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POL201 -Lecture9.docx

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Political Science
C Jung

POL201- Lecture 9 Tuesday November 6, 2012 The Washington Consensus This week; neo liberalism- as a global order and strategy. The difference between left and righ liberalism and neoliberalism. Liberalism is the belief in individual freedom, but practically and politically it may lead to different types of commitment.  Classicas like Locke and mill believed the liberalism was the act of limiting government action on society and indivudals; freedom from interference (negative freedoms; freedom of religion, speech- government refrains from interfering thus called negative freedoms) this idea that freedom just invloves avoiding individual life. Secuirty; merely meant non- interference. People are naturally free and the fear is the governemnt interference.  Modern liberalism believe that freedom is not pre-exsisting but instead needs to be produced; under conditions of inequlity- freedom is unequally distributed.wealthy people have more freedom than poor people- who only have freedom to starve. – their primary goal is to produce freedom not to just secure it because as the classics believe “freedom is pre-exsisting”. Moderns endorse the idea that the state is able to produce freedom.  Classical freedom= right liberalism. Modern liberalism=left Neoliberalism- Adam Smith  Adam smith; advaced the theory that individuals could structure both moral and economic life without state intervention. 1759- theory of human motivation- human self interest would produce the market spontanously- unregualted state- insivilbe hand. In the wealth of nations, he arguded that the market would naturally produce and progress itself than those markets that were heavily resistricted and regulated- which was the norm back then. The role of government was limited into rule of law and security public goods- those not produced by the market- example; defense miltary. “night watchman state” state is basically their for security and looking out  Neo-liberalism is basically the construction of adam smiths argument expect for some of his economic ideas, but basic priniciples of economic liberalism becomes basic priniciples of neo liberalism Keynesism – John Maynard Keynes  Aruged that private sector decisions sometimes leads to iniffucient macro economic outcomes. He argued the importance of government intervention to stablizes the output of the business cycle. Policies were key to the keynesism veiwpoint  Both thoughts are capitalists but one of them is more free market and the other is more into governemnt intervention and regulation. After 1980- keynesism was mostly discredited for a more free hand method. In 2008 when countries were suddenlty faced with global fincial meltdown- government intervention was of key discussion.- they intervened in the market in order to save the market from itself. One of the reasons that canada came through from the crsis was becomes the canadain regualtory was not completely undermined than those in America  The new discussion become that what should be the limits of governement and free hand market. The debates back then were about the end of neo-liberalism- we need government intervention to sustain the market- thus, keynesism was back on top. But did not last as long as people though it would.  The difference between left(modern liberalism – state production of freedom) and right liberalism(classical liberalism- security of freedom)- political doctrine. Neo liberalism is the econmoic commitment of the same doctrine Gobal economic boom  Green Revolution; had the positive effect of increasing food production so that food supplies good keep up with population growth. But the negative was the through increase of food- prices of food goes down, thus revenu of agraculture goes down along with it. benefits; everyone feels it- revoultionary changes in seed technology (tractors and physcial moblity) planting techniques and fertilizers, chemicals to treat plant diseases. However, the places and people who take the most advantage of this are the huge argraculture businesses and wealthy countries. Negative; the sideline issue; the fact that we are all now cosuming food that as been genetically, chemically produced  Mexico; self suffiecnt in the production of wheat – half million tons of export of wheat- all because of green revolution. Decolonization took place around that time too.OPEC; 1970s Prices of oil goes up and forces many countries go bankrupt and are forced to go to the IMF and world bank- for loans and dedpt rescuing. Few years later OPEC falls apart and countries who produce oil are also forced to go to IMF and world bank. By 1982 most of the developing world are bankrup and need to get bailed out – thus going to the the international insttions Structual adjustment program  was in place by IMF and world bank- counditionality agreements which determined what their economic policies would be- thus, their soverighnty is diminished. Through IMF and world bank conditionality packages these countries were pegged down – the point of time and the mechanism in which the neo-liberalism free market economics was dimished  The struclutalism adjustment program was all about economic policies; a lot to do with democracy. Started to be all economic policies – you can do whatever you want economically. But in the 1990s the IMF and world bank focused on governments. Free market economic Policies  This is called the washington consensus; agreeing in what each person has to do.  Fiscal disiplines; washington believes in fiscal disiplines (the US has not had a balaced budget in a long time, their debt is astronomical) – when washignton says they believe in balancing the budgets and fiscal disipline it makes it so clear of their hypocracy  Fiscal deficit; the requre governemnts to use fiscal defisits- you need to balance your budget. What would they allow any country to run a short term deficsist; so that they governemnt can spend money and stimulate the economy- in order to inject money into the economy- to keep people buying and selling things.  Public expenditure priorities; countries normally turn to the IMF because they went bamkrupt – massive fiscal defiscit- they spent more than they made thus they need to reduce their fiscal defistit; either increase revenu or decrease expenditure. Increasing revneue includes raising taxtes- which washignton refuses- believe you should keep that money in the private sector not the public sector – which is government  THUS, there is only one way; decreasing your spending. How or where do they cut spending? IMF as their opinion on where to cut the spending; on subcidies. Oftern developing countries subcides basic goods consumed by the poor (water, electricity)- things that everyone uses and needs. They subcides them because they can then control certain sectors of the populations and also basic most of their population is poor. IMF and
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