Extract from a course diary prepared as part of a graduate course on Development Theory and Practice taught by DrPeadar Kirby at Dublin City University, 1998.
Lecture 8: Trade, Aid and the Magic of the MarketBy Rob Kevlihan
‘Making markets work better’
- the new mantra of development theory. Moving beyond blindadherence to the allocative effects of the market to a recognition that society and the state need toameliorate market failures.The strange thing is that the need for regulation has been recognised in certain sectors for manyyears. In that heart of conservative neo-liberalism that is the accountancy profession, it has beenrecognised that the market could not be trusted to ensure the best outcome for society for almost
30 years. In the wake of a number of financial scandals in the late 1960’s, th
e profession begandeveloping standards of accounting and disclosure of financial information that companies mustadhere to. These standards have developed to become ever more complex to reflect theincreasing complexity of the business world. The accountancy profession has done thisvoluntarily, seeking to pre-empt state interference in the regulation process. There has been aclear consensus in the profession that regulation is not just a nice thing to have, but that there isan economic need for standard setting
It is somewhat surprising then, that the ideology of the unrestrained free market has taken such agrip on policy makers over the last 20 years. That perhaps there is now a slow realisation thatsome regulation is required in the wake of the East Asian currency crisis is beyond doubt
It isunfortunate that the powers that be only seem to be capable of putting regulation in place afterthe horse has bolted, so to speak (financial scandals in the accountancy profession, currencycrisis in the financial markets).In many ways, the resurgence of
was an ideological backlash to the failure of socialdemocracy to sustain economic prosperity in the face of market shocks and growing in-efficiency in industrialised economies. It is in some ways depressing that it appears that in orderto remain efficient, fear of failure
of redundancy, making losses, company rationalisations etc,must be part of the motivational package. This realisation means that the market cannot beignored, that it must be the centre of attention in an economy. But, it cannot be allowed toovershadow the common good, or dictate policies that create gross inequalities in the system.Making markets work better
and being clear about what ‘better’ means, is where
developmentstudies should offer fair and just solutions to the current inequalities imbedded in the globalpolitical economic system.
1. Kevlihan, Robert, 1993:
A Critical Appraisal of the Accounting Standards Committee 1970-1990,
Dissertation submitted in part fulfilment of the degree of Master of Accounting, University College Dublin.2. The threat of moral hazard that now exists was recognised by Peter Sutherland in his address to theTrocaire conference, Working towards a Global Ethic, held in Dublin on 30
October 1998. In his keynoteaddress, Mr. Sutherland recognised the need for stricter regulation of the international financial markets tocombat this risk.