Neoliberalism is known as a political movement supporting economic liberalization, open market, and free economy and advocating the necessity to enhance the private sector in the countries. In such a manner, the members of the movement seek to prevent the government from introducing the reforms hampering the overall development of society.
Neoliberalism tendencies in political and social development signify a shift from a public-based economy to the private sector. With people at its core, the neoliberalist movement planned to introduce an improvement to the governmental policy and create a solid basis for the national development (Lim 9).
The neoliberal state should promote private property rights of individuals, instructions of tree trade, and functioning markets. The institutional agreements guarantee freedoms for individuals and, therefore, the legal framework should protect an individual right to action, choice, expression.
Structural adjustment programs (SAPs) aim to reduce the fiscal imbalances of the borrowing countries and reduce poverty. SAPs are also concerned with developing countries and seek to change their direction into developing their market orientations. Free market program and policies also include the privatization process that should contribute to the goals of reducing trade obstacles.
The practice of borrowing money from abroad required the countries to have substantial foreign exchange researched to be able to cover borrowings. The fluctuations in the interest rates contributed to a robust financial flow, which negatively influenced the developing countries.
The tendency of borrowing has been significantly resented by the supporters of neoliberalist movement, believing that lenders should be immune to the financial losses whereas the borrowers must pay up, despite the social costs. In this respect, the theory of neoliberalism warns the lenders, but in practice, borrowers stay on the safe side.
The restrictions in the capacity to compress surpluses from underdeveloped countries exist (Harvey 74). Therefore, some losses have created an attractive option concerning debt relief because there was a higher probability for the developing countries to recover their economies and sustain further steady economic and political growth.
Taking advantage of this debt loss has brought the neoliberalist theory into a tight corner because of the approach to labor markets (Lim 10). The point is that the neoliberal state is opposed to social solidarity, which imposes limits on accumulating the capital.
The social movements and trade unions received power under the new tendency of liberalism but were suppressed because of the right to individual liberty. Increased flexibility, therefore, became a milestone of unequal distribution among people.
An individualized approach to labor market led to incredible social costs because not all social layers were able to promote their private businesses and, as a result, lack of governmental control generate more biases within this domain.
The analysis of the above-presented situations highlights the significant problems of neoliberalist reforms and structural adjustment programs oriented on the private sector. According to Rapley, “…SAPs, though positive in some respects, did not yield all their anticipated gains, and produced some unexpected and undesired consequences” (90).
At this point, though production under the central premises of structure adjustment rose dramatically, the local orientation did not allow the private owners to compete with the public markets. Another problem is confined to social losses as a result of Structural Adjustment Program implementation.
In particular, methodological pitfalls have negatively influenced social development because of the policy of devaluation, cost recovery, increase in subsidies, etc. These policies changed income distribution and excellent public provision. By alleviating poverty in Africa, SAPs failed to consider the output reduction in urban areas.
Less attention paid to the public sector had a substantial impact on the federal workers, such as teachers and doctors whose salaries reduced to almost 33 % (Rapley 90). Moreover, the devaluation process led to increased prices of imported good, uncontrolled rise o prices, absence of the essential commodities.
Health and education were under the threat of financial recession as well. The economic downturns touched upon such developing countries as Venezuela and Ghana, where the rates of GDP decreased dramatically once the structural adjustment programs were implemented. Industries in such countries tried to sustain healthy development by shifting cost by reducing workers’ wages and downsizing the labor force.
In conclusion, it should be stated that both the neoclassical economy and SAPs have imposed significant damage to the developing economies at the end of the twentieth century. Though their neoliberal reforms aimed at privatization of the national property sought to reduce poverty, further policies and strategies led to the economic disaster and financial instability.
The social welfare sector experienced significant difficulties in handling social groups and sustaining adequate economic and financial level. Nevertheless, such public spheres as health and education faced a severe financial recession.
Significant investments made into the development of the rural spheres hampered the development of the public market, leading to substantial shortage of financial resources and decline in employment in public areas. Cuts off in capital expenditures put the developing countries under the threat of economic crisis.
Works Cited
Harvey, David. A Brief History of Neoliberalism. UK: Oxford University Press, 2005. Print.
Lim, Timothy. Doing comparative politics: An introduction to approaches and issues, second edition. US: Lynne Rienner, 2005. Print.
Rapley, John. Understanding Development: Theory and Practice in the Third World. US: Lynne Rienner, 2007, Print.