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Does neoliberalism offer an effective solution to poverty?

Explain,
using relevant theoretical concepts and examples.
When one examines poverty, both within the developed and
developing world, it is clear that rather than providing any sort
solution to poverty, the neoliberal paradigm does a great deal to
create and perpetuate it. Neoliberalism itself is an economic
philosophy that follows the ideology that economic prosperity is
achieved through minimal to no governmental involvement in the
market, with the aforementioned prosperity theoretically trickling
down to the poorest in society. Yet upon closer inspection, it fails to
deliver in many of these aspects, with neoliberal policies
perpetuating issues of income inequality and unequal distribution of
wealth, as is the case in the United States. Furthermore, the
feminization of poverty has escalated as a result of neoliberal
practices, a phenomenon which has echoed through developing
nations such as South Africa. International organisations such as the
IMF and the World Bank have also adopted this programme of
economic liberalization and in their goal to reduce poverty push
similar programmes upon Developing Countries in the form of
Structural Adjustment Programmes and more lately Poverty
Reduction Strategy Papers, which have essentially forced
Developing Countries such as Nicaragua to adopt neoliberal
schemes to the detriment of their populations.

Before one unpacks the implications of neoliberalism, it is important


to understand the assumptions that underpin it. The philosophies of
neoliberalism were first put forward by the Austrian economist and
philosopher Friedrich Hayek, in his book The Road to Serfdom in
1940, and would later be picked up by Milton Friedman of the
Chicago School of Economics.1 Its doctrine is founded on the
following ideas. Firstly that human well being is based upon an open
market, free from any and all state intervention save that which is
carried out in the name of maintaining such open markets and
emphasizing privatisation of state owned enterprises.2 Secondly,
that every human is their own sovereign individual, who is self
sufficient and free to make their own decisions, being primarily a
consumer rather than a citizen.3 These ideas would transform the
economic and political landscape drastically in the 1980s, being
adopted by political leaders such as Reagan and Thatcher, and with
their due influence, spreading around the world.4 Neoliberalism
requires geographic range5, in that it necessitates a global
marketplace through which the free market can do its work
effectively, thus making it the prerogative of its proponents to
create a more globalized world in which trade is unchecked by tariff
and regulation. Furthermore, the idea of the individual as self-

1 Susan George. Whose Crisis, Whose Future: Towards a Greener, Fairer, Richer
World. United Kingdom: Polity Press, 2010, 26-27
2 David Harvey. A Brief History of Neoliberalism. New York: Oxford University
Press, 2005, 2
3 George, Whose Crisis, 28
4 ibid., 28
5 Harvey, Brief History of Neoliberalism, 4

sufficient prompts those states, which adopt neoliberalism to limit


welfare and encourage personal responsibility over reliance on the
state.

Inequality is one of the defining features of modern political times; it


is one of the main causes of poverty and can be seen as a direct
derivative of neoliberal policies. Inequality occurs when different
classes are created. Within a modern
context these classes are polarized as the rich and the poor, which
in turn are created by the increasingly prevalent unequal
distribution of wealth, in which a certain small subset of the
population receives a significant portion of the wealth while the
majority goes without. The United States is a country that has fully
embraced neoliberalism as a central aspect of its economic and
social policy. Alongside this policy change, it has seen a rapid
increase in inequality, with a Gini Coefficient (a scale used to
measure the level of inequality within a country, with numbers
closer to one indicating higher levels of inequality) of 0.380 as of
20106. This is amongst the highest, indicating the United States to
be one of the most unequal countries in the world. It is within this
framework that the super rich or the 1% has emerged in the US
and between 58 of total economic growth ended up in the pockets
of the 1%7 while the average income of the bottom 20% declined
6 Income Distribution and Poverty, OECD Stat Extracts. Accessed 14/05/14,
http://stats.oecd.org/Index.aspx?DataSetCode=IDD
7 Tim Koechlin. "The Rich Get Richer." Challenge 56, no. 2 (2013): 5.

by 10.7%.8 Therefore those with the most receive more while the
poorest in society get less. It cannot be denied that this upward
distribution of wealth is almost entirely supported by the neoliberal
schemes put forward by the government. Massive tax cuts were
afforded to the rich business owners with the belief that the wealth
would trickle down as the businesses, free from large taxes could
work more functionally and create more prosperity.9 However, upon
any inspection of wealth distribution in the US, it is clear that
excessive tax cuts for the rich are what they are -- a simple upward
redistribution of income10. This, combined with the systematic
cessation of welfare programmes, which reflects the neoliberal
thought of individuality and self sufficiency, has brought the poorest
in the United States to their knees, exacerbating poverty where
welfare might have reduced it.11 However, the US is just one
country, and it is important to realise that these developments are
happening on a global scale, all around the world.

In considering the impact of neoliberalism, it is clear it not only


creates poverty, but also contributes toward the overall feminization
of such poverty, marginalizing women into a state of subjugation.
Neoliberalism has resulted in a mass restructuring of the workplace,
particularly in the labour force, most markedly the increasing
8 ibid., 7
9 ibid., 24
10 ibid., 27
11 David Coburn. Beyond the income inequality hypothesis: class, neoliberalism, and health inequalities. Social Science & Medicine 58, no. 1 (2004): 44

flexibilization of the work force. This flexibilization includes


outsourcing and casualization of labour.12 Which in turn promotes
the employment of those open to such terms. These, in gendered
terms make women ideal workers as they are more often viewed as
secondary labourers within a family, with the man seen as the
breadwinner, meaning that they should theoretically be more suited
to part time work, with lower salaries.13 These types of work have
become feminized and ignore the increasing propensity in the
developing and developed world, of female-headed households14. If
the only labour available to women in these situations is low paying,
part time work, it makes it increasingly difficult for them to support
their families, thus contributing to their poverty. A review done of
the rural poor community In Durban, South Africa confirms such
findings. The lowered tariffs on textile industries in South Africa
post- Apartheid to promote trade gutted the industry and left many
women without a stable job. This in turn meant that many of the
women had to rely more upon flexible and informal work in order to
survive.15 Many women also pointed out that the burden of
maintaining the home falls squarely on [their] shoulders men
can just sit around or walk around here with no care about how food
will get onto the table.16 Neoliberal promotion of trade through the
12 V. Spike Peterson. How is the World Organized Economically. In Global
Politics, eds. Jenny Edkins and Maja Zehfuss (Abdingdon, Oxon: Routledge, 2014),
368
13 Ibid.
14 Valentine M. Moghadam, The Feminization Of Poverty And Womens Human
Rights, SHS Papers in Womens Studies/ Gender Research, no. 2 (2005): 1
15 Saranel Benjamin. The Feminization of Poverty in Post-Apartheid South
Africa. Journal of Developing Societies vol. 23 no. 1-2 (2007): 191
16 ibid.

reduction of trade tariffs has destroyed these womens livelihood,


while the flexibilization and informalization of the labour force,
particularly ones occupied by women, has led to a lack of stability in
terms of where next their source of income will come from. Gender
norms worsen the situation, as in addition to this, women are
expected to both work to feed their families, while at the same time
being treated as subordinate within the family dynamic. This creates
a very gendered dynamic that these neoliberal institutions create
and sustain.

Developing Countries in what is known as the global south have felt,


and continue to feel the far-reaching effects of neoliberal reform.
Many developing countries that exist are in such a state as a result
of colonial relations in the 19th and 20th centuries, which saw
European nations ravage their economies by using them as sources
of cheap exports and stunting their industrial growth. When these
countries were finally liberated in post- World War Two, they were
unsurprisingly behind the global north in terms of development.
This situation has been worsened by the fact that the same type of
dynamic continues today in what economist Michel Chossudovsky
calls market colonialism.17 This is essentially a global economic
system whereby developed countries such as the United Kingdom
and France have had a direct and conscious role in the manipulation
of markets within the developing world so as to benefit their own
17 Michel Chossudovsky, The Globalisation of Poverty: Impacts of IMF and World
Bank Reforms. New Jersey: Zed Books, 1997, 37

economic interests. Such interests are fulfilled in the name of


development in these countries under the guise of global financial
institutions such as the IMF and World Bank who have heavily
adopted neoliberal schemes as their main mode of aid to developing
countries.18 This aid has been delivered in the form of Structural
Adjustment Programmes (SAPs) and more recently, Poverty
Reduction Strategy Papers (PRSP). These programmes have been
informed by a neoliberal mode of thought, which includes
privatization of industry and liberalization of the economy. The effect
of this in the developing world already ravaged by inequality and
poverty has been devastating, essentially creating wealth for a
small percentage of the population, while forcing destitution and
deprivation upon the majority.

19

Nicaragua is a prominent example of a country that has felt the


negative effects of the global neoliberal development schemes such
as the PRSP. Prior to being a recipient of the PRSPs Nicaragua
received aid in the form of SAPs. These SAPs included terms such
as the privatization of certain sectors of the economy and the
liberalisation of trade so as to allow for foreign investment. This
programme led to high levels of unemployment and manufacturing
production went from 15% of GDP in 1992 to 5% in 2000.20 The
18 Anita Lacey. Why are some people better off than others? Lecture, Politics
106, The University of Auckland, May 7 2014
19 Arne, Rcker. Producing neoliberal hegemony? A neo-Gramscian analysis of
the Poverty Reduction Strategy Paper. Studies in Political Economy, no.79 (2007):
95

20 ibid., 108

PRSPS that were to follow were a slight improvement, placing some


emphasis on poverty reduction and containing within its conditions
one that ensures some spending on poverty reduction. However,
this is an incredibly limited way of dealing with the issue and does
little to offset and target the problems that have created such levels
of inequality and unemployment, thus exposing the inadequacies of
a neoliberal approach to poverty reduction.

21

Neoliberalism is a theory embraces the idea of individuality,


privatization and market fundamentalism. This theory is one that in
practice does very little combat the pandemic of poverty that
currently grips the world we live in. The ideas of individualization
had led to the breakdown of the welfare state and thus the
propagation of huge levels of inequality as demonstrated in the case
of the United States. Equally, it perpetuates gendered working
conditions and in doing so encourages the idea of the feminization
of poverty, in which women are inordinately more likely to be the
target of poverty as seen amongst the women in South Africa who
have no choice but to pursue short term work. Finally, neoliberal
development schemes have wreaked havoc upon the developing
world and placed them in a position whereby the Global North
indirectly mediates their economies, and forces such neoliberal
policies upon them in their own interests; with very little resources

21 ibid., 109-10

being put in place to directly tackle the growing levels of poverty


and unemployment these countries face.

References
Benjamin, Saranel. The Feminization of Poverty in Post-Apartheid South Africa.
Journal of Developing Societies vol. 23 no. 1-2 (2007): 191
Chossudovsky, Michel, The Globalisation of Poverty: Impacts of IMF and World
Bank Reforms. New
Jersey: Zed Books, 1997
Coburn, David. Beyond the income inequality hypothesis: class, neo-liberalism,
and health inequalities. Social Science & Medicine 58, no. 1 (2004): 44
Harvey, David. A Brief History of Neoliberalism. New York: Oxford University Press,
2005
Koechlin, Tim. "The Rich Get Richer." Challenge 56, no. 2 (2013): 5-27
Lacey, Anita. Why are some people better off than others? Lecture, Politics 106,
The University of Auckland, May 7 2014
Income Distribution and Poverty, OECD Stat Extracts. Accessed 14/05/14,
http://stats.oecd.org/Index.aspx?DataSetCode=IDD
Moghadam, M. Valentine, The Feminization Of Poverty And Womens Human
Rights, SHS Papers in Womens Studies/ Gender Research, no. 2 (2005): 1
Peterson, V. Spike. How is the World Organized Economically. In Global Politics,
edited by Jenny Edkins and Maja Zehfuss, 405-26 (Abdingdon, Oxon:
Routledge, 2014)
Rckert, Arne. Producing neoliberal hegemony? A neo-Gramscian analysis of the
Poverty Reduction Strategy Paper. Studies in Political Economy, no.79
(2007): 95-110
Susan George. Whose Crisis, Whose Future: Towards a Greener, Fairer, Richer
World. United Kingdom: Polity Press, 2010