Development with and beyond the market: in search of economically rational alternatives to neo-liberalism

The world-wide trend over the last quarter of a century has been towards allowing markets much greater freedom to allocate resources. Unlike many in the community, economists have generally been enthusiastic about this trend. In fact, not only have the majority of economists been strongly supportive of economic reforms such as financial deregulation and tariff reduction, they have also demonstrated a remarkable degree of faith in the value of the narrow neoclassical economic approach to addressing policy dilemmas. This has meant, among other thmgs, that they have lacked an adequate framework for dealing with some important factors influencing the long-term evolution of economies, such as technological change. In recent years, economists such as Paul Krugman and Paul Romer have taken advantage of developments in computer technology and the techniques of modelling, and have sought to develop economic models which have a more 'real world' look about them. The conclusions reached in some of the neoclassical revisionist literature have undermined, to some extent, economists' faith in the optimality of market outcomes. In the case of developing countries, some of the recent literature by economists can even be reasonably utilised to present a relatively strong case in support of a 'big push' strategy. Despite this, the majority of economists are still of the opinion that the potential benefits of interventionist policies are still not sufficient, when compared with the risks involved, to justify states intervening much beyond what neoclassical theorists have generally regarded as desirable. Among other reasons for questioning this conclusion is the fact that so-called new economic models still ignore, or deal simplistically with, a range of factors that have an important influence on the long-term evolution of economies such as institutions, firmbased innovation, and the role of demand. Among the more sophisticated and less doctrinaire critics of neo-liberal economic policies, significant differences exist about what needs to be done to encourage more satisfactory economic and social development. However, as this thesis shows, in many areas sufficient evidence now exists to draw some strong conclusions. In fact, the most pressing problem at the present time is arguably not a lack of good ideas about what is wrong with conventional thinking and what policy changes are required, but rather the failure of many critics of neoliberal economic poHcies to fiilly appreciate the unportance of these ideas. This has, if anything, been especially a problem m debates involving developing countries - the concerns of which are the main focus of this thesis. Initially, the main reason why so many social theorists struggled to develop a viable set of alternative strategies was their strong attachment to dependency theory and other equally flawed Marxist-mfluenced development perspectives. In recent years, critics of neoliberalism have sought to develop less generalised and reductionistic theoretical frameworks which are less prone to divorcing theorising from 'real world' issues. However, progress has generally been slow, and some important areas of discourse, including those involving globalisation, the enviromnent and rural development, still suffer from a good deal of confiised analysis. As this thesis shows, even the work of some of the most prominent and widely-respected critics of orthodox development thinking is seriously deficient in a number of respects. All this has provided supporters of neo-liberal economic policies within national and international bureaucracies and elsewhere more opportunity than they should have been allowed to deflect attention away from their own analytical limitations and ideological obsessions.