Lil Milagro's notes on 'Intellectual Openings and Policy Closures'

Definitions:

Washington Consensus: an extension of neo-liberal economic policy that worked in conjunction with the World Bank and the International Monetary Fund to create ‘structural adjustment programs’

Walrasian equilibrium – “there exists a set of prices which jointly and simultaneously equates demand and supply for all commodities and factors of production”
• Emerged out of and reinforced Adam’s Smith’s work around the ‘invisible hand’ and the idea that the market when left to itself will automatically balance itself
• This is the idea that the market, left to itself, will naturally find an equilibrium where prices will set at a ‘perfect’ level that reflects supply and demand that is consistent with individual’s self interest at both the supply and demand level
• If there is any sort of imbalance, “employed workers who cannot supply all the labor they would like at the going rate”(123) will make an effort to change the prices/wages so that the market better reflects their self-interest and move the market towards equilibrium.

Keynesian macroeconomic and microeconomic theory
• Idea that the macroeconomics can be helped with governmental involvement at the micro level, the level of the individual and that oftentimes it is not enough to just have a laissez-faire economic model and that governmental intervention in creating structural support for certain programs can stimulate macrolevel growth and production which can stimulate microeconomics
• These processes can be used when Walrasian equilibrium is not reached and is not enough to stimulate economic growth
• There was a backlash against this idea by those who followed Smithian liberalism (125)

Asymmetrical transactions: (126 – 128)
• Happens “when one party to a transaction knows more about the characteristics of the transacted commodity than the other” (126)
o Idea that either the quality of the supply/demand is difficult to ascertain and thus it is not able to hold it’s Walrasian equilabrium
o This can lead to the idea that the price can influence the quality (see page 126 - 127)

Two trends that have characterized the evolution of development economics
1. “Ascendance of a policy orthodoxy of development liberalism” (119)
a. Creation of a de-regulation of national markets and the need to create a ‘laissez-faire’ – hands off governmental policy, Invisible Hand Theory – Adam Smith – founder of this idea, Foucault talks about the importance of this as instrumental towards the creation of political economy and the development of the Economic Man
b. Seen also with the creation of the Washington Consensus that gained popularity during the 1990’s – roughly
c. Represented a “decentralized, noninterventionist perspective of the ultramodernist critique represents a dramatic change from prior approaches to development which stressed more active state planning and policies.” (120)
2. “Disciplinary revisionism which questions the singular generality, if not the relevance of these same core economic theorems” (119)

Invisible Hand Theorem
• “the invisible hand will see to it that. . . . private interests and passions of men’ are led in the direction ‘which is most agreeable to the interests of the whole society.’” (122)
o This is the idea that if people follow their economic self interest that the everyone’s self interest will be rewarded through the market. It is the idea that laissez-faire competition will naturally led to the high growth rates for countries/individuals/interest groups.

Agrarian Growth and Transformation
• Idea of how hard it is to create a real value or to ascertain certain quality in regarding to agrarian growth/development (see page 130 for examples)
• “Within inegalitarian economies (those of Latin America and parts of southern Africa) . . . (there is a suggestion of) two fundamental breakdowns which distort the process of market-mediated growth and transformation”: (131)
o “Production behavior is likely to systematically vary across wealth-based classes of producers, with low-wealth producers behaving like prototypical peasants . . . and high wealth producers behaving like entrepreneurial capitalists”
• Idea that when people start off from a place of inequality, there will be a difference in the way they use their resources and the importance they place on land, resources and the ability to acquire new technologies. The low-wealth producers will relay more on labor-intensive production and the high-wealth producers will be able to acquire and use more technological means of achieving a higher harvest
o “The process of agrarian growth and transformation in actually existing market economies can be an unsteady one, and one in which initial levels of inequality are reproduced and deepened by a growth process.

Endogenous Growth theory and the Reproduction of the Core-Periphery Structure
• There is a theory amongst neo-Marxists called the Dependency theory which states the in much the same way that working class/the proleteriat is oppressed by the bourgeois, the same things happen at an international level; that the ‘periphery’ states are the ones with the natural resources that are exploited for the benefit of the ‘core’ rich states and the money and resources are diverted away from periphery states in order to enrich the ‘core’
• The opposition to this theory, which lead to the emergence of free-trade structures and NAFTA and CAFTA, states that we all emerge from interactions with the world market victorious and that interaction within a world-market will lead to “national growth and high living standards (will) eventually converge, extinguishing the distinction b/w developed and less developed countries” (132)
o We will all reach a place of balance and equilibrium within the world market
• Endogenous growth theory states that wealthy nations can continue their wealth and their gains through an interaction with the ‘periphery’ states and expentionally increase their growth and lead to a greater divide b/w core and periphery states