NEOLIBERALISM AND NEOLIBERAL ECONOMIC DEVELOPMENT PARADIGM

NEOLIBERALISM AND NEOLIBERAL ECONOMIC DEVELOPMENT PARADIGM






Baakoh Alhassan


TABLE OF CONTENT
1.0 Introduction..........................................................................................................................3
1.1 The Theory of Neoliberal Economic Development Paradigm.............................................4
1.2 Critique of the Neoliberal Economic Development Paradigm.............................................6
1.3 Neoliberal Social Intervention Programmes and their Consequences...............................12
1.4 Some Social Intervention Programmes and their Implementation Challenges..................13
1.5 Conclusion...................................................................................................................15








1.0 Introduction
Prior to the introduction of the neoliberal economic reforms, a 'modernisation' model dominated agricultural sector policy in Sub Saharan Africa. This involved efforts to promote rural development through the introduction of 'modern' technologies (hybrid maize, fertilizer and other inputs) and 'modern' public institutions like the co-operatives, marketing boards and parastatals. The introduction of modern technologies was attempted largely on the basis of the public provision of seasonal credit. Co-operative, marketing boards and parastatals were frequently granted crop marketing monopolies partly in order to allow credit recovery through crop sales. The main policy emphases were upgrading production systems and increasing agricultural commercialisation (Friis-Hansen, 2000). The practical outcomes of this model were generally disappointing and in most Sub Saharan African countries, growth in agricultural value added started to fall from the late 1960s onwards (Friis-Hansen, 2000).
In the wake of the disappointing results of the 'modernisation' model, neoliberals began to push forward the neoliberal ideology as a viable alternative economic development model especially for developing countries (Friis-Hansen, 2000). Neoliberalism, or neo-classical liberalism is a product of classical economic liberalism. The term was coined in 1938 by Walter Lipmann, a German sociologist and economist, Alexander Rostow, one of the fathers of 'social market economy'.
In broad terms, neoliberalism seeks to transfer part of the control of the economy from public to the private sector under the belief that it will produce a more efficient government and improve the economic indicators of the nation. The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's 'Washington Consensus', a list of policy proposals that appeared to have gained consensus approval among the Washington based international economic organisations (like the International Monetary Fund and the World Bank).
1.1 The Theory of Neoliberal Economic Paradigm
Theories of neoliberal economic reforms were developed in the eighteenth century and believed to be first fully formulated by Adam Smith and Robert Cox, of the University College of London. It advocates for minimal interference by government in a market economy, though it does not necessarily reject the states provision of a few basic public goods with what constitute public goods originally being seen as very limited in scope. These theories began with the then startling claim that if everyone is left to his own economic devices instead of being controlled by the state, then the result would be a harmonious and more equal society of ever-increasing prosperity. This underpinned the move towards a capitalist economic system in the late 18th century (Adams, 2001).
Private property and individual contracts form the basis of liberalism. The early theory was based on the assumption that the economic actions of individuals are largely based on self-interest, and that allowing them to act without any restrictions will produce the best results provided that at least minimum standards of public information and justice exist.
While economic liberalism favours markets unfettered by government, it maintains that the state has a legitimate role in providing public goods. For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption. In addition, he advocated retaliatory tariffs to bring about free trade, and copyrights and patents to encourage innovation and its deeper implications on the free market.
Today, economic liberalism is associated with classical liberalism, 'neoliberalism', 'propertarian' liberalism and some schools of conservatism, particularly liberal conservatisms.
Justifying the need for economic liberalism, U. C Berkeley and Brad DeLong stated that 'neoliberalism has two main tenets, the first of which is the close economic contact between the industrial core (of the capitalist world economy) and the developing periphery. According to them this contact is the best way to accelerate the transfer of technology which is the sine qua non for making the poor economies rich (hence all barriers to international trade should be eliminated as fast as possible). The second argument is that governments in general lack the capacity to run large industrial and commercial enterprises. Hence, for core missions of income distribution, public good –infrastructure, administration of justice, and few others, government should shrink and privatise.
In capitalism and freedom (1962), Friedman developed the argument that economic freedom while itself an extremely important component of total freedom, is also a necessary condition for political freedom. He commented that centralised control of economic activities is always accompanied with political repression. In his view, the voluntary character of all transactions in a free market economy and wide diversity that it permits are fundamental threats to repressive political leaders and greatly diminish their power to coerce. He argued that through elimination of centralised control of economic activities, economic power is separated from political power, and that one can serve as a counterbalance to the other. Friedman feels that competitive capitalism is especially important to minority groups and in this instance, women farmers, since, according to him, impersonal market forces protect people from discrimination in their economic activities for reasons unrelated to their productivity.
Neoliberal advocates also argued that, 'development is freedom' (free market capitalism). More economic growth, specialisation and opportunity create chances for individuals to achieve more than rigid structures which provide only illusory protection.
1.2 Critique of the Neoliberal Economic Paradigm
Notable critics of neoliberalism in theory or practice include economists Joseph Stiglitz, Amartya Sen, and Robert Pollin, linguist Noam Chomsky, geographer David Harvey, and the alter-globalisation in general.
Critics of neoliberalism and its inequality enhancing policies argue that not only is neoliberalism's critique of socialism (as un-freedom) wrong, but neoliberalism cannot deliver the liberty that is supposed to be one of its strong points. Daniel Brook's 'The Trap' (2007), Robert Frank's 'Falling Behind' (2007), and Richard Wilkinson's 'The Impact of Inequality' (2005) all claim high inequality is spurred by neoliberal policies and produces profound political, social, economic, health, and environmental constraints and problems.
Critics further argued that the two principles as outlined by Berkeley and DeLong represent parts of the 'trickle-down theory' that is, that under free market capitalism, economic growth and technological change benefit the poorest countries and people, even if ownership remains predominantly with the wealthier countries. Critics also claim that these claims are contradicted by empirical record.
Critics sometimes refer to neoliberalism as an 'American Model', which they claim promotes low wages and high inequality. According to economists Howell and Diallo (2007), neoliberal policies have contributed to a U.S. economy in which 30 percent of workers earn low wages and 35 percent of the labour force is underemployed.
Harvey (2005) claims that neoliberalism is a global capitalist class power restoration project. Neoliberalism, he argues, is a theory of political-economic practices that dedicates the state to championing private property rights, free markets, and free trade, while deregulating business and private collective assets. Ideologically, he suggests that neoliberals promote entrepreneurialism as the normative source of human happiness. Harvey also considers neoliberalism a form of capitalist 'creative destruction', a 'Schumpeterian' concept. This indicates that while neoliberalism is a critical concept, the Marxist term for neoliberalism is 'primitive accumulation'.
Harvey (2000) claims that neoliberalism has become hegemonic worldwide, sometimes by coercion. Neoliberalism has had the support of large debt restructuring organisations such as the World Bank and the International Monetary Fund (IMF), which were encouraged to promote neoliberalism in order to revitalise capital accumulation. Opponents of neoliberalism argue that neoliberalism is the implementation of global capitalism through government/military interventionism to protect the interests of multinational organisations and not the citizens of the countries concerned.
Whilst neoliberal theorists claim that if left to their own economic devices instead of being controlled by the state, the result would be a harmonious and more equal society of ever increasing prosperity (Adams, 2001:20), critics have blamed neoliberalism for high levels of inequality, social exclusion and absolute poverty among the vulnerable sections of society in countries that have embraced these policies (Baker, 2006).
Towards the end of the 1990s it was becoming clear that the neoliberal policies that emphasized only on economic growth did not benefit the majority of the population. In fact the conditions of food crop women farmers were made worse as emphasis was shifted from food crop to male controlled cash crop agriculture. In Ghana whilst poverty levels had gone down significantly, poverty levels among food crop women farmers was still very high. In the face of mounting poverty levels among the vulnerable, especially women, neoliberal policy makers refashioned the policy into micro-economic and poverty reduction programmes. These programmes like their predecessors also underwent a number of transitions and in Ghana it started with the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD), through the various National Poverty Reduction Strategies, to the Highly Indebted Poor Countries Initiative (HIPC). The US sponsored Millennium Challenge Account Programme is the latest. However, these neoliberal social intervention programmes have also suffered the same criticisms as the early neoliberal policies. For instance according to Carlos Vilas, neoliberalism considers the growth of poverty to be pathology, not a consequence of the economic system. That neoliberal economic development advocates isolate poverty from the process of capital accumulation and economic development, and reduces the solution to designing specific social policies. Thus, social policy interventions according to Villas are reduced to limited series of measures intended to compensate the initial negative effects of structural adjustment among certain sectors of the population. These negative effects, neoliberal policy makers purport, are rooted in the irrationality of the previous system's distribution of resources. Social policy is considered transitory: after an initial painful phase, structural adjustment will re-establish basic macroeconomic equilibrium and promote economic growth without inflation. New jobs will be created within the modern sector of the economy-the "trickle-down" effect-which will raise incomes and leave only a small proportion of the population in need of public attention (Vilas, 1996).
As a matter of principle, neoliberal economics does not concern itself with social policy. A strong economy, it is argued, will make permanent social policies unnecessary. Social issues are considered a government expense, not an investment; the concept of social development gives way to that of social compensation. With the drastic cuts in social spending, however, only minimal compensatory mechanisms can be sustained. As a result, social policy has contracted, and its two traditional functions--accumulation and legitimization--have experienced severe adaptations (Vilas, 1996).
Critics further argued that neoliberal social policy operates like a charity, directing aid toward the extremely poor. Rather than improving the working and living conditions of low-income groups, social policy tries to assist the many victims of structural adjustment, and to prevent further deterioration in the living standards of the population already below the poverty line. Neoliberal social policy doesn't help these people get out of the hole of poverty; it simply tries to prevent them from sinking further into it. These characteristics of neoliberal social policy severely limit its capacity to fulfil a legitimizing function for the political system. In fact, social policy is essentially reduced to putting out fires so that situations of extreme social tension do not become larger political problems. Neoliberals fear that such problems would create a climate of instability that might negatively affect the inflows of foreign capital, putting the whole economic model at risk. In this sense, social policy becomes closely linked to the politics of the moment.
The second principal tenet of neoliberal social policy according to critics is targeting. Given the contraction of funds assigned to social policy, targeting is promoted as a way to guarantee that resources effectively reach those to whom they are directed. The arguments in favour of targeting echo the criticisms of the Keynesian-Fordist model (Vilas, 1996). That model was based on the principle of universal, free social services. Neoliberals argue that the model benefited workers in the urban wage- labour force and the middle classes, but did not reach the poorest of the poor - the rural poor and the informal sector. Targeted social programs, specifically designed to reach the neediest, impose new management practices and efficiency criteria on state social policy. Clearly however, targeting responds less to the supposed inefficiencies of the Keynesian-Fordist social-security model, than to the need to respond to mounting social problems with scarce resources.
In theory, targeting aims to fulfil a basic requirement of any public policy, reaching the intended constituency, and optimizing the use of resources. The first obstacle is defining the beneficiary group given the magnitude of needs. This process normally involves much more than a technical breakdown of the population according to particular statistical indicators. Who benefits from these special programmes is the outcome of a complex interplay of pressures and competition among potential beneficiary groups. In this sense, targeting is highly sensitive to struggles over income redistribution, which grows more acute as the economic crisis deepens and resources become scarcer. These programmes are also used as patronage tools to create and maintain clientelistic relationships. In the same way, targeting is open to bureaucratic or political manipulation for electoral purposes.
Experience shows that it is extremely difficult to redirect resources that used to go to the middle class toward the poorest. In general, the poor exert little pressure, either because of their lack of experience or their sheer vulnerability. Moreover, it is middle-class professionals, not the poor, who design the projects. Targeting may in fact aggravate inequality, since targeted programmes can improve the situation of one particular community while others languish in poverty. In the end, the desire to keep people who are not poor from receiving benefits often results in the exclusion of many of the poor.
It is also argued that targeting frequently puts a heavy burden on women. Especially with targeted community-based programmes such as food supplements, the social policies rely on the direct involvement of women. Women can gain important organizing experience by participating in these programmes, which have the potential to become the basis for a truly participatory social policy. At the same time, they make women's workload heavier. As unpaid female labour grows, gender inequality is reinforced.
The present study on the effects of the Millennium Challenge Account on women farmers could best be appreciated within the framework of the neoliberal economic policies. In recognition of the fact that women's conditions have been worse off by the implementation of neoliberal economic reforms, donors and governments began to embark on intervention programmes to alleviate the plight of the poor and marginalized women. The Millennium Challenge Account is one of such intervention programmes that targeted poor farmers by building their capacities, granting them loans and facilitating their access to farm input. Whilst MCA is widely regarded as a social intervention programme, it still contains most of the neoliberal economic growth policies; namely, private ownership of production, free market operation and profit making motives. It has thus been criticised as being a policy intended to advance American political, economic and security interest. It is argued that if the real intention of MCA was to reduce poverty it should have targeted endemic areas such as the Upper West and East regions of Ghana or exclusively on women who are the most vulnerable.
Contrary to the assertion that the neoliberal development interventions are not pro poor policies the MCA has proved to be an exception. It has enhanced the access of women farmers to credits, farm input and agricultural input. The result is the empowerment of women farmers economically through increases in their crop yields. Through the empowerment process participants have had their access to nutrition, education and health care enhanced.

The experience of the MCA intervention has also disproved the widely held view that the neoliberal social intervention programmes frequently puts a heavy burden on women. In fact the introduction of women participants to labour saving techniques has drastically reduced their heavy workload especially in agriculture. However the fact that women farmers who are not participants in the intervention programmes are lagging behind their participating counterparts in terms of their socio economic well being lends credence to the contention that the neoliberal interventions sometimes aggravate inequality by improving the situation of targeted social groups while others languish in poverty.



1.3 Neoliberal Social Intervention Programmes and their Consequences
Social liberalism is the belief that liberalism should include social justice. It believes it is the legitimate role of the state to address economic and social issues such as unemployment, health care, and education while simultaneously expanding civil rights. Under social liberalism, the good of the community is viewed as harmonious with the freedom of the individual. Social liberal policies have been widely adopted in much of the developing world, particularly following the abysmal performance of the structural adjustment policies in the 1980s.
Social liberal policies gained broad support across the political spectrum, because they reduced the disruptive and polarizing tendencies in society, without challenging the capitalist economic system. Businesses accepted social liberalism in the face of widespread dissatisfaction with the boom and bust cycle of the earlier economic system, and because it seemed to them to be a lesser evil than more left-wing modes of government.

1.4 Some Social Intervention Programmes and their Implementation Challenges
A study of special credit schemes, an intervention programme for women in Kilimanjaro, Northern Tanzania for example, pointed to 'a top-down' implementation approach, with too little emphasis on participatory processes, too little weight given to business training, predominant attitudes to women among implementers, and neglect of the legal aspects of soft loans as features of the scheme which corresponded badly to stated aims of empowerment. The scheme aimed to create employment for young people, by providing money in the form of commercial credit rather than grants for starting up businesses, in order .to discourage dependency on the government and encourage the spirit of self reliance (ILO Project Document, quoted in Von Bülow et al, 1995). Projects established under the scheme included piggery, dairy, tailoring, gardening and other small scale businesses.

In practice, most loan takers were older women rather than the young men and women the scheme was aimed at, because the programme had to turn to existing income generating groups to identify suitable clients for loans. Participants were allowed to have very little or no influence over the design of their own projects but when poor choices led to lack of produce to market, they were still expected to repay loans.

Further problems were caused by the fact that loan agreements were drawn up in English, a foreign language to most participants. Insufficient explanation was given by bank staff so that most women had only a vague idea about the implications and risks involved in commercial loan taking.

The scheme therefore suffered from low repayment rates (less than 60 percent in 1993). When repayments were not made, bank and donor staff threatened participants with court action. Within households, it was not clear who bore legal responsibility. In some houses this resulted in serious quarrels between spouses. Many men in the area came to oppose their wives taking up loans, and a running joke was..."if you want to get rid of your house and your farm, you just go ahead and allow your wife to take a loan" (Von Bülow et al, 1995).
In Ghana one of the first social interventions to address the inequalities created by the structural adjustment programme was the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD). PAMSCAD was instated by the government with the support of the International Monetary Fund to assist such vulnerable groups as women to improve their living standard from low levels due the adjustment.
Studies by Ardayfio-Schandorf and others (1995) on the PAMSCAD intervention in the Western Region indicate that the programme have had significant impacts on the lives of participants and their families. In terms of economic performance the study indicates that the programme had led to significant improvement in income levels of participants and their families (Ardayfio, et al 1995). In terms of women empowerment the study also indicated that women participants did increase their involvement in decisions affecting them, their households as well as their communities (Ardayfio, et al 1995).
Economically, the findings indicated that the situations of participants had improved as was reflected in their ability to look after their children and their families, the nutritional status of the household and their ability to purchase needed commodities for the home. More importantly the study noted a spill over effect of benefits of the programme. This according the study, was seen in the greater ability of participating villages to contribute more in terms of finance and labour in improving their community infrastructure as compared to the non-participating communities (Ardayfio, et al 1995).
A similar but successful intervention programme is the International Fund for Agricultural Development (IFADs) Small Ruminant Rehabilitation programme. Starting as a pilot programme with 10 women who began raising 21 ewes and two rams, the programme expanded to include 39 women's groups in the Savelugu/Nanton District. Later, the group included goat-raising at their own expense. They also learned how to keep accounts and records for their businesses. The goat-and-sheep business has helped women participants to have better living conditions, "they are enabled to buy food and clothes and pay for medicines and school fees for their children" (IFAD, 2008). As the number of livestock increased, members of the various groups started establishing their own individual sheds or pens. In Kanshegu, seven such pens exist today. Women in Kanshegu and elsewhere have also had the opportunity to share their knowledge outside the district by participating in a Ministry of Agriculture field school programme (IFAD, 2008).
The Smallholder Rehabilitation and Development Programme closed in 1995, but the women in Kanshegu and other communities continued their activities. In Kanshegu, the group is now working to become registered as a cooperative society. The programme also successfully pioneered the concept of women extension volunteers. And it released three improved varieties of cassava, which were the starting point for the subsequent nationwide Root and Tuber Improvement Programme (IFAD, 2008).
1.5 Conclusion
The studies indicate that the neoliberal social interventions have yielded mixed results. Whilst some have had lasting impacts on the lives of beneficiaries, others have been less successful. This paper holds the view that a critical examination of the available evidence on the impact of the neoliberal intervention programmes will help academics and policy makers reshape them so that they effectively address the needs of women.
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