New Right (Neo-Liberal)
Theory on Development
03d New Right theory
Adapted from Kirby and Haralambos
1990s and the New Right
In the 1980s Modernisation theory and Underdevelopment
Theory appeared dated in a rapidly changing world due to:
i.
The decline in usefulness of the concept of First,
Second and Third world due to the increased diversity
between countries in developing world
ii.
The decline of Marxism in sociology
iii. The collapse of Soviet Union
Key Names and arguments in the New Right
• Milton Friedman and Peter Bauer
influenced economic policy of
Thatcherism
and Reaganism
• This emphasised laissez-faire (leave
economic forces to do what they will or the
economy will be damaged)
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)
Friedman argues that:
Governments should not be involved in the
economy except four main functions:
i. Defence
ii. Law and Order
iii. The provision of the necessary public works
that private enterprise does not find profitable
to provide
iv. Protection from members of the community
who ‘cannot be regarded as ‘responsible
individuals’
Peter Bauer (British
development economist)
Bauer advocates a wider range of functions
for governments:
i. The basic provision for health and
education
ii. The management of the monetary and
fiscal (taxation/spending) system
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
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
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. Multilateral 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
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
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
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
For more about Asian tigers click
below for Wikipedia entry
• http://en.wikipedia.org/wiki/East_Asian_Tig
ers