on their investments would fully materialise (greatest 'risk' for investors is investing their money in economies under policies that aim to achieve stabilisation)

Question 68

Why was there a failure of trade in Africa during liberalisation?

Answer 68

linked to failure in the structural transformation of African economies decline of Africa's world trade share is closely related to low levels of growth, which is related to deindustrialisation as other countries have grown, their trade volumes have expanded more than proportionately (when other countries were implementing ISI, Africa was under colonial rule)

Question 69

Industrial stagnation and globalisation in Africa link

Answer 69

globalisation in Africa has been linked to industrial stagnation and deindustrialisation leading to decline in TFP, sluggish growth in exports and failure to diversify after colonial rule Africa was reluctant to borrow for industrialisation

Question 70

What is 'path dependence'?

Answer 70

past policy errors (before-adjustment) have a lasting effect through hysteresis

Question 71

What leads to successful export drives?

Answer 71

strong relationship between structural change rates and growth rates in value added in manufacturing and growth of export rates principal means for effecting export diversification is investment

Question 72

Why were the Structural Adjustment Policies (SAPs) introduced?

Answer 72

introduced to stabilise African economies by reducing fiscal deficits, controlling inflation, and encouraging foreign trade and investment

Question 73

What dod the Structural Adjustment Policies (SAPs) lead to?

Answer 73

led to "maladjustment", placing economies on low-growth trajectory due to their deflationary impact (stifled demand, discouraged private investment, reduced government-spending on developmental activities)

Question 74

What did the Structural Adjustment Policies (SAPs) lack

Answer 74

lacked a development-focused approach, which would involve creating structural changes to support industrialisation and economic diversification rather than short-term, financial stabilisation

Question 75

What was the link between globalisation and marginalisation in Africa?

Answer 75

weakened local industries that could not compete with imports, leading to deindustrialisation rather than diversification and remain highly dependent on a limited range of privacy exports financial liberalisation did not yield expected increases in FDI in sustainable sectors (investment was concentrates in extractive industries, e.g. mining, with little impact on manufacturing or technology sectors)

Question 76

How was capital flight affected in Africa during liberalisation?

Answer 76

capital flight remained high as local investors sought returns abroad (reforms attracted speculative foreign capital that was not intended for productive ventures and was often tied to short-term profit-driven investments)

Question 77

What was Mkandawire's criticism of the SAPs?

Answer 77

SAPs focus solely on liberalisation without considering the structural adjustments needed for growth, e.g. building infrastructure, supporting education SAP-driven focus on fiscal austerity linked state's ability to invest in long-term development projects

Question 78

What is neoclassical economics?

Answer 78

ideology involving "rationally motivated" individuals model behaviour of perfect competition and not against state intervention

Question 79

What is the Austrian Libertarian Tradition?

Answer 79

anti-planning and free market reigns

Question 80

What was the conceptual origin of neoliberalism?

Answer 80

"unholy alliance" between neoclassical economics and the Austrian-Libertarian tradition

Question 81

How was there a neoliberalism global spread?

Answer 81

via IMF and World Bank (SAPs in developing countries, Bretton Woods Institutions)

Question 82

What is the timeline of the spread of neoliberalism?

Answer 82

1970s US crisis (recession) 1980s IMF SAPs rolled out (agreements signed, development model dismantled) 1990s hope and defeat (initial outcome and disappointments) 2000s to now uncertain futures and more SAPs 1970-1980 rise in economic (stagnation in the west led to neoliberalism adopted by leaders like Thatcher in the UK and Reagan in the US)

Question 83

How did international bank loans benefit Latin American borrowers?

Answer 83

International bank loans helped avoid restrictions placed by the IMF and World Bank and reduced tensions caused by the expansion of multinational corporations (MNCs) in LAC.

Question 84

By how much did commercial bank lending increase in LAC from 1961–65 to 1976–80?

Answer 84

Commercial bank lending increased from 1.6% to 58.3%

Question 85

Why were unregulated offshore banks significant for international loans?

Answer 85

They weren't required to hold cash relative to loans, increasing their lending capacity

Question 86

How did the number of overseas bank branches change from 1960 to 1980?

Answer 86

It increased from 8 to 139

Question 87

Which LAC countries faced severe capital flight, and why?

Answer 87

Mexico and Venezuela, due to their open capital accounts

Question 88

What made lending to LAC risky in the 1980s?

Answer 88

Declining export revenues, capital flight, and the drain on foreign reserves made countries unable to borrow

Question 89

What event in 1982 marked the beginning of the Latin American debt crisis?

Answer 89

Mexico declared it would be unable to repay its loans

Question 90

Why did emergency funding after the 1982 debt crisis fail to resolve the issue?

Answer 90

It provided a short-term solution but failed to address root causes, leading to long-term economic stagnation

Question 91

How did loans in the 1990s differ from earlier loans to LAC?

Answer 91

They were largely portfolio investments with short-term bonds ("hot money") that could be withdrawn quickly

Question 92

Why did short-term loans in the 1990s make LAC vulnerable?

Answer 92

Dependence on volatile capital flows exposed the region to external economic shocks, leading to crises in Mexico (1994-95), Brazil (1998-99), and Argentina (2001-02)

Question 93

Did neoliberal policies reduce vulnerability in LAC?

Answer 93

No, neoliberal measures failed to reduce economic vulnerability

Question 94

What cyclical pattern does Shadlen identify in LAC's economic crises?

Answer 94

Increased external lending, followed by crisis and debt burdens on debtor countries

Question 95

What was the initial ideological response to the 2008 crisis regarding neoliberalism?

Answer 95

The crisis was expected to challenge neoliberalism, with premature announcements of its decline, but neoliberalism proved resilient and adapted, reinforcing its practices

Question 96

How did post-neoliberal alternatives fare after the 2008 crisis?

Answer 96

They did not gain significant traction, leaving neoliberalism largely unchallenged

Question 97

What characteristic of neoliberalism allowed it to persist after the crisis?

Answer 97

Its adaptability, enabling it to absorb shocks and criticism while maintaining foundational principles

Question 98

What challenges did developing countries face after the 2008 crisis?

Answer 98

They needed to oppose market dominance while promoting public sphere alternatives and redefining the role of the state

Question 99

How did neoliberalism respond to the 2008 crisis?

Answer 99

Governments doubled down on neoliberal policies, implementing stringent fiscal discipline and austerity measures

Question 100

Why does neoliberalism persist despite its challenges?

Answer 100

It is deeply embedded in global financial, corporate, and political systems

Question 101

Why is it problematic to oversimplify neoliberalism?

Answer 101

It risks attributing all global changes to neoliberalism, ignoring context-specific variations and interactions with other forces

Question 102

What challenge do alternative movements face?

Answer 102

Moving beyond isolated acts of resistance to enact meaningful systemic change

Question 103

Which political leaders' policies were significantly influenced by Hayek’s ideas?

Answer 103

Margaret Thatcher in the U.K. and Ronald Reagan in the U.S.

Question 104

How did Hayek’s neoliberalism affect public discourse?

Answer 104

It led to the privatisation of public discourse, commodifying public goods and services and prioritising profit over democratic discussion

Question 105

What are some criticisms of neoliberalism’s impact on democracy?

Answer 105

It has caused economic inequality and social fragmentation, weakened democratic discourse, and contributed to the rise of populism by failing to address citizens’ moral and economic concerns

Question 106

What do critics like Michael Sandel argue about market-driven policies?

Answer 106

They argue that such policies have eroded the moral and social foundations of democracy

Question 107

How has digital media been affected by neoliberalism, according to the article?

Answer 107

Digital media, initially seen as a democratic tool, has been commercialized by large corporations, limiting its potential as a public space