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  A congerie of ideas and theories associated with the rise of the New Right in the North Atlantic economies during the 1980s and with the desirability of the market as the central plank for the organization of social, economic and political life (Hayek, 1981). As the name implies, neo-liberalism traces some of its lineages to particular interpretations of eighteenth- and early nineteenth-century liberalism. In spite of the frequency with which the name of Adam Smith is invoked by neo-liberal theorists and politicians, the logic of the New Right position and of neo-liberal thinking departs substantially from much of what Smith actually argued in The wealth of nations. During the industrial transition in England (1750-1840) a group of political economists gravitated around the idea of the Olympian merits of laissez-faire capitalism. Thomas Malthus, Adam Smith, the so-called Manchester Liberals and David Ricardo, among others (see Hirschmann, 1992; McNally, 1993), argued, in a variety of often incompatible ways, for the radical diminution of constraints to market behaviour. Economic liberalism receded during the nineteenth century, and its defeat was in a sense sealed by the Keynesian revolution of the 1930s which overshadowed the monetarist and Austrian Schools of economic analysis. The crises of the 1970s — inflation, instability in global commodity markets, business cycles — prompted a so-called liberal counterrevolution (Toye, 1987), triggered by the political hegemony of Mrs Thatcher (1979-90) in the UK and Ronald Reagan (1980-8) in the US (Krieger, 1986; Jessop et al., 1988). These two figures and their theorists became the vanguard through which laissez-faire thinking entered the realm of development thinking. At the Cancun Conference in 1981, Reagan and Thatcher directly attacked the Keynesian notion of a New International Economic Order (NIEO), expressing a distaste for enhanced foreign assistance and commodity stabilization (two planks of the NIEO). The call for free markets and liberal reforms was given a further push by the debt crisis of 1982 and the growing dominance of the IMF and the IBRD in their structural adjustment programmes. In its earliest iteration, the ideas favoured by the New Right were monetarist, in which Milton Friedman (1962) figured centrally. Abhorring forms of government regulation they advocated a minimalist role for the state. The monetarists were subsequently dubbed neo-liberals since the New Right policies went beyond the monetarist strategy, which was narrowly fiscal. Neo-liberalism had by the 1980s come to describe \'the predominantly laissez faire, market driven economic policies sweeping across the globe\' (Cypher and Dietz, 1997, p. 208). Francis Fukuyama\'s book (1992) The End of History and the last Man celebrated the demise of socialism as the final triumphalist victory for the free market.

The theorists of the New Right offer a stark account of neo-liberalism. The overarching claim is that free markets maximize human welfare: economically, markets efficiently distribute knowledge and resources; socially, liberal individualism will maximize moral worth; and politically, liberalism maximizes political freedoms since it rests on the most efficient (Pareto-optimal) distribution of resources and wealth. The core of neo-liberalism turns on the functioning of the free market, which comprises \'atomistic individuals who know their own autonomously arising needs and wants and who make contracts with other individuals through the mechanisms of the marketplace to satisfy those wants and needs\' (Preston, 1996, p. 253). The market is in all respects neutral and its effective functioning demands a minimum state machinery to provide basic legal and social security to underwrite individualism, private property, and political stability. The pro-market position of neo-liberalism has informed development theory and practice through the multilateral regulatory institutions (GATT, IMF, IBRD). Here the work of Deepak Lal (1985) is important: government failure, in varying ways and degrees, is seen as central to poor economic performance, whether in China or Nigeria. Conversely free trade is read into any success story, whether Taiwan or the US (World Bank, 1994).

Curiously, there is little in Adam Smith (1776), or indeed other of the early liberals, which approximates the sloganeering and free market triumphalism of the neo-liberals. Indeed Smith himself feared the consequences of the unregulated market and of unfettered accumulation (desire let loose). Such a society would indeed tear itself apart and it was only something like civil society that could restrain the impulses and destructive urges of the market, and indeed the corruption and authoritarianism of the state. (MW)

References Cypher, J. and Dietz. J. 1997: The process of economic development. London: Routledge. Friedman, M. 1962: Capitalism and freedom. Chicago: University of Chicago Press. Fukuyama, F. 1992: The end of History and the last Man. New York: Free Press. Hayek, F. 1981: The political order of a free people. Chicago: University of Chicago Press. Hirschmann, A. 1991: The rhetoric of reaction. Cambridge, MA: Harvard University Press. Jessop, B. et al. 1988: Thatcherism. Cambridge: Polity. Krieger, J. 1986: Reagan, Thatcher and the politics of decline. Cambridge: Polity. Lal, D. 1985: The failure of development economics. Oxford: Oxford University Press. McNally, D. 1993: Against the market. London: Verso. Preston, D. 1996: Development theory. Oxford: Blackwell. Smith, A. 1776: The wealth of nations. New York: Modern Library. Toye, J. 1987: Dilemmas of development. Oxford: Blackwell. World Bank 1994: The East Asian miracle.Washington, D.C.: The World Bank.

Suggested Reading Gray, J. 1993: Beyond the New Right. London: Routledge.



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