Emergence Of Neoliberal Development Theory Economics Essay

Emergence Of Neoliberal Development Theory Economics Essay Introduction This essay aims to justify the emergence of neoliberal development theory by analysing the historical, political and economic backgrounds in the second half of the twentieth century and identify the key features of its success. Also, the essay aims to establish the reasons behind the failure of the Keynesian model that was dominant prior to the neoliberal theory. Firstly, it will define development, outline its origins and goals and look back at the history of development to identify major theories prevailing in global economics. Secondly, it will account for the transition from the Keynesianism to neoliberal theory and argue that the main drawback of the former extensive state intervention in economics was the reason behind the rise of the latter. Finally, it will analyse the neoliberal development theory in terms of its strengths and weaknesses and conclude with suggesting perspectives of the theory in the future. What is development? Development presents an elusive concept to define. As the term itself is incredibly broad, the simplest definition of Good Change (Chambers 1997) will not suffice: factors such as time, perspective and focus should be considered to encompass the term (Thomas 2000). Development does not happen overnight, therefore, to understand it we need to look at a series of changes throughout history and the inevitable processes which accompany it. Secondly, understanding of development shifts depending on the vision or perspective of what development aims to achieve (modern society, maximum use of human potential or fixing the faults of progress). Finally, development could be seen as a focused effort to eradicate a problem (i.e. poverty, hunger, AIDS, etc.). Generally, development is summarised as a process of developing countries trying to catch up with developed countries (Kiely 2007). If we look at the current goals in development outlined by the Organisation for Economic Cooperation and Development (OECD), we can see that in developing countries by 2015: Extreme poverty should be reduced by one half. Universal primary education should be ensured and gender disparity in education eliminated. Infant/child mortality should be reduced by two thirds and maternal mortality by three quarters. National strategies for sustainable development should be implemented (OECD 1996). On the surface these goals appear to tackle social problems (quality of life and education) but they are deeply intertwined with both politics and economics. In order to achieve those state leaders need to work along with international organisations whose economic expertise can help to shape needed policies. No matter how noble these aspirations sound, it is the question whether they are realistic enough to implement that we should ask ourselves. It is possible to assess the chances of success better by looking back at the history of development and its former achievements. The modern history of development begins with the end of the Second World War in 1945 when new states emerged and the old international order was reshaped. The key theme in development was expanding the economic growth through industrialisation. The unique position of the USA after the war (minimal losses) facilitated its becoming a super power. Not only did it have an exceptional political influence in the international affairs but it also helped to promote capitalism and democratic values in Europe as well as the developing countries. The USA did this not only through foreign aid and direct investment but creating such international organisations as the UN, the IMF and the World Bank. The Cold War split the world into two camps: capitalist and communist. While the superpowers were trying to win more political influence, they also helped to modernise developing countries by boosting their economies. Of course, it came with a price joining a camp of the donors. The USA supported national liberation of the colonies and promoted development of anti-communist ex-colonies. This period from 1950s to 1970s is also known as the golden age of capitalism. High rates of profit facilitated high rates of capital accumulation and unprecedented economic growth, high productivity, high wages, expanding demand (Kiely 2007). Such growth resulted in full employment, creation of welfare system and a spread of globalisation. However, by the 1970s problems with the system became obvious: states had monopolized important industries (coal, steel) which limited the capacity of economic growth, thus investment was dominated by political not economic reasons. Preston argues that there was an assumption that states have the right to intervene directly in production and distribution (Preston 1996: p. 154-156). This resulted in capital not being allowed to cross borders without government approval, so states could set domestic interest rates, fix the exchange rate, tax and spend as they wanted to secure national economic objectives, moreover, the divide between developed and developing countries remained high (Leys 1996). The decline in profit rates recorded in the developed countries at the end of the 1960s deepened and in the 1970s spread into an open capitalist crisis, characterized by a swing of the whole system into monetary-financial chaos, exploding inequalities, and mass unemployment (Herrera 2006). The Keynesian model The golden age of capitalism was dominated by the Keynesian development model, which maintains that the level of economic activity is determined by the level of aggregate demand (Palley 2004). John Maynard Keynes, the forefather of modern macroeconomics, argued that if markets were depoliticised, completely free from the intervention of governments, it would cause a period of economic depression and financial crisis. In order to prevent such a downfall he suggested that governments should control fiscal and monetary policies. Within this theory unemployment could be explained through weakness in the aggregate demand generation process that capitalist economies are subject to. In the aftermath of the post war period it was this particular model that allowed states to rebuild and boost economies. A weak point, however, was the so-called spending ratchet governments provided additional support for workers during hard times but it was politically difficult to take them away during a booming economy. Therefore, the rate of economic growth slowed down and the risk of inflation rose. This was not the only problem with the Keynesianism. According to Palley (2004) there existed two sub-theories about income distribution: one originating in the USA, the other in the UK. American Keynesians advocated the neoliberal paid what you are worth theory of income distribution, while British Keynesians argue that income distribution depends significantly on institutional factors. Palley then explains it in detail: It meant that not only do a factors relative scarcity and productivity matter, but so too does its bargaining power, which is impacted by institutional arrangements. This explains the significance of trade unions, laws governing minimum wages, employee rights at work, and systems of social protection such as unemployment insurance. Finally, public understandings of the economy also matter, since a public that views the economy through a bargaining power lens will have greater political sympathies for trade unions and institutions of social protection (Palley 2004: 2 ). In essence the two schools differed in their understanding of the factors involved in (simply put) wages and income. For example an American Keynesian, would view an employees bargaining power in wage negotiations as entirely dependent on demand for the employees skills, its relative scarcity and the employers ability to pay. The British view in however would encompass such additional factors as unions (in the case of employment) enforcing collective bargaining or national minimum wage structures. The British view therefore contained a more realistic accounting of income distribution versus a more pure capitalist view. One of the major factors of the transition from the Keynesianism to neoliberalism was the unstable prices for petrol in the OPEC in the 1970s. Another factor is of social nature the USA has promoted individualism that rejected the communist collective economic approach and kindled the debates in favour of free markets not controlled by the government. Combined with the divide between the train of Keynesian thought in the UK and the USA the theory slowly started to be replaced with neoliberalism. What is neoliberal development theory? Like development neoliberalism is a disputed notion. This term could be attributed to describe a theory of International Relations, an ideology, a development theory or economic theory. To avoid confusion we suggest a definition by Harvey: Neoliberalism  is  a  theory  of  political  economic  practices that proposes that human well being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework  appropriate to such practices (Harvey, 2005: 2). Neoliberal development theory has emerged in 1970s with the end of the golden age of capitalism. As the world economy was entering a recession, old strategies ceased to work and neoliberalism claimed to provide tools to overcome the financial crisis. The core of the theory lied in an assumption that bad policies were rooted in extensive governmental intervention in economics. Economic growth could be restored by policies ensuring competitiveness in the world economy. Neoliberal development theory aimed to enhance growth, create free markets, replace the Keynesianism that proved to be weak, and eliminate the intervention of the state in the economy that resulted in poor economic performance in many countries (Harrison, 2005). This approach was adopted by major international organisations such as the IMF and the World Bank which made the transition faster. This theory accumulated popularity as the USSR economic growth began to slow down in the 1980s and with the collapse of the Soviet Union, capitalism had proven to be a superior political-economic system to those that had  been its alternatives (Flew 2012). In order to understand what neoliberalism could offer that the Keynesianism could not Herrera (2006) splits the neoliberal strategies into domestic and international ones. They are both aimed at ensuring that the USA sustains and develops its hegemony. Firstly, at the national level, implementing the government control free economy by: (1) deforming the structure of capital ownership to the benefit of the private sector, (2) reducing public spending for social purposes, and (3) imposing wage austerity as a key priority in fighting inflation. Then, to internationally maintain the dominance of the American dollar with the help of the major international organisations and to promote free trade. This argument is in line with the Washington Consensus development strategies which included fiscal discipline, keeping inflation under control, welcoming foreign trade and investment, reducing the role of the government in general, and promoting new exports (Skidmore and Smith, 2005: 59). As com plementary to these goals, the Consensus also advocated tax reform including cutting marginal tax rates (reducing taxes for the rich), creating a unified and competitive exchange rate, and securing property rights (particularly for foreigners in developing countries) (Todaro and Smith, 2006: 538). During the last 30 years this objective has resulted in the proliferation of neoliberal policies of deregulation, privatisation and marketisation (Cahill 2010). When portraying neoliberalism it is paramount to mention the basic principle of individualism. Neoliberalism implies that at the very heart of the concept lies the uniqueness of an individual that leads to subjective and self-centred preferences. Cahill (2010) argues that neoliberals base the defence of free markets on this: liberty is depicted as a core aim of society in which markets represent spheres of voluntary exchanges between individuals. Based on the assumption that from rational point of view individuals would only engage in an exchange that was beneficial for them, markets allow them to satisfy preferences free from external interference or coercion. This way markets represent an excellent platform for spreading liberty. From the economic point of view free markets, with voluntary exchange at their core, let the preferences of rational self interested utility maximisers to be expressed and satisfied. In this case prices represent markers of such preferences and along with the freedom of choice ensure that resource allocation is subject to the preferences. Such system leads to the claim of neoliberals that are not only moral but efficient means for producing and distributing goods and services. Freed from governmental involvement markets produce better results unlike when being under state control with politicians inevitably choosing one industry over another. It appears that better results could be achieved with a shift from the public to the private sector. Strengths/weaknesses In order to establish if the transition to the neoliberal development theory was successful it is necessary to go back to the goals that the theory proponents wanted to achieve: free trade, economic growth, liberalisation, depoliticising of economics and privatisation. While there is evidence that free trade facilitated economic growth it has been slower than expected and still connected with state intervention: there is a positive correlation between an economys exposure to international trade and the size of its government in the years from the 1960s to the 1990s (Rodrik 1998) and similarly whereas levels of trade and levels of government expenditure are positively correlated, countries in which trade has increased more quickly in recent decades have experienced slower growth in government spending (Garett 2001). At the same time free trade and liberalisation has facilitated the emergence and development of globalisation opening new prospects of integration in the international economics and society. On the other hand, globalisation has its own drawbacks, especially in regards to developing countries they still have to catch up with more advanced states but the competition is a lot higher. Without modern technologies which are too expensive, tight budgets and a lack of mass production capability the developing countries, for example in sub-Saharan Africa, remain behind the western states or BRIC countries. Moreover, they have not achieved political freedom either the international organizations call on national governments to adopt neoliberal economic policies imposed from without while the globalized financial markets dispossess these states of their sovereignty and foreign core capital insinuates itself into the periphery countries capitalist ownership structure (Herrera 2006: 5). Promoting democracy and liberalisation could mask more egoistic than altruistic reasons. Neoliberal reforms concentrate on achieving them at the expense of other important factors of development, such as environmental protection, human rights and most important elimination of global absolute poverty (Todaro and Smith, 2006: 548). Conclusions and considerations Summing up the explanation of the emergence of the neoliberal development theory we argue that although the theory has proven to be flawed, nevertheless, its world domination is justified and it is likely to continue its course in the future. While the Keynesian model was efficient during the post-war period and helped to rebuild the economy, it could not provide the international community with the tools they needed to overcome the financial recession in the 1970s. The state-controlled economics framework could not accept and embrace the free market and privatisation because it would mean losing a substantial part of political influence for the governments. Therefore, neoliberalism was the rational choice to adopt in order to revive the economy. As the major superpower (and after the end of the Cold War the unitary) the USA hegemony started to spread further the IMF, the World Bank and other international institutions promoted the development of neoliberalism in both developed and developing countries. Neoliberals believed that markets are able to manage and distribute capital better than states. For the developing countries it also meant more options for employment by expanding the output of exports. Conversely, the emergence, development and finally establishment of the neoliberal development theory as the dominant one has created a number of issues that are complicated to resolve: the widening gap between the rich and the poor, the slowdown of the economic growth and the recession. Promoting democracy and liberal values often hide states own interest, i.e. the war in Iraq in 2003, recent interventions in Syria and Libya. Although economy has become less state-oriented the goals of multinational corporations do not comprise of reducing poverty and inequality as their primary objective. In order to sustain the neoliberal model, it should be re-developed to provide better social security, lessen inequality and poverty, pay greater attention to human rights and create truly independent and unbiased institutions. Only then the 2015 goals of development could be achieved.

Inner City

1. Financial Ratios— †¢Liquidity Ratio: measure the availability of cash to pay debt. Current Ratio = Current assets/ Current Liabilities 262,515/ 285,030= 0. 92 There is a problem meeting its short term obligations The best way to improve this ratio and better position the business to cover its short-term obligations is to better manage current liabilities (accounts payables).Generate more profit (cash) out of each sale by increasing profit (as long as it is competitive within the industry), reducing costs of goods sold (making the product with less cost or providing services with less costs) or finding efficiencies throughout the operating cycle. †¢Asset Management Ratio: indicate how successfully a company is utilizing its assets to generate revenues. Inventory Turnover= COGS/ Average inventory 1,428,730/ 18,660= 76. 57 Indicate a shortage or inadequate inventory levels, which may lead to a loss in business.Average days to sell the inventory= 365 days/ inventory t urnover ratio 365/ 76. 57= 4. 8 Measure of the number of times inventory is sold or used in a time period (a year). A low turnover rate might point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. On the other hand, a high turnover rate might indicate inadequate inventory levels, which can lead to a loss in business, as the inventory is too low (stock shortages). Receivables Turnover= Sales/ Accounts Receivable 1,784,080/ 242,320= 7. 36 A low ratio implies the company should re-assess its credit policies in order o ensure the timely collection of imparted credit that is not earning interest for the firm. Days Receivable= 365/ Receivables Turnover 365/7. 36= 49. 6= 50 The receivables turnover ratio is used to calculate how well a company is managing their receivables. Total assets turnover= Net Sales Revenue/ Average Total Assets 1,784,080/ 294,565= 6. 06 Measures the efficiency of a Co. use of its assets in generating sales revenue. Companies w ith low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Debt Management Ratio: measure the firm's use of Financial Leverage and ability to avoid financial distress in the long run. The use of debt can improve returns to stockholders in good years and increase their losses in bad years. Debt Ratio= Total Liabilities (Total Debt)/ Total Assets (285,030+ 15,000)/ 294,565= 1. 02 All assets are financed by creditors and some losses are covered by creditors. Indicates the proportion of a company's debt to its total assets. It shows how much the company relies on debt to finance assets. The higher the ratio, the greater the risk associated with the firm's operation.A low debt ratio indicates conservative financing with an opportunity to borrow in the future at no significant risk. †¢Profitability Ratio: represents the % of total sales that Co. retains after incurring the direct costs (variable costs) associated with produc ing the goods sold. Return on Assets= Net Income/ Average Assets 17,610/ 294,565= 5. 98% Indicates that the company is asset heavy. Net Profit Margin= Net Income/ Sales Revenue 17,610/ 1,784,080= 0. 987% A high percentage of each dollar generated by the company in revenue is actual profit Gross Profit Margin= 1,784,080-1,428,730)/ 1,784,080= . 20% Indicates that gross margin isn’t large enough to cover other expenses beyond cost of goods sold. Purpose of margins is to determine the value of incremental sales, and to guide pricing and promotion decision. Understanding and monitoring gross margins can help business owners avoid pricing problems, losing money on sales, and ultimately stay in business. Helps avoid offering prices that are too low or have costs that are too high to ultimately make a profit. 2. Strengths, Weaknesses, Opportunities, and Threats— †¢Strengths: Fast Service/ delivery- supplied paint to contractors within 24 hours, -Steady growth in its mark et, -Competitive price, -Cheap rent/ low overhead costs- gives a competitive advantage, -Cheap employee wages- nonunion organization, -Low production costs- low cost and high quality paint, -Excess capacity †¢Weaknesses: -Unorganized- operating with no management or financial controls, -Lack of consistent and reliable inventory control system, -No customer record (manual count): wastes too much time, -No office space, no billing records, no shipping information -Undesirable ocation and building is in poor condition: old plant, and old equipment (dusty, dirty environment) -No sales personnel, -No computer, no database, -Inexperienced/ unskilled employees, -Lack of delegation and employee empowerment -Narrow product line, -Bad cash flow: insufficient financial resources to fund any changes, -Culture, -Lack of customer confidence: customer perception as a company that negotiates price and unreliable to fill large orders. -Lag between time when they are paying their suppliers and e mployees versus time it takes to collect receivables from customers (30-60 days) †¢Opportunities: Expand product range: go after different segments, -Purchasing a computer to organize data and reduce needless paperwork, -Increase market share by taking large orders, -Hiring professional salesmen to ensure consistent growth and accountants/ consultants to identify problems and solutions: Lower cost of goods sold, lower expenses due to Walsh’s salary, and lower bad debt. †¢Threats: -Market is in slow growth- housing market and overall economy, -High bargaining power of suppliers -High threat of substitutes: larger Co are more reliable Threat of new entrants,low entry barriers in paint manufacturing industry -Rumors that company is in difficult financial straits- unable to pay suppliers and owes a lot for payment on previous taxes, -No audit has been performed= IRS penalties: Wash did not include his income taxes in his income statement; he owes $38,510 in taxes. 3. Re commendations— Within 30 Days: †¢Pay his taxes before he gets audited †¢Collect bad debt from clients †¢Hire personnel to assist in various tasks -Salesmen and accounting managers †¢Grow business and solve current financial problems Within 90 Days: Inner City Paint should keep records of inventory, finances, billing info. -They should invest in a computer and keep all records in a database to automatically calculate changes. †¢Take a cut in high salaries †¢Find and research new suppliers -To be able to provide timely delivery for large orders †¢Minimize COGS Beyond 90 Days: †¢Buy more equipment and trucks †¢Improve management skills and create policies †¢Earn business of larger clients †¢Manage business and growth of the company and to be able to acquire companies in the future that help attaining a larger market share.

Interoffice Memorandum Essay

In recent months, the Roanoke office has had complaints from four clients. Customer satisfaction is declining; this is partly due to low morale among the branch’s employees. It has come to my attention that some of the graphic designers and art directors feel that their ideas are not being taken seriously. All the while, employees are work longer hours without proper compensation. We must give our immediate attention to this situation as Roanoke handles some of our biggest clients. We must also be sure the employees we hire are being treated as part of a team. As an executive team, it is very important to reach out to the Roanoke branch to find out the root of the problem before the entire company is affected. Here is my proposed plan of communication with the branch: †¢ Zachary Sylvan – Speak with Roanoke’s clients to see if they can give any feedback as far as trends they might be seeing in the branch’s operations. †¢ Al Gucciardo – Speak with the Public Relations department employees and get their feedback †¢ Troy Richards – Speak with the marketing department employees for their feedback †¢ Devi Dewdat– Speak with the advertising department employees for their feedback Please put together a report from each person you speak with by July 31, 2014. I will meet with Michelle Garner, the HR director of the Roanoke branch to discuss the issues. We will then hold an executive meeting to discuss the status of the branch and what changes need to be considered. Thank you in advance for all your time. This is a very critical time for the Roanoke branch and the company as a whole. As previously discussed in our last meeting, we need to communicate with the employees at your branch about their concerns due to the longer hours they have been required to work recently. Please provide the payroll statement for the branch for the past 12 months. These will help the executive team analyze how the employees’ time is being managed to see where management might be falling short. This is a very critical time for the Roanoke branch. We must work together to end to the low morale that seems to have taken over the office. With that, please make that getting these statements your top priority today. I will be traveling to the branch on Thursday, July 31 to go over them. Please keep in mind that we will be approaching this situation at all angles and we can discuss some ideas on how to improve employee morale overall at our meeting.

Globbing a Directory in Perl

Its very simple to print a list of all files in a directory using the built-in Perl glob function. Lets look over a short script that globs and prints a list of all files, in the directory containing the script itself. Examples of the Perl Glob Function #!/usr/bin/perl -w files *; foreach $file (files) {   Ã‚  print $file . \n; } When you run the program, youll see it output the filenames of all files in the directory, one per line. The glob is happening on the first line, as the * characters pulls the filenames into the files array. files *; Then you simply use a foreach loop to print out the files in the array. You can include any path in your filesystem between the marks. For example, say your website is in the /var/www/htdocs/ directory and you want a list of all the files: files /var/www/htdocs/*; Or if you just want a list of the files with the extension .html: files /var/www/htdocs/*.html;