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Globalization, Neoliberalism, and

the State of Underdevelopment in
the New Periphery

This study provides an analytical sketch of the context, culture, structures, processes, and
consequences of neoliberalism. It examines the subject from two fundamental and complementary
perspectives. The Ž rst involves an appraisal of the history and evolution of neoliberalism as a sociopolitical phenomenon from its origins to the present. The second perspective provides a systematic
analysis of the theory and practice of neoliberalism, its circumstances and effects, with special
reference to the issue of globalization and its impact upon the weaker sectors of society. The authors
conclude that neoliberal globalizationhas contributed to the emergence of a new centre and periphery,
no longer based on distinct geographical regions, but on different political and economic strata in both
the North and South.



HE 1998 FINANCIAL meltdown has exposed the mutual vulnerability
of the present global order. It has also signalled a profound crisis in the theory
and practice of international development. The domino-like collapse of the Asian,
Latin American, and East European economies, underscores the inability of the
world economic regime to foresee, avert, and manage multiple dysfunctions.
The structures that emerged from the Breton Woods agreements of 1944 —
the International Monetary Fund (IMF), the World Bank (WB) and the General
Agreements on Tariffs and Trade (GATT; today the World Trade Organization,
WTO) — far from steering countries away from their grave predicament, have
ostensibly compounded their difŽ culties. The once deemed secure “developed”
countries of the “North” are increasingly vulnerable to events in the lesser secure

Jorge Nef is the Director of the School of Government, Public Administration, and Politics at
the University of Chile in Santiago, Chile. Wilder Robles is a PhD candidate at the University
of Guelph.

c Koninklijke Brill NV, Leiden, 2000

JDS 16,1



and hence “underdeveloped” areas of the “South,” in a manner that conventional
international relations and development theories have not been able to predict
(Head 1991).
The main thesis of this essay is that the aforementioned crisis of development
is rooted in the logic of a distinct ideological and programmatic policy “software,”
often referred to as neoliberalism. The latter alludes to a ubiquitous set of beliefs,
doctrines and policies, favouring the interests of transnational capital (especially
Ž nance capital), and in uencing decision-making at the highest levels within the
Group of Seven nations and beyond. This discourse has been far more successful
in articulating a rationalization for the globalization of market relations and
unprecedented (as well as unencumbered) capital accumulation than in effectively
improving the living conditions of most human beings (Rist 1997). The neoliberal
development model has brought about a massive deterioration of living standards,
growing income disparities, environmental destruction, an erosion of national
sovereignty and the undermining of equity-producing policies. Most importantly,
neoliberalism has implied a redeŽ nition of the implicit “social contract” that has
sustained — at least in developed countries — the pattern of labour and social
relations of the post-World War II Welfare State.
The purpose of this study is to offer an analytical sketch of the context,
culture, structures, processes, and consequences of neoliberalism. Due to its very
nature, this undertaking will be broad, tentative, and interpretative. It will examine
the subject from two fundamental and complementary perspectives. One involves
an appraisal of the history and evolution of neoliberalism as a sociopolitical
phenomenon from its origins to the present. The second perspective involves a
systematic analysis of the theory and practice of neoliberalism, its circumstances
and effects, with special reference to the issue of globalization and its impact upon
the weaker sectors of society.
From Keynesianism to Neoliberalism
One way to explain and understand the neoliberal discourse is to concentrate
upon its genesis and evolution as an induced historical construct. In this sense,
and without attempting a sweeping review of economic and political ideologies,
it is possible to sketch the circumstances of its emergence, as well as the existing
doctrines against which it rose. As a bundle of ideas with hegemonic pretensions
and tied to an explicit political project, the neoliberal reaction appeared in full
force in the 1970s. The “neoliberal” label, however, had been in use since the
1950s. Most social science encyclopaedias did not have an entry under this term; a
situation observable even today. Nor did it exhibit its present ideological vigour and
aggressiveness as a hegemonic counter-revolutionary discourse of global reach.
From the times in which Friedrich von Hayek “lost” the debate on the causes of

President Kennedy summarized the essence of Cold War liberalism by contending that those who made social change in the short-run impossible made violent revolution in the long-run inevitable. the Keynesian model had exacerbated the contradictions between accumulation and legitimisation inherent in the liberal-democratic hybrid. 1975). and European reconstruction through the Marshall Plan. by the end of World War II had become the orthodox staple of government policy. On the contrary. They shared a deeply ingrained belief in the inappropriateness of Keynesianism and their common ground centred on a scathing critique of “statism.” making society ungovernable. existed in an almost latent and underground state. Until the First and Second UN Development Decades (1961 to 1981).THE STATE OF UNDERDEVELOPMENT 29 the Depression to John Keynes in 1936. was molded by the experience of the Depression. the welfare state.” both Marxist and social democratic. would transform social and political relations. Sklar 1980). hunger. Monetarism and neoclassical economics were conŽ ned to a small but in uential group of conservative economists. In other words. the Ž scal crisis of the Welfare State had moralistic and economic overtones. politicians. Thus. bring political stability (and democracy) and prevent communist-inspired insurgency. resulting in the undermining of the “traditional” moral fabric of society and de ation of authority. the intellectual “software” that was later to merge in the neoliberal synthesis. The optimistic expectation that poor countries could “catch up” by merely emulating the Western experience of industrialization. business people. World War II. it created a “crisis of democracy. their stand also involved an assault on political liberalism and its acceptance of equity as a guiding principle for choice. were the immediate targets of their attack.” By the end of the First Development Decade (1961 to 1971) it had became evident that induced development strategies had failed. At a deeper level. . and public sector involvement in it. but a way to protect them from tyranny and the “appeals of Communism. did not materialize. For radical thinkers. the economic gap between rich and poor had increased. while a Ž scal and an institutional crisis of major proportions loomed on the political horizon of the West. For conservative critics. The accepted view among theorists and practitioners was one in which universal and replicable stages of economic growth. the predominant view of development. malnutrition. the transformation of ‘traditional’ societies into “modern” ones was not only a means to free people from poverty. Bureaucratism. This scheme was also the predominant framework and prescription for international development (McMichael 1996). Instead of stability. the problem was the inevitable consequence of generous social entitlements to the lower classes and political “over-participation” (Huntington et al. and thinkers. The prescription was to bring about Ž scal prudence and a more restricted form of democracy (Hobsbawm 1994. In their view. revolutionary insurgency threatened the status quo. and disease. and the myriad of induced development and demand-side schemes which.

In fact. and research centres. congressional hearings in the 1970s. propaganda. and paramilitary vigilantism. then a minority within the Catholic church. and organized religion were forged. facilitated the dissemination of the neoliberal viewpoint. as subsequently revealed in U. the term referred speciŽ cally to movements of the “modern right. Louis Baudin.-induced movement was provided by ideologues and thinkers like Friedrich von Hayek. a multitude of business schools. a sympathetic observer2 described the movement as one of “organizations dedicated to the maintenance of political and economic liberty and backed by the relatively new business-professional sector of society. In many cases. and Ayn Rand. During the period of military rule.-trained economists. political parties. It operated on a multitude of counter-revolutionary fronts. Most important.30 JORGE NEF AND WILDER ROBLES Neoliberalism. by means of their research centres and their U. the Latin American modern right was well organized. In particular. such as the Germanbased Ludwig Erhard and Seidel foundations. neoliberals gained control of crucial academic departments. The idiom emerged in Latin America a few years later. among others the Center for Productivity in Montevideo and the Business School of the Adolfo Ibáñez Foundation in Chile. Groups of this stripe were to play. it is important to note its relationship with the ultraconservative and fundamentalist Opus Dei. that were attempting to modernize capitalism. Since new right ideas had difŽ culty in penetrating universities. Their goal was to Ž ght socialism in the extra-parliamentary arena.S.”1 These included business and professional organizations at the margins of party politics (especially in Germany and Italy). rather than in the realm of elections and political parties. The new right was active in creating “alternative” structures through “apolitical” labour movements. But the international ramiŽ cations of early neoliberals did not stop there. unequivocally as a conservative response to the Cuban revolution.”3 According to this same source. Ludwig von Mises. It was tied to Western strategies and tactics deployed in the ideological front of the Cold War. Chile became and continues to be a construed showcase of “Chicago-boys” neoliberalism at work. as a concept appeared Ž rst in Europe and Latin America in the 1950s and 1960s. with implications far beyond the region.S.S. including policy analysis. cooperatives. In 1964. ideological indoctrination. Milton Friedman. The intellectual backbone of this counter-revolutionary and U. and “productivity centres” were created. inŽ ltration. however. Elite think-tanks in the West. grassroots organizations. Many of these groups. including the Mont Pelerin Society and the Bilderberg Group established in 1947 and 1954 respectively. a central role in shaping the policies of military regimes in Latin America’s Southern Cone: from Brazil after 1964 to Uruguay and Chile after 1973. es- . armed militias. Leonard Read. Karl Popper. Originally. were the connections with the aforementioned First World intellectuals and private international assistance programs. foundations. received signiŽ cant support from transnational corporations and the Central Intelligence Agency (CIA). a wide array of connections with governments.

The emerging forms have exhibited a remarkable degree of adaptability. has made it possible for neoliberalism to establish its hegemony as an overwhelming discourse in the “transitions to democracy” in the 1980s and 1990s.” as well as right wing control over the media. tax advantages. the bulk of the white-collar. TNCs play a fundamental role in the integration of elites and their ideologies at the transnational level. ideological control of the commanding heights in the bureaucracy and academia was secured. often by-passing national “interests” and regulatory structures. 1993) to semi-peripheral sectors and from there to the various groups at the core of corporate power. wagedifferentials. New trading regimes. franchises. by forcefully displacing “radicals” and structuralists espousing the once mainstay U. combined with shifting economic policy. crossing national borders and affecting the national balance of payments.THE STATE OF UNDERDEVELOPMENT 31 pecially faculties of economics. The spectrum of TNCs has changed: from primarily extractive and manufacturing concerns to include services and Ž nance. Today it is possible to transfer Ž nancial resources from one country to another at the  ick of a key.4 From these positions. In recent decades. In this process of transnationalization. important sectors in the old post-1930 social contract such as labour. via credit-indebtedness devices. there have been clear winners and losers. In addition. One of the most important developments in recent decades has been the rapid and profound globalization of trade and Ž nance (Hirst 1996). capital. programmatic and policy “software. and in general proprietary high-tech cosmocorporations have emerged on top. skewness. a profound restructuring of the world economy has taken place. from demand-side Keynesianism to supply-side monetarism.N. Globalization. telecommunications. dynamism. Economic Commission for Latin America doctrine. consumers. is the “cosmocorporation” (Müller 1973). information. farmers. and the like (Collinworth et al. and power. evolving into more than a mechanism for the transfer of capital and technology across jurisdictional boundaries. transfer pricing. This control over the ideological. ASEAN and now NAFTA and MERCOSUR — have facilitated a transnational integration of business elites into extended circuits of trade. employee middle class and . The emergence and consolidation of transnational corporations (TNCs) over the past two or three decades has created a global network of transactions and business alliances. Meanwhile. and the whole gamut of socio-political relations accompanying it. They now are a most effective vehicle for the extraction of surplus from peripheral sectors. under the rules laid down by the World Trade Organization (WTO) and the emergence of dominant trading blocs — the European Union. Central to the transnationalization of production. interdependence. Finance capital. To understand the historical implications of militant neoliberalism as a counterrevolutionary project it is essential to sketch the broader international circumstances which facilitated its emergence and dissemination as a global ideology. and fragility are appropriate characterizations of the aforementioned restructuring.

While consumerism and “prosperity” are peddled as popular ideology. the state. crushed between the death of the so-called socialist Second World and the debt crisis of the former Third World. this discourse conceals the objective reality — and operational doctrine — of massive unemployment and the creation of a low-wage economy (Standing 1989). We now have “trickle up. but to their own populations as well. Substantively. transnational corporations) in seemingly internal matters of credit. not only to the populations of the former Second and Third worlds. or mesmerizing chant produced by the business elite for popular consumption. or a “Trade Union of the Third World” proposed by former President Julius Nyerere of Tanzania and endorsed by successive United Nations Conferences on Trade and Development (UNCTAD) also have failed to materialize. the ideological foundation of this “New Internationale” is distinctively neoclassical. as in the case of central banks. both globally and within countries (Sassen 1996). the latter resulting from the 1955 Bandung Conference of Non-Aligned Countries in 1955. The ensuing social and political restructuring has affected the nature of contemporary politics. neoliberalism has become entrenched as a global ideology (Sklar 1980). Ž scal and monetary policy. Externally-imposed “structural adjustment” policies severely undermine economic sovereignty. the Eastern European countries and a number of centrally-planned economies in the Third World.. The Neoliberal Regime In the post Cold War and largely unipolar world. has tended to escape national and democratic controls. This has brought about a persistent tendency of external involvement (e. Macroeconomic decision-making. deepen underdevelopment. the IMF. The possiblies of South-South cooperation are not very promising.g. foreign creditors. Alternative trading regimes to those controlled by the major trading blocs within the Group of Seven have all but crumbled. the future of economic union in the Southern cone of Latin America under the aegis of MERCOSUR is very much in question. the deŽ nition of citizenship and the very essence of governance. or recessive income distribution” on an unprecedented global scale. Domestic concerns have become peripheral and subordinate to the interests of transnational capital. The dismantling of the socialist trading block known as COMECON has eliminated the presence of a trade arrangement which encompassed the Soviet Union. More recently. with the crises of the Brazilian and the Argentinean economies.32 JORGE NEF AND WILDER ROBLES nationally-based medium-sized manufacturers have been severely hurt. . now lie in shambles. and spread poverty. UNCTAD itself and the Non-Aligned Movement. The initiatives for a New International Economic Order. Western elites and their clients elsewhere in the world are now in a position to dictate the terms of global surrender. This mind-set has hegemonic strength among the core sectors within the Group of Seven countries.

this would be tantamount to switching off global civilization (Pelton 1981).” and the “rule of law. Despite an outwardly progressive rhetoric of democratization.” this new worldview is every bit as Manichean and dogmatic as the old Cold War. and monistic. nor freely available. this type of reactionary modernism has more than a casual continuity with its military predecessor. The fourth source is a revamped version of nineteenth century social darwinism á la Herbert Spencer. Its major proponent has been Milton Friedman. In fact. A highly stratiŽ ed global information order. and paraphrasing Tof er. is the quasimystical “objectivist” individualism à la Ayn Rand. Most important though. Last. we live in a world of “future shock. is the fact that the new orthodoxy has a strong appeal to the af uent. but equally relevant. rooted in von Hayek’s interpretation of Adam Smith. According to some. with support for individual freedoms. with a poetic and highly normative  avor. and the premise that economic rationality is solely the consequence of individuals maximizing choices. The Communications Counter-Revolution Ideologically. with Malthusian and deterministic connotations. “open societies. Department of Commerce 1993). and modern elite sectors in what used to be called the Third and Second Worlds. The Ž rst source is neoclassical economics. irrespective of its wide spread is neither neutral. with its own boundaries and dynamics. values and structures. neoliberalism can be seen as a discourse legitimating elitist national and international regimes. It is a highly concentrated business. privileging anti-in ationary measures over employment. represents a massive onslaught of Western culture by means of a revolution in communications.” one so dependent on computers and telecommunications that should these gadgets cease to function. Communications technology. The emerging global cultural regime.” the “End of History. From this perspective. globally-integrated. consumption-intensive. with outright reactionaries and “cold warriors” on the other. The second source is monetarism and its prescription of Ž scal restraint. private media operations. the “triumph of the West. associated with the “Chicago school. At least Ž ve identiŽ able streams of thought converge in contemporary neoliberalism.” the latter closely connected to Ž nancial speculative circles. This has meant a disappearance of both state-owned public information systems as well as small independent. The third source is political neoconservatism: an offshoot of a moralistic and culturalistic reaction amalgamating on the one hand disillusioned welfare liberals.5 driven by transnational capital and deregulation (U.S. more than a deŽ ned set of circumstances. managed by private . national security discourse it has replaced (Drury 1993).THE STATE OF UNDERDEVELOPMENT 33 elitist.” the “Clash of Civilizations” (Huntington 1993) and “Manifest Destiny” blend in a synthesis with distinct functionalist overtones.

One emerging cultural pattern has been referred to as an elite managerial culture: “a set of attitudes. not a substantial departure from mainstream thought. the capitalist variety has become. The global news and entertainment networks are the conveyor-belts in the transmission of a common neo-materialist and hedonistic worldview. especially in radio and television. values and behaviour models. and a set of forms and models of organization” (Ibid.” modernization remains unchallenged as the prevailing teleology of development. the dominant paradigm. The production and dissemination of information  ows from North to South. While the Marxist-Leninist strain of modernization has fallen in disrepute with the disintegration of the “really existing socialisms” of Eastern Europe.6 In addition to unidirectionality. Thus. yet this time the message is directed to transnational consumers conditioned by a massively-marketed coating of pop culture. Its mass ideological correlate is the culture of consumerism in its mainstream and pop versions.7 The Pervasiveness of Modernity The cultural thrust of neoliberalism discussed above has been equated by elites at the core with the idea of modernity. media programming. other than the re-assertion of religious fundamentalism — as with the “Clash of Civilization” thesis — or the  imsy critique offered by the postmodernism of Western intellectuals. A central aspect of this hegemonic construction is the manufactured belief that there is no alternative to neoliberalism at the present time. even this apparently radical post-structural critique starts from the premise of a hegemonic Western culture. by default. where the fastest growing industry is the entertainment industry. at closer scrutiny a manifestation of neo or hyper-modernism. shows marked uniformity.34 JORGE NEF AND WILDER ROBLES international consortia has emerged. Therefore it is possible “that all forms of national transformation converge towards a small number of common and hence universal types” (UNESCO 1982). However. The elite doctrine underpinning this deceivingly chaotic ideological veneer is a complex amalgam of “cyberpunk” and market economics. This expansion is mainly unidirectional. Its foundations are inserted in the same possessive individualism and competitiveness of classical liberalism. There is a phenomenal gap between a minority accessing the technology and a majority who are experiencing “digital inequity” as well as material inequality. The development of a global news and entertainment industry has meant an unprecedented explosion of cultural imports practically everywhere.) centred on the market and the myth of achievement. linguistic pyrotechnics notwithstanding. despite the rhetoric surrounding the “crisis of modernity. The centre of the dissemination is clearly the United States. What appears on the surface of most post-modernist critical analyses of modernity is. .

Organizations The aforementioned Mont Pelerin Society and the Bilderberg Group have provided global outlets where neoliberal ideas have been debated and where the interests of the dominant social groups they represent have been articulated on an international scale. particularly in disciplines like economics or political science. the strength. business.” and create a venue for the transnational integration of the powerful and in uential. the establishment of the Trilateral Commission in 1973 (by the U.THE STATE OF UNDERDEVELOPMENT 35 Social Forces and Interests Ideologies are not disembodied “systems of thought. These individuals are the most in uential people in the world. has further articulated and projected the views of international capital by bringing together likeminded leaders in the political. based Council for Foreign Relations and the Bilderberg Group). the upsurge of neoliberalism is grounded in the advent of a powerful constituency for whom this ideology provides both a policy roadmap and an intellectual justiŽ cation for their interests. however. Furthermore. created in the 1980s. and academic communities. or Davos Group. combining policy-research and propaganda have also proliferated. solidity. and governments everywhere are affected by external economic forces beyond their control. directly as well as through the intermediation of friendly governments in the G-7 countries.” without reference to concrete social forces. and mobility of this internationalized new bourgeoisie have expanded. but most importantly. As business in the more developed countries has gone global and Ž nance capital increasingly plays the leading role in the world economy. but their leverage is even more decisive in the Third World. The TNCs have been able to break the “sovereignty barrier. It was. such as the Institute of Economic Affairs in the UK. they have expanded their control over the crucial agencies of the Bretton Woods system (chie y the IMF and the World Bank). which gave the anti-Keynesians world-wide prominence. the American Enterprise Institute (AEI) in the United States and the Fraser Institute in Canada. Not only are these sectors in a dominant position within the developed world.S. Numerous and well-Ž nanced national groupings. The latter include the mighty transnational investors and managerial elites in transnational corporations. Neoliberal ideas have also become predominant in academia. in alliance with a vast array of equally transnationalized service clientele of technocrats and politicians. The transnationalization of production and capital weakens territorial sovereignty. media. Beyond the exhaustion of Keynesianism and induced development as a containment doctrine. they in uence in no small manner the upper levels of university administrations. and within the European Union. The ability of business to transcend national boundaries has strengthened the role of external constituencies. The World Economic Forum. .

those unable or incompetent to adapt. compete and abide by the objective laws of the market. These policies set the fundamental parameters of the economic game. since rule-making in this area is effectively removed from the domestic political process. no gain” is the capsular ideological chain of signiŽ cation of the new scolasticism. The Constructed Hegemony of Neoliberal Economics The central tenet of the above-mentioned belief-system is that only competitive and unregulated markets hold the key to development. The other systemic impact materializes by means of the control that the very same Ž nancial and political elites have over the major international institutions which are at the core of the global economic regime: the IMF. Deviant behaviour is often punished by business blackmail and “capital  ight. neoliberal policies are entrenched and legitimated in the domestic modus operandi of lesser developed and “transitional” economies. This relational control (Baumgartner et al. the World Bank and the World Trade Organization (WTO).” a sort of holistic economic determinism of the right. It encompasses a theory of history. or who fail to acquire the attributes of outward success. via regulation (and deregulation). deserve to descend to the abyss of abject squalor. Virtually all political parties. this may help to explain why governments of diverse political orientation end up adopting neoliberal policies. Neoliberalism . draped in “common sense” and folksy clothes. Behind this Kuznetsian slogan there lies an operational doctrine characterized by an extreme inequity in the domestic and global distribution of pain for the many and gain for the few. 1978). a political economy (“Public Choice Theory”) and a theory of world politics (“Complex Interdependence”). which in turn affect material production and distribution. irrespective of how representative it is.” before direct intervention. “No pain. The transnationalization of Ž scal policies makes it virtually impossible for national governments to legislate neoliberal norms out of existence. Such “fatalism” prevails also in Latin America and in the former socialist countries of Eastern Europe. From there. international law and conditionalities. or hegemony manifests itself especially in the allegedly “technical” Ž scal and monetary policies articulated by the ministries of Ž nance and the central banks. Beyond pure ideological conviction and even opportunism. Conversely.36 JORGE NEF AND WILDER ROBLES The macro impact of contemporary neoliberalism is manifested institutionally in two ways. often against the manifest and overwhelming mandate of their constituencies. One is through the control of the political/technocratic high ground and the government agendas by the political and business elites of the OECD countries. Neo-liberalism has evolved into a new form of fundamentalism or “economic correctness. from conservative to social democrats have embraced neoliberal economics as “the only way” to promote prosperity.

is subordinated to a techno-bureaucracy of experts who manage “objective. which economic experts in bilateral and multilateral agencies actively encourage. All in all. The elimination of price controls allows the market to Ž nd its own equilibrium. It also involves greater openness to international trade and investment. wages are made competitive by de-unionizing workers and eliminating “artiŽ cial barriers” such as workers’ rights. stability and governability (O’Brien 1968. while critical thinking becomes anathema. ignoring the citizen. Since the 1970s. Politics. . As billionaire Ž nancier and former Cold Warrior. education into indoctrination. The Abandonment of Politics The fundamental connection between politics and human security is public policy. a process the outcome of which is the allocation of rewards and deprivations among various publics. and market reductionism substitutes for class-reductionism. minimum wages and the like. Western political theory has consistently abandoned a normative ideal based on participation. currency controls. 1968) exempliŽ ed by Public Choice theory. George Soros has pointed out: the “arch enemy of an open society is no longer the Communist threat but the capitalist one” (Soros 1997). In the labour front. democracy and the “input side” of politics favouring another teleology centred on order. and. The new political economy (Huntington 1967. The issues of participation and regulation are as central to the question of “good governance” as are the issues of accumulation or enforcement. Leys 1982). This recipe. This dysfunctional cultural “loop” is reproduced through the acritical institutions of higher education and by the ever more homogeneous and transnationally integrated systems of diffusion of ideas as a form of “Musak” or mesmerizing chant. as in vulgar Marxism. contains six major interconnected policy recommendations. the neoliberal package is best known for the simplicity of its formula. and other impediments to free trade are phased out. is that. tariff barriers. laws that cannot be legislated or debated but dictated by those who interpret the arcane and reiŽ ed realm of the behavior of capital and the market. total freedom of movement for capital. 1) The Ž rst is re-establishing the rule of the market. if possible. “Really-existing capitalism.” natural-like economic laws. emphasises the role of the merchant over the prince. eliminated. This means liberating private enterprise from the “artiŽ cial” bonds imposed by governments. Thought processes evolve into tautological slogans.THE STATE OF UNDERDEVELOPMENT 37 is also a vanguard political movement of the well-to-do which exhibits many of the epistemologically fallacious assumptions of its now-defunct and discredited ideological opposite. it soon runs out of ideas. but not least.” rather than “really-existing socialism” is erected as the only possible teleology at the end of history. Last. Beyond this political and economic philosophy. The difŽ culty with present day exclusionary scolasticism.

38 JORGE NEF AND WILDER ROBLES goods. especially direct taxation on income and wealth are to be drastically cut down. those who are not able to fend for themselves are blamed for their own problems and left largely on their own to solve them. In principle. and pensions are considered inimical to economic efŽ ciency. Whenever possible these activities are to be taken over by “revenue generating” private enterprises. Government regulation of everything that could diminish private proŽ ts is to be drastically reduced. The assumption here is that private enterprise.” This is to be replaced with a view of the common good emphasizing “individual responsibility. 3) The third is reducing public expenditure. is inherently efŽ cient. unemployment insurance. education. key industries. bureaucratism. This includes banks. greater efŽ ciency is supposed to ensue.” 2) The second prescription is reducing taxes. schools. driven by proŽ t-maximization. 6) Finally is the elimination of the collectivist concept of the “public good. energy.” Thus. Conversely. These policies are clearly set to beneŽ t big business and are essentially anti-labour and anti-consumer. and corruption. 5) The Ž fth is the privatization of the public sector.” The subsidiary state has a minimal role to play in dealing with individual “failures. not service is the main criteria. and services (but not labour) is to be attained. water supply. A central postulate in market sovereignty is that an unregulated market is the best way to increase economic growth. As markets become the automatic comptrollers. Public revenues. water and communications utilities. especially in the form of value added or goods and services taxes (VAT and GST). and other services. including welfare assistance. bridges. eliminating red tape. constitutes an attempt to . and even natural resources. This is geared to increase disposable earnings among the well-to-do. railroads. hospitals. health care. The Neoliberal Threat The effort by socioeconomic elites and their institutional intellectuals to circumvent established democratic traditions and make politics “governable” and markets “free” is a potentially antidemocratic trend. They also reduce the Ž scal base of government. The tendency to favour “limited” democracies. highways. 4) The fourth recommendation is deregulating the private sector. deregulation is geared to enhancing competitiveness. as well as public-sector produced goods and services are to be sold to private investors. or indirect taxation is boosted. State-owned enterprises. The same goes for social safety nets and even the maintenance of physical infrastructure such as roads. ProŽ tability. Social disbursements. taxation on consumption. resulting in a favorable investment climate. risk-taking and innovative. which will ultimately beneŽ t everyone: “supply-side” economics would produce “trickle-down. able to respond to “market” forces.

The implementation of this project involves essentially re-drafting the implicit social contract among the various social actors. The challenge presented by the 1975 report on The Crisis of Democracy (Huntington et al. all this in the name of freedom. In the last analysis. the induced fragmentation and trivialization of the opposition. The neoliberal solution has been to limit the role of the state and to facilitate private accumulation. It also produces an effective loss of citizenship. Elite politics offers very few real options and transforms the state’s allegedly “populist” and welfare functions into mere symbolism. In fact. a strong connection develops between neoliberal policies. the economic policies charted under this economic doctrine have been best suited for . The rationality of the economy ends up in contradiction with social and democratic rationality. Attempts to resist the inevitability of this regressive order brings out the seamy side of democracy: the manipulation of public opinion. penalization and criminalization. are considered legitimate. They remain conŽ ned within acceptable limits by means of transnationalized regional trading agreements. This elitist tendency to facilitate the governability of democracies reduces the governments’ capacity for governance.THE STATE OF UNDERDEVELOPMENT 39 reduce participation and depoliticize politics. while reducing the scope and salience of popular participation and social policies. The neoliberal project is. for this reason. As John Sheahan has commented. It also relates to the deŽ nition of what social actors. Without the legitimizing trappings of welfarism. the application of “authorized” force and intimidation as insurance policies against dissent. The so-called “leaner but meaner” state resulting from structural adjustment and debt-reduction policies has built-in safeguards to prevent possible redistributive policies resulting from “irresponsible” majority demands and “overparticipation. as an expression of sovereign national constituencies. 1975) to the Trilateral Commission was how to reconcile market politics with unrestricted private accumulation leading to monopoly. The main reason it cannot win popular support is that it neither assures employment opportunities nor provides any other way to ensure that lower income groups can participate in economic growth” (Sheahan 1987). effectively taken away from public debate. the only possible outcome is the maintenance of an inequitable socioeconomic order. Monetarist economic policies and those referred to as macroeconomic equilibrium are. distinctively exclusionary and heavily class-biased. the enhancement of law-and-order.” The choices of citizenship are stripped of substance. which regulates the pattern of labour relations (and income-distribution) in society. the neoliberal policy package is “inconsistent with democracy because an informed majority would reject it. and the possible emergence of police states. as mentioned earlier. Critics and dissidents end up being labelled “subversives” and are subjected to numerous security regulations. central banking mechanisms and bureaucratic expertise. especially non-elite actors.

These socioeconomic policies have been rationalized on grounds of keeping in ation down. In Canada. such as Brazil under the Generals. receiver states are not circumscribed nowadays to the periphery of the Third World and former Second World. or more recently the current internal debt-crisis. Western elites have been applying a similar political agenda in their own societies. Reaganomics. and Singapore. results in plant closures and the loss of jobs in the “developed” countries. As the national security states orderly retreated into their barracks.” real income per capita grew a paltry . which preceded the current “democratic opening” in Latin America. In all cases. Pinochet’s Chile. In Chile during the 17-year Pinochet dictatorship. Such globalism replicates in the centre similarly depressed conditions to those in the periphery. private accumulation. on account of alleged comparative advantages brought about by depressed economic circumstances and the low-wage economy. these policies have led to growing income disparities. evolves into a global maquiladora9 type industry . Manufacturing. There is a deŽ nite solution of continuity between the authoritarian and the electoral phase of neoliberalism. These goals are accomplished via debt service and the execution of the conditionalities attached to the negotiation of such service. there emerged restricted democracies with entrenched neoliberal economic agendas. the income differential between the top and bottom 10 percent of the population increased from a ratio of 21 to 1 to 314 to 1. Economic “restructuring” and the new social contracts are their programmatic expressions. for nearly a decade the top ranking country in the UNDP’s Human Development Index. a recent study indicated that between 1973 and 1996. Two examples can be illustrative. or some of the Asian “miracles” in South Korea. and the supply-side policies applied in Canada for over a decade and repudiated by the electorate in 1993. A similar trend towards liberalization is observable in many of the former socialist republics of Eastern Europe. Its manifestations have been Thatcherism. hailed in conservative circles as a neoliberal “miracle. Taiwan. Nor is a large foreign debt one of their intrinsic characteristics. privatization. and deregulation. The key role of this state is to secure macroeconomic equilibrium.8 Effects: An Incomparable Disadvantage The transnationalization of production and the displacement of manufacturing to the semi-periphery. reducing the tax burden.3 percent per annum on the average while the proportion of people below the poverty line increased at a record 7 percent per year (Nef 1996). However. in this context. The juxtaposition of economic “freedom” with political repression is the essence of the formula known as “authoritarian capitalism” (Letelier 1976).40 JORGE NEF AND WILDER ROBLES authoritarian political regimes. These new democracies are “receiver states” (Nef and Bensabat 1992) based upon restricted participation and a peculiar consociational arrangement: a pact of elites.

distribution. and accumulation are now global. The third parameter is economic globalization on a scale and depth unprecedented in human history. This discourse contains in its core a distinctive ethics of possessive and predatory individualism with very few moral constraints. a decline of employment and wages at the centre will not necessarily create incentives to invest. Its fundamental components are trade. consumption. The Ž rst is the end of the Cold War and the collapse of the socialist Second World. and the protection of the proprietary rights of international business. distribution. centralized. or increase productivity in the poorer countries. Whether under the spell of monetarism or the so-called “Trilateral” doctrine (Sklar 1980). The second contextual parameter of this new order is the disintegration and further marginalization of the Third World. production. Rules. Since there are many peripheral areas with easy access to inexpensive raw materials and with unrepresentative governments willing to go out of their way to please foreign investors. In contrast to the fragmented and increasingly marginalized condition of both the blue and white collar sectors of the workforce. Conclusion The historical and structural circumstances of this new economic order are deŽ ned by three fundamental structural parameters. national legislation or responsible governments.THE STATE OF UNDERDEVELOPMENT 41 under economies of scale and integrating its Ž nances and distribution by means of major transnational companies and franchises. the present structure of the global economic order is transnational. Abundant — and above all cheap — labour and pro-business biases on the part of host governments are fundamental conditions for the new type of productive system. and institutionalized at the top. In the current global environment. Ž nance. concentric. neoliberal globalization is likely to lead to a situation of permanent unemployment. Since production. Nor will wage reductions increase “competitiveness. and accumulation are not constrained by the tight compartments of the nation state. conventional economic thinking has displaced not only socialism but practically all manifestations . This circumstance is construed as the victory of capitalism. The new correlation of forces is one where blue-collar workers have lost. the common denominator of which is global macroeconomic restructuring. and instrumentalities constitute a de-facto and de jure system of global governance in which elite interests in the centre and the periphery are increasingly intertwined. The most crucial ideological trait that underpins the present global regime is the pervasiveness of neoliberalism as a hegemonic and homogenizing discourse. transforming the bulk of the blue collar workers — the “working” class — into a “non-working” underclass. and lost big.” one of the favourite neoliberal buzzwords. actors.

treasury boards. Most important. however. and credit policies. The formal linkage between global and domestic management is provided by international agreements and external conditionalities attached to Ž scal. and central banks. manifested in poverty. in turn. Ž nance and distribution in a rapidly globalizing economy become transnationalized. As Huntington (1992) rather cynically put it: Decisions : : : that re ect the interest of the West are presented to the world as : : : the desire of the world community. so does economic vulnerability. NAFTA. and MERCOSUR. world economic elites manage their interests and negotiate regulatory structures to serve their common interests and maximize proŽ ts. the Organization for Economic Cooperation and Development (OECD). This linkage is. especially those of debt-management. This is tantamount to the establishment of a formal mechanism for the regulation of world trade. the various regional banks. The WTO was established at the 1993 Geneva meeting of the GATT to substitute a monitoring. the Group of Seven (now Group of 8 with the inclusion of Russia) and the established major trading blocs: the European Union. The effects of economic insecurity. the International Monetary Fund (IMF). Through these devices. is the entrenchment of inequality and the devaluation of labour as the guiding principles of economic life. ASEAN.) But harmony and predictability at the transnational summit does not necessarily translate into order and security at the base.42 JORGE NEF AND WILDER ROBLES of structuralism. unemployment and sheer uncertainty are felt by the bulk of the population in the periphery. As production. and enforcement agency for the GATT conference itself. monetary. After the years of world-wide prosperity during the 1960s and the 1970s. the West promotes its economic interests and imposes on other nations the economic policies it thinks appropriate (P. the World Bank. The very phrase “the world community” has become the euphemistic collective noun (replacing “the Free World”) to give global legitimacy to actions re ecting the interest of the United States and other Western powers: : : Through the IMF and other international economic institutions. thus formalizing the leading role of trade in both the international economic regime and the over-all global order. encompassing the General Agreements on Tariffs and Trade (GATT) and its successor. re-enforced by common ideology and professional socialization on the part of national and international experts. the World Trade Organization (WTO). Economic globalization under the neoliberal formula has disenfranchised people from . regulatory. economic instability and vulnerability to external economic forces have become endemic. The proposed Multilateral Agreement on Investment (MAI)10 is another complementary set of rules — a charter of rights for Ž nance capital. The formal decision-making structures of the global economic regime are clearly recognizable. This global structure has its correlate inside the mechanisms of macroeconomic management at the level of nation-states: ministries of Ž nance.

On the other. there stands the highly transnationalized. the proportion of those in the “other world” increases. Norman Bailey. Economic and Hemispheric Security.” Yet.” in Bailey (ed. resulting from a conference organized by the Center for Strategic Studies at Yorktown University in July 1964. New York. 1997). 193. So does the probability of human insecurity and mutual vulnerability. With hindsight neoliberalism may well be perceived as one of the greatest and most elaborate deceptions in modern history. On the one hand. The extreme vulnerability of the South and the East. and Third World. But today its consequences are real and go beyond a clever global con game. NOTES See Carl Friedrich. the inherent superiority of this global project has been demonstrated by the collapse of socialism in Eastern Europe. and in uential elites in the First World. is a symptom of a profound malaise in the entire global system. af uent. but on political and economic groupings in both the North and South.” As the process of globalization under the banners of neoliberalism advances. there is the heterogeneous and fragmented majority of the inhabitants of the planet — living in all the “worlds of development” — who are increasingly marginalized and disenfranchised in the “global village. 4 The ECLA Doctrine refers to the keynesian approaches to economic recovery and importsubstitution industrialization followed by the relatively more advanced Latin American coun- 1 . Praeger 1965. It is a direct threat to everybody’s security. The entire volume is a collection of pieces by right-wing thinkers. 2 According to the Portuguese Times (June 12.” American Political Science Review. Politics. the disintegration of African societies and Latin America’s “lost decade. an academic and a former Senior Director of International Academic Affairs for the National Security Council during the Reagan Administration. 1955. mobile. former Second World. offers a scenario of violent confrontation: a new “World War III. far from enhancing the security of the North and the West. housing.THE STATE OF UNDERDEVELOPMENT 43 fulŽ lling their basic human needs. 509ff. not only in what is contemptuously referred to as “down there” but essentially “up there” too. It has contributed to the emergence of a new centre and periphery no longer based on geographical regions.” The growing squalor of the many. “The Political Thought of Neoliberalism.). unstable and besieged global and domestic periphery. There is a great deal of optimistic triumphalism among those who espouse neoliberalism. This dysfunctional system is already eroding post-industrial civilization’s vitality. “Organization and Operation of Neoliberalism in Latin America. access to food. namely. and employment. It has caused social polarization within and across national boundaries. From the perspective of its supporters. XLIX: 2. 3 Norman Bailey. which makes the prosperity of the few possible. has intrinsically destabilizing effects. has had longstanding connections to the US intelligence community. the sharp schism between these two worlds and the con ict between an expanding Western civilization and an increasingly fragile.

from Venezuela and Osvaldo Sunkel.nassist.” Document accessed via the web at http://www. Amin. and Chile. B A IROCH. the top 10 information and communication enterprises which virtually controlled the technology and R&D of global communications and informatics. West-port. Ž lm and television revenue. and Hemispheric Security. Satoshi I K EDA and Alex I RWAN 1993 “The Rise of East Asia: One Miracle or Many?” Pp. edited by S. Giovanni 1982 “A Crisis of Hegemony. .html. 70 percent of it coming from abroad (D+C 1998). While the high-income countries possess 50 telephone lines for every 100 inhabitants. For an analysis of maquiladoras.” The Toronto Star. 1993). “The Maquiladora in the Mexican Economy”. José Antinio Mayobre. Matsushita.G. New York: Frederick Praeger. Of these. edited by R. Argentina. from Argentina. included 2 American (IBM and AT&T). in Ricardo Grinspun and Maxwell Cameron (eds).A. 55-108 in Dynamics of Global Crisis. 1998.7 billion. A few Ž gures are illustrative. an increase of 47 NEC and Toshiba). A RRIGH I . over the past record of 3. one Dutch (Phillips). it was estimated that the musical industry alone had grown to about 20 billion dollars in annual sales. one must add the ever-expanding computer software market. The Political Economy of North American Free Trade. and to a lesser extent Peru and Colombia — between the late 1930s and the early 1960s. 1998. a 30 percent increase over 1986. In addition.” UNCTAD Discussion Paper # 113. A. (Montreal & Kingston: McGill-Queen’s University Press. 141162. At the same time 50 percent of the people of the world reportedly had never used a telephone: “lower income countries (where 55 percent of the population lives) have access to less than 5 percent of the telephone lines. Wallerstein. net exports in this sector doubled: 7 billion. See “Rich get richer as wage widens. 41-65 in PaciŽ c-Asia and the Future of the World-System. Brazil. pp. one British (British Telecom) and one French (France Telecom). many low income countries have less than one telephone line for 100 inhabitants” (Hamelik 1998). the export of American records. Giovanni. A1. (Ed. Norman A. “The Multilateral Agreement on Investment. B AIL EY . G. New York: Monthly Review Press. from Brazil. Thursday October 22. Frank and I. Palat.5 billion. only 15 percent of the inhabitants of the planet had access to 71 percent of the main global lines. Date November 17. Industrialization and Growth in the World Economy. Between 1987 and 1991. K O ZU L -W RIG H T 1996 “Globalization Myths: Some Historical Re ections on Integration. four Japanese (NTT. tapes and other recordings rose from $286 million in 1989 to 419 million in 1991.) 1965 Latin America: Politics. Celso Furtado. Arrighi. The names of economists such as Raúl Prebisch. To this. Paul and R. one German (the state-owned Deutsche Bundespost).” In 1988. In 1991 foreign sales accounted for 39 percent of U. Uruguay. According to a 1992 report by ITU/BTD there were about one billion telephones in the world and a population of about 5. and articulated by the UN Economic Commission for Latin America (ECLA). In 1998. from Chile are considered to be representative of the “doctrine. REFERENCES A RRIGH I . Economics. See Tony Clarke.S. CT: Greenwood Press.44 5 6 7 8 9 10 JORGE NEF AND WILDER ROBLES tries — Mexico. see Kathryn Kopinak.” Pp.

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