Economic Liberalization: Neoliberalism

The focus on the article written by Michael Walton was “neoliberalism” and its effects on economic and social development in recent Latin American history. Walton explains two ways in which neoliberalism is used; the first being a narrow usage and the second being a broader view. Walton then goes on to examine the economic and social effects of market-oriented policies with respect to growth, economic volatility, and social conditions.

A narrow use of neoliberalism refers to a shift in a subset of policies to a greater reliance on markets. This narrow use of neoliberalism occurred most often throughout the 1980’s and 1990’s. Although these shifts in policy that relied more heavily on markets were disappointing relative to the expectations of advocates, they were usually highly beneficial. However these policies were also largely incomplete as a development strategy. Growth in the 1990’s was significantly better than in the 1980’s, which is commonly referred to as the “lost decade”. The new neoliberalism policies that were market-oriented were good for growth especially in the 1990’s but they were not sufficient enough to shift Latin American countries to East Asian tiger style performance.

Privatization of utilities has become one of the most controversial and least popular of market-oriented policy areas in Latin America (Walton). In the absence of a clear, transparent, and competitive process, there are risks of loss of receipts because of corruption. Interpreting neoliberalism in its broad sense, of a wholesale retreat of the state and reliance on markets, neoliberalism is hopelessly incomplete as a development strategy and therefore undesirable. However combining market-policies, political and social institutional development, and equalizing expansion of assets and influence will allow Latin American countries to set on robust paths of successful growth and economic development.