Neoliberalism refers to the ways in which countries attempt to control economic factors by shifting the public sector to become a private sector.
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The term neoliberalism bases its concepts on neoclassical economists who argue that in order for a country to realize development, its government should reduce deficit financing of projects, limit subsidies, remove fixed exchange rate, broaden the tax base, limit protectionism by opening up its markets, privatize the businesses that are run by the state, support deregulation, and allow people to have private property (Larner, 2012).
Neoliberalism therefore attempts to remove all barriers and restrictions to development in order to create an atmosphere that is suitable for economic development.
This paper will therefore analyze the requirements of neo-liberalism and the manner in which it assists realizing development objectives.
Neoliberalism seeks to transfer the control of nations from the public to the private sector (The Economist, 2012). To achieve this, nations are supposed to abide by certain requirements.
To begin with, it is observed that many nations especially the developing ones finance their development goals by borrowing. The funds that these nations borrow carry very heavy interest rates such that the countries invest a lot of state resources to enable them repay funds.
Under neoliberalism, nations are required to avoid large deficits that would have to be paid by future citizens (Wade, 2012). Governments should therefore minimize deficits as much as possible because deficits result to high rates of inflation thereby bringing down the productivity of a country.
In order to minimize wastage of public funds, public spending should be redirected from subsidies and other forms of spending that are deemed wasteful by the neoliberals.
Public spending needs to be based on provision of services that are important to the growth of an economy such as primary health care, education, and development of infrastructure.
Tax reform also plays an important role in driving a nation towards development (Dressler, 2012). Governments should therefore broaden their tax bases and moderate their tax rates in order to encourage efficiency and innovation.
Interest rates are very important in influencing the level of investment in a country (Abboud , 2012). They determine whether people should consume, save or invest their money.
In order to ensure that the economy realizes relevant development, governments need to ensure that the interest rates in the country are determined by the market. Fluctuating exchange rates are also important in encouraging other nations to participate in the foreign exchange markets (Buttonwood, 2012).
Trade liberalization helps in removing quantitative restrictions thereby encouraging competition in the long run. The products produced within countries are therefore of high quality in order for them to remain competitive with other quality products that are produced by other countries (Abboud , 2012).
Governments also need to remove the regulations that limit entry of other firms into the market and only limit regulations to those that are focused on safety, consumer protection, and the environment.
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Neoliberalism is however different from modernization. This is because modernization looks at the internal factors present within a country that influence its development objectives.
It looks at the manner in which social variables contribute to the development of a country (Mowbray, 2012). Modernization therefore differs from neoliberalism in that it focuses on the internal factors influencing the development of a country whereas neoliberalism is global in nature.
Abboud , S 2012, Failures and Successes of Neoliberal Economic Policy in Iraq, International Journal of Contemporary Iraqi Studies, vol 3 no. 1, pp. 45-60.
Buttonwood, C 2012, The Meaning of Liberalism: Liberals and Deficits. Web.
Dressler, W 2012, The Good, the Bad, and the Contradictory: Neoliberal Conservation Governance in Rural Southeast Asia, World Development, vol. 35, no. 9, pp. 851-862.
Larner, W 2012, Neoliberalism, Third World Quarterly, vol. 12, no. 4, pp. 374-378.
Mowbray, M 2012, What became of The Local State? Neo-liberalism, Community Development and Local Government. Web.
The Economist 2012, Neoliberalism: Everything Falls Apart. Web.
Wade, H R 2012, Is Globalization Reducing Poverty and Inequality? World Development, vol. 32, no. 4, pp. 567-589.