The history of development over the last century has been one of competing theories
and developmental models. From time to time certain models dominated the
theoretical and practical agenda. These models of development had – and still have -
their own advantages and disadvantages, advocates and opponents, strengths and
weaknesses. Neo-liberalism is one of the models that was studied most deeply in
terms of its positive and negative impacts on development generally and on the state
role specifically.
Since the 1970s neoliberal approach was widely applied in different countries around
the world, including developing and developed countries with the assistance of the
International Financial Institutions (IFI) that evidently advocate for neoliberalism in
developing countries. Therefore, strong debates on the efficiency and validity of this
approach were developed (Greig et al., 2007).
This paper will discuss neoliberalism as one of the development models. It attempts to
highlight the strengths and weaknesses of the neoliberal approach to development. It
will start by reviewing the emergence and evolution of neoliberalism. Then, some of
the strengths and weaknesses of neoliberalism will be presented. Chilean and
Egyptian case studies will be briefly highlighted in order to illustrate the strengths and
weaknesses of neoliberalism. Finally, the conclusion will be presented.
Contents
1 . Introduction
2. Emergence and evolution of neoliberalism
3. Strengths and weaknesses of neoliberalism
3.1 Strengths
3.2 Weaknesses
4. Conclusion
1. Introduction
The history of development over the last century has been one of competing theories and developmental models. From time to time certain models dominated the theoretical and practical agenda. These models of development had – and still have - their own advantages and disadvantages, advocates and opponents, strengths and weaknesses. Neo-liberalism is one of the models that was studied most deeply in terms of its positive and negative impacts on development generally and on the state role specifically.
Since the 1970s neoliberal approach was widely applied in different countries around the world, including developing and developed countries with the assistance of the International Financial Institutions (IFI) that evidently advocate for neoliberalism in developing countries. Therefore, strong debates on the efficiency and validity of this approach were developed (Greig et al., 2007).
This paper will discuss neoliberalism as one of the development models. It attempts to highlight the strengths and weaknesses of the neoliberal approach to development. It will start by reviewing the emergence and evolution of neoliberalism. Then, some of the strengths and weaknesses of neoliberalism will be presented. Chilean and Egyptian case studies will be briefly highlighted in order to illustrate the strengths and weaknesses of neoliberalism. Finally, the conclusion will be presented.
2. Emergence and evolution of neoliberalism
Neoliberalism, as a global approach to development, dominated global development literature and practice from the 1970s. It emerged mainly to enhance growth, create free markets, replace the Keynesianism that proved to be weak, and eliminate the intervention of the state in the economy that resulted in poor economic performance in many countries (Harrison, 2005). The prevalence of neoliberal approaches around the world was supported by IFIs such as the World Bank (WB) and International Monetary Fund (IMF), which could be considered the main institutions advocating neoliberalism. By the 1980s, the job of the IMF had extended from observing and managing the stabilization of global finance to assisting governments to recover from economic defects or financial instability. The WB’s role also developed over time as it was mainly initially concerned with providing WWII torn-countries with needed finance for reconstruction. After this, additional institutions were added to the WB group, such as International Development Associations (IDA) and International Financial Corporation (IFC), to expand WB activities to include supporting developing countries. In 1973 the oil crisis created by OPEC countries through increasing the price of oil resulted in surpluses for OPEC countries’ funds, which in turn kept the money in the private banks in developed countries. These banks started to offer loans to poor countries that were suffering from the oil price escalation, but they failed to pay back either the loan or the interest. As a result, the IMF interfered to help solve the economic crisis in the developing countries, and this was a suitable time for the IMF to introduce so-called conditionality for obtaining loans (Greig et al., 2007). This conditionality was associated with the implementation of the “Structural Adjustment Programs” that are mainly structured based on the “Washington Consensus Agenda”. It could be said that the prevalence of neoliberalism is because of the widespread implementation of “Washington Consensus” economic reforms in developing countries in 1980s and 1990s with the support of IMF and WB, which set adopting “Washington Consensus” reforms as a condition for borrowing money (Payne and Philips, 2010; Greig et al., 2007). The Washington Consensus consists of ten reform policies, including: “fiscal discipline, public expenditure priorities, tax reform, interest rates, exchange rate, trade liberalization, foreign direct investment, privatization, deregulation and property rights” (Williamson, 1990).
3. Strengths and weaknesses of neoliberalism
3.1 Strengths
Frequently asked questions
What is the main topic of this text?
This text is a language preview focusing on neoliberalism as a development model. It aims to analyze its strengths and weaknesses, including its historical emergence and evolution.
What are the key themes discussed in this text?
The key themes include the emergence and evolution of neoliberalism, its strengths and weaknesses as a developmental approach, the role of International Financial Institutions (IFIs) like the World Bank and IMF, and the impact of Structural Adjustment Programs and the Washington Consensus.
What are the strengths of neoliberalism, as discussed in this text?
The text suggests that neoliberalism, with its free market approach, was believed to contribute to economic growth, potentially leading to poverty reduction and increased liberty. It also highlights instances of high economic growth achieved through neoliberal reforms.
What are the weaknesses of neoliberalism, as discussed in this text?
The text mentions that despite economic growth, neoliberalism is criticized for income inequality and widening disparities between the rich and poor.
What role do the International Financial Institutions (IFIs) play in the context of neoliberalism?
The IFIs, particularly the World Bank (WB) and the International Monetary Fund (IMF), are presented as key institutions advocating and supporting the implementation of neoliberal policies in developing countries, often through Structural Adjustment Programs and the Washington Consensus.
What is the Washington Consensus?
The Washington Consensus refers to a set of ten economic reform policies including fiscal discipline, public expenditure priorities, tax reform, interest rates, exchange rate, trade liberalization, foreign direct investment, privatization, deregulation, and property rights, which are often associated with neoliberal approaches.
Does the text mention specific countries as examples?
Yes, the text mentions Chile and Egypt as case studies to illustrate the strengths and weaknesses of neoliberalism, though they are only briefly highlighted in the preview.
- Arbeit zitieren
- Abdelfatah Ibrahim (Autor:in), 2011, Strengths and weaknesses of the neo-liberal approach to development, München, GRIN Verlag, https://www.grin.com/document/186939
