Review of International Political Economy 8:2 Summer 2001: 329343

Review Essay
NE O LIB E R A L IS M O R DE M OC R A T IC D EV EL OP M EN T ?

Arthur MacEwan, Neoliberalism or Democracy? Economic Strategy, Markets,

and Alternatives for the 21st Century, London and New York: Zed Books,
1999, xi+255pp., ISBN 1-85649-724-0 (hbk) 1-85649-725-9 (pbk).

In a widening sphere of vastly different societies economic growth has

come to be guided by the same set of neoliberal policies. Neoliberalism
is a broad structure of political beliefs founded on right wing, yet not
conservative, ideas about political democracy, individual freedom and
the creative potential of unfettered entrepreneurship. The economic
analysis at the theoretical core of this belief system derives from a certain
reading of the founding texts of classical and neoclassical liberal
economics. These represent market processes as optimally efcient means
of allocating resources to the most productive uses. The main restriction
on the tendency for free capitalist economies to grow is thought to be
market failure resulting from perverse governmental intervention. In
neoliberal thought, governments may play a productive role in providing
public goods, such as infrastructure. Fiscal policy may help stabilize
overly-exuberant economies. But most governments in welfare state soci-
eties and developing countries alike are said by neoliberals to have gone
too far in interfering with the free play of markets. Neoliberal econo-
mists like Milton Friedman began to be taken seriously during the series
of economic crises in the 1970s. Neoliberal-type economic policies were
imposed by the IMF and the US Treasury on a left-leaning Labour
Government in Britain in the middle 1970s. Neoliberalism was eagerly
adopted by the Reagan and Thatcher governments in the early 1980s.
The World Bank began to shift towards neoliberal positions with the
Berg report on development in sub-Saharan Africa. A series of World
Bank reports published in the 1980s showed increasing adherence to
neoliberal positions. By the late 1980s, a system of policy recommenda-
tions, dubbed the Washington consensus, dominated what had previ-
ously been a liberal or social democratic development discourse. The
consensus showed a renewed faith in classical economics, while advo-
cating prudent macroeconomic policies, outward orientation, and free
Review of International Political Economy
ISSN 0969-2290 print/ISSN 1466-4526 online 2001 Taylor & Francis Ltd
http://www.tandf.co.uk
DOI: 10.1080/0969229001003341 1
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

market capitalism (Williamson, 1997). In the 1990s, some commentators

nd the World Bank shifting to a revised neoliberal model stressing
market-friendly state intervention and good governance (political plura-
lism, accountability and the rule of law), conditions found typical of the
East Asian miracle economies (Kiely, 1998) The culmination of this trend
towards neoliberalism with a human face was the 1999/2000 World
Development Reports Comprehensive Development Framework (CDF)
with two complementary parts: a stable macroeconomy shaped by pru-
dent scal and monetary policies; and the CDF itself, stressing: honest
governments; strong property and personal rights supported by an ef-
cient legal and judicial system; human development, as with education
and health; physical infrastructure; and sectoral elements like integrated
rural development strategies and urban management (World Bank, 1999).
This is a new kind of reexive developmentalism that incorporates its
own critique into ever-more sophisticated, but basically unchanging,
versions. Reexive neoliberalism is the main ideological force creating
the socio-spatial conditions of our time.

Democratic development
Now, at last, we have a major critique of neoliberalism and a leftist but
pragmatic proposal for an alternative development policy. Arthur
MacEwan is a professor of economics at the University of Massachusetts
at Boston. He has been editor of the Quarterly Journal of Economics (19725),
the Review of Radical Political Economy (19802) and Dollars and Sense
(197490). His latest book, Neoliberalism or Democracy? (1999), is based on
a considerable history of writing on the political economy of develop-
ment. MacEwan argues that the current type of globalization involves
intense, unregulated competition between capitalist socio-economic sys-
tems integrated into an increasingly homogenized world. In this real
world context, he says, arguments for free trade have again come to
the fore, this time in neoliberal forms. MacEwan nds the essence of
neoliberalism to be the doctrine that economic growth is maximized when
movements of goods, services and capital, but not labour, are unimpeded
by governmental regulations. MacEwan traces this position to the
Ricardian notion that countries gain (i.e. have growing economies) by
specializing on goods for which they have the greatest comparative
advantage (as with Britain producing cloth and Portugal wine in the
eighteenth century), or least comparative disadvantage and trading these
goods freely. This static theory of trade was made into a dynamic growth
model by adding a sequence of further arguments. Economies growing
through trade have higher levels of savings and, when turned into invest-
ments, these increase productivity. As the savings-investment connection
is far from automatic savings could leak out the addition is made
330
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

that movements of money should also be unrestricted to assure inows

of capital into a country. The theory is empirically validated by referring
to the history of economic development in Britain, Western Europe, the
US and, more recently, East Asia. Specialization in a widening division
of labour, investment by unfettered entrepreneurs, free capital move-
ments, are taken as proven by neoliberal growth and development the-
ory. MacEwan immediately points out several deciencies undercutting
this neoliberal argument: (1) the interchange of British cloth for Portugese
wine, that forms the original model for the Ricardian theory, was a mer-
cantilist ploy manufactured at the Treaty of Methuen (1703) aimed at
undercutting French exports, rather than a case of free trade; (2) the spe-
cial exception restricting international movements of labour reveals the
social and political considerations underlying the apparent scientic neu-
trality of free trade arguments; (3) tariff protection rather than free trade
characterized the historical emergence of the industrial structures of
Britain and the US, while countries achieving economic growth later
(Japan, South Korea, Taiwan) were likewise characterized by state regu-
lation of foreign commerce; (4) free trade theory fails to account for the
locationally-specic ways initial production positions affect technological
development and the subsequent determination of economies of scale,
powerful arguments for protecting or guiding the early phases of econo-
mic growth that set in motion regional trajectories. MacEwan concludes
that the free trade position is insufciently supported by purely economic
arguments (cf. Krugman, 1986). Yet free trade remains the ofcial line in
professional economics. Free trade lies at the core of the dominant neo-
liberal doctrines on international commerce. We are dealing, therefore,
with a political belief rather than a scientic principle.
MacEwans counter-argument against what is clearly a political ideo-
logy, rather than a statement of economic fact, takes two main forms: a
direct critique of some main tenets of neoliberalism, especially questions
of income distribution and markets (Part I of the book); and an outline
of alternative democratic development policy (Part II of the book); a
third line of attack, via ethical criticism of the human suffering caused
by neoliberal policies, is mentioned but not pursued (p. 146).
In terms of critique, MacEwan examines the relation between economic
growth and the distribution of income. The neoliberal justication for
inequality is that the rich save, invest and enable growth, hence income
distribution should be left to the market. Redistributive state policies
(progressive taxation, food subsidies, minimum wage policies, protection
of union rights etc.) should be avoided, while public welfare programmes
(education, health care etc.) should be limited. Neoliberalism seldom
proclaims the desirability of inequality directly, for it retains vestiges of
liberal conscience, but instead argues for the ethical legitimacy of free
market-determined outcomes, claiming that everyone eventually bene-
331
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

ts from growth, indeed that growth itself produces income equality in

the long run (the Kuznets curve). In response, MacEwan demonstrates
the reverse, that during the rapid growth of the twentieth century, the
distribution of income shifted in favour of the already-rich countries.
There was no pattern of association between Third World countries with
unequal income distributions and countries with high rates of growth
in the period 196093. Instead studies show that relative income equality
is related to economic expansion, the connection lying through formal
education and other kinds of social investment. With this falls the most
obvious neoliberal ploy on behalf of the rich that market-driven
inequality is good for everyone.
MacEwan then looks at markets, crucial institutional framework in the
neoliberal argument. Neoliberalism argues that incomes in the Third
World are low because states have excessively structured economies best
left to the market. In response MacEwan shows that while markets them-
selves are ancient, market systems (in which market relations operating
through price signals are the dominant allocators of productive resources
and determinants of the distribution of incomes) are relatively new.
MacEwan makes the case that markets are social and historical construc-
tions rather than natural institutions emanating from functional ef-
ciencies. States play central roles in dening the conditions (property
rights etc.) under which markets function (cf. North, 1990). So the crucial
issue becomes how to construct markets, so they will enable develop-
ment, rather than letting markets emerge naturally. In economic devel-
opment, he says, we should use markets rather than be used by them.
This means democratic authority over market operations, the theme of
the second part of MacEwans book.
In terms of democratic alternatives to neoliberalism, MacEwan criti-
cizes the development-equals-growth argument made by the World Bank
and the IMF. Instead development entails widespread improvements
in peoples well being, relative equality in the distribution of incomes,
environmental sustainability, the maintenance of community, and a
democratically-directed process of economic change. While considera-
tions of policy are usually conned by realistic considerations of what
governments should do to reach already set goals, MacEwan employs
a different policy realism that includes democratic participation in the
determination of goals by unions and social movements that is, policy
involves structural change through popular social action. MacEwan
insists that there are democratic alternatives to neoliberalism that do not
return to the state-guided development typical of East Asia, Brazil or
Indonesia up to the early 1980s, nor do they refer to the failed Soviet
communist model.
A democratic economic development strategy would be undermined
should it cause instability and ination. So a macroeconomic framework
332
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

that is neither wildly inationary nor socially unstable is necessary for

establishing the viability of a democratic strategy. Key to this macro-
economic framework is the source of public nance for state investment
in development. MacEwan argues that resources could be diverted from
military expenditures; yet with few grotesque exceptions, (as with
Myanmar, where defence spending makes up 39 percent of the central
governments budget), diversions from the military would be insuf-
cient because the amounts involved are too small. Resources could come
from decit spending; yet while moderate decits, and some price
increase may be useful, large state decits cause rampant ination.
Ultimately, therefore, a democratic programme must depend on taxes
higher income taxes, but also more broadly based extractions, as with
value-added taxes. These have to be set within capital controls to slow
down capital ight, as with a Keynes tax on sales of foreign assets held
for less than a certain minimum length of time, or a Tobin tax on foreign
exchange transactions. So, a macroeconomic strategy is essentially based
on higher taxes and restrictions on fast capital.
The core of a democratic strategy, for MacEwan, consists of state
investment in social programmes. These meet the basic needs of a wide
spectrum of the population; they can be the foundations for direct
popular participation; and they contribute to income and power equal-
ities. The main connection lies between education, understood as the
transmission of knowledge, information and understanding, together
with socialization related to the social organization of the workplace,
and economic growth, achieved through resulting increases in labour
productivity. Similar arguments can be made for health care and other
social programmes like public transport, housing and environmental
repair. The state of Kerala in India is a case in point, although Kerala
lags behind the national average in rate of economic growth perhaps,
MacEwan concedes, because social movements pressing for increases in
the social wage do not provide an attractive ambiance for business invest-
ment. To achieve a virtuous circle, education and other programmes
must correspond to the needs of the workplace. So they must be linked
to growth-generating economic policies. This basically means policies
directed at the private sector. What distinguishes a democratic strategy,
for MacEwan, is the way a state manages a market-driven economy,
rather than the degree of state ownership. Here the essential idea is that
capitalists have to be constrained and guided by policies to assure that
in enriching themselves they contribute to larger social goals MacEwan
adds that this involves considerable tension. Rather than wide incen-
tives to encourage business decisions (as with tax holidays) that benet
society through trickle-down effects, he favours focused measures to
achieve clear social gains. In particular, the aim should be what David
Gordon (1996) called the high road to economic change, the route
333
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

through technology, productivity and wage growth, rather than the low
road through assembly lines, conict, insecurity, and low wages. So,
policy should be designed to construct markets so they move society
towards a technological high road, as with schooling, investment incen-
tives and the regulation of foreign trade. For example, training for jobs
programmes, levy-grant systems, selective protection, picking winning
industries for support (as was the case in Japan), and so on. These
measures should be linked with a smallholder programme and land
reform to increase local production of food. All this would involve popu-
lar participation in the formulation of policy, something that is impor-
tant in itself, but also something that generates commitment and raises
the likelihood of success.
MacEwan admits that arguments for democratic development, like his,
may be greeted with scepticism. Democratic development would chal-
lenge the power of entrenched elites supported by wealthy countries
and international institutions alike. Yet these are practical, achievable
and workable ideas, he contends. Globalization has not eliminated the
possibilities for national policies in low-income countries. Organizations
of civil society, in concert with political parties, can enlarge the space
needed for democratic development strategies. In the late twentieth cen-
tury elements of global democratic activity, as with international labour
union alliances, environmentalist and womens movements, began to
expand. Indeed globalization itself creates opportunities for progress.
MacEwan concludes that economic analysis and the potentials of glob-
alization reveal possibilities for doing development differently.
MacEwans book begins a long process of constructing alternatives
that are more than gments in the minds of safely distant, utopian theo-
rists. The democratic alternative MacEwan outlines is sufciently com-
prehensible to allow endless variations to be elaborated in reaction to
different local conditions. And most importantly it is coherent in macro-
economic terms. So this reviewer hesitates before launching a critique.
Liberals and leftists working on questions of development have bick-
ered far too long, and much too rancorously, without resolving very
much. Those of us concerned with development tend to take holier-than-
thou positions in internecine debates, ddling while the von Hayeks
and Friedmans of this world take over policy formulation. In this spirit,
the criticisms that follow are meant entirely constructively. MacEwans
magnicent accomplishment can begin a dialectic of debate and discus-
sion that leads to a new kind of critical developmentism positioned
between neoliberalism in its various guises on the one hand and post-
developmentalism in its more nihilistic forms on the other.

334
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

Critique
My critique of MacEwans book focuses on the core of his imaginative
proposal for a democratic development strategy the suggestion, in a
nutshell, that Third World governments tax their populations, invest in
education, and structure markets to encourage the growth of technology-
intensive industries that employ educated people at increasing wage
rates. There are two main components to this model: a popular, devel-
opmentalist state and privately owned businesses. Popular states tax the
incomes and spending of working class and peasant peoples as venture
social capitalists, risking the very bases of their social movement support
in the expectation that eventually well-paying jobs will materialize to
utilize accumulating yet unused skills. Privately owned businesses are
coaxed through market-structuring inducements to realize that using
these skills productively would make protable sense. The problem lies
in merging the two imperatives, social investment in people and private
investment in prot-making, into a coherent growth-development
process.
Merging implies compatibility in theory and practice. Theoretically,
education, skills, high wages and prot can be linked into virtuous circles
of developmental growth, the main question being whether education
is a sufcient starting motor especially for Third World countries lacking
large tax bases. But problems inherent in the translation of theory into
practice are compounded by selective globalization of high-waged manu-
facturing. We are faced by a situation in which a hundred countries
compete vigorously even for the low technology jobs offered by multi-
national corporations, let alone the prized well-paying jobs of the tech-
nological high road. There are many countries, with massive populations
(as with India), where tens of millions of educated but under-employed
workers are already available. The prospect would therefore be for a
Third World state to squeeze every last cent out of rich and poor alike
for investment in an education that earns no reward in terms of high-
paid employment. This problem arises exactly from the lack of social
control over private economic decisions, a quandary long theorized by
leftists. For MacEwans proposal to be believable we also need a broader
developmental model connecting the state, labour and capital in an age
of globalization. In particular we need to know how a country using the
democratic model inserts itself into the global economy. A conversation
held with Arthur MacEwan, in Cambridge, Massachusetts, one sunny
day in June, indicated that he has in mind moving countries from
the low road of the assembly line to the high road of technologically-
sophisticated production. Even so, the two sides of MacEwans social
equation necessarily match precariously because of the inherent incom-
patibility between economic planning and competition.
335
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

This precariousness is revealed when it comes to empirical demon-

stration. The democratic alternative can be termed realistic only with the
presentation of at least one viable, working case. Two examples of demo-
cratic development recur in MacEwans account: South Africa, about
which more later; and the Indian state of Kerala, which is briey re-
examined here. In chapter 7 of MacEwans book, the example of Kerala
shows that it is possible for a low-income state to launch a series of
mutually-reinforcing social reforms that have real results, as with literacy
and education supporting better health care, especially for women, or
land reform yielding greater equality in rural areas (pp. 191, 193). Yet
precisely when these social successes were rmly established, in the
1980s, Keralas growth rate lagged to 0.3 percent a year, while Indias
overall growth rate was 3.1 percent a year (Dreze and Sen, 1995).
MacEwan says, in response, that Kerala calls into question simple connec-
tions between social programmes and economic growth, and that further
attention has to be given to the more exact connections between the form
of education and the organization of productive enterprise. MacEwans
recommendation is that social programmes should be part of a system
where work is organized on the basis of shared decision-making and
positive incentives in high-road technological organizations (p. 195).
Then, in MacEwans last chapter, when arguments about practicality are
framed in terms of a political feasibility conned to social movements,
(and not business reform or alternative kinds of productive organiza-
tions), the situation in Kerala, while not without problems, is cited as
providing an important illustration of the connections between demo-
cratic power and socio-economic progress (p. 228). But the argument
earlier was that the social side of democratic socio-economic progress
undercut the economic side of the equation, as businesses avoided unions
and social movements in Kerala. So we are left without an effective
demonstration that the two key ingredients of the democratic develop-
ment strategy, states responding to social movements and acting in the
public interest, and private businesses responding to prot incentives
and acting in their shareholders interest, can be brought together in a
market-structuring symbiosis. Would that the necessary good will was
possible in a world where social and environmental rationality could be
realized! In the meantime those of us who support the kind of democ-
ratic proposal that MacEwan has generously offered need to focus further
research on two related aspects of the question: institutional connections
between populist states and private enterprises in stateprivate initia-
tives; and social-economic models that project virtuously connected
publicprivate initiatives into globalizing systems of the geographical
division of labour.

336
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

The South African case

At several points MacEwan mentions post-apartheid South Africa as a
possible case of democratic development. For example, the South African
Ministry of Labour has proposed a levy-grant system to nance skills
development (p. 209). Civic organizations in South Africas black town-
ships, important in the struggle against apartheid, are mentioned as
possible examples of social movements participating in populist national
economic programmes (p. 230). Indeed South Africa, with its export-
oriented resource processing industries combined with a range of import-
substitution activities and with a developmentalist state led by the
African National Congress (ANC), seems as good an opportunity for
democratic development as we could realistically nd. What does the
South African case tell us about the possibilities for democratic devel-
opment?
In the period leading up to the rst free elections in South Africa in
1994, public attention focused on the ANCs (1994) Reconstruction and
Development Programme (RDP). As Nelson Mandela said in the preface
to the report, the document resulted from months of consultation within
the ANC, with other mass organizations, involving public and private
comment . . . both favourable and critical [which] caused us to rethink
because by doing so the greater interests of all would be served. So the
RDP economic policy document was apparently based on the principles
of democracy, participation and development. Six principles were said
to guide ANC policies: (1) an integrated and sustainable programme; (2)
a people-driven process; (3) peace and security for all; (4) nation-building;
(5) the linking of reconstruction and development; and (6) the democ-
ratization of South Africa. Of these the key to economic policy was prin-
ciple number 5. In contrast to the view that economic growth and
development/redistribution are contradictory processes, the RDP docu-
ment claimed to break decisively by integrating the two:
The RDP integrates growth, development, reconstruction and redis-
tribution into a unied programme. The key to this link is an infra-
structural programme that will provide access to modern and
effective services like electricity, water, telecommunications, trans-
port, health, education and training for all our people. This
programme will both meet basic needs and open up previously
suppressed economic and human potential in urban and rural areas.
In turn this will lead to an increased output in all sectors of the
economy.
(ANC, 1994: 67)
The industrial strategy needed to accomplish these goals involved
increasing national investment in manufacturing, job creation, and the
337
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

meeting of basic needs. Stable policies, it was thought, would create a

climate conducive to foreign investment; the RDP mentioned, but did
not stress, integration into the world economy in a manner that increased
the potential to export manufactured goods. But the RDP document
warned foreign investors that they would have to abide by the countrys
laws and standards, particularly with respect to labour, with the govern-
ment ensuring that knowledge and technical capacity were transferred
to allow greater participation by workers in decision making. In a phrase,
the RDP came very close to the democratic development, involving
considerable market structuring, proposed by MacEwan.
Yet things changed rapidly over the next two years as the ANC came
to power. An independent RDP government department was soon closed,
its duties being assumed by the ofce of (then) Deputy President Thabo
Mbeki. For it now seems that a change in emphasis had already begun
(in 19923) towards an ANC position more compatible with a realistic
position that more closely resembled the neoliberal, rather than the demo-
cratic, ideal. In the early 1990s, South Africa had come under increasing
scrutiny from the IMF and the World Bank. For instance, as prelude to
a 1993 $850 million loan, the IMF published a report on the South African
economy that stressed an outward-looking macroeconomic strategy with
growth trickling down to the poor through employment and increased
governmental revenues. A letter of intent signed with the IMF in 1993
committed the new government to responsible management of the
economy, with responsibility interpreted as cutting state decits, con-
trolling ination, imposing wage restraint, switching to an outward orien-
tation and, in general, recognizing the superiority of market forces over
state regulatory interventions (Padayachee, 1994). According to one left
critic, Patrick Bond (1997), the ANC government not only followed IMF
policies, but liberalized the economy faster and further than expected.
Under pressure from global institutions, the ANC self-imposed struc-
tural adjustment.
This was shown by the next development report, entitled Growth,
Employment and Redistribution (GEAR, 1996), prepared by the Department
of Finance and a team of academics, representatives of the Development
Bank of Southern Africa, the South African Reserve Bank, and the World
Bank. GEAR reiterated the RDPs link between economic growth and the
redistribution of incomes. But it argued that higher economic growth
rates were necessary to achieve social objectives. Sustained growth on
this higher plane now required transformation towards an outward-
oriented economy centred on a competitive platform for a powerful
expansion by the tradable goods sector within a stable environment for
condence with a protable surge in private investment and exibi-
lity within the collective bargaining system (GEAR, 1996: 2). A series of
policies were recommended to promote an outward-oriented industrial
338
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

economy integrated into the global environment and responsive to

market pressures. The states budget decit was to be cut from 5.4 per-
cent to 3.0 percent of GDP by 2000, while trade was to be liberalized.
The GEAR report called for a national social agreement to create a com-
petitive environment for investment and economic growth, for example
through wage moderation. All this was to break current constraints and
catapult the economy to the higher levels of growth, development and
employment needed to provide a better life for all South Africans (GEAR,
1996: 2).
South Africas unions, acting through their federal organization
COSATU, objected that the GEAR report was adopted to please big busi-
ness rather than the working class. They continually threatened mass
actions against the policy, even to the point of withdrawing their support,
but ended up working for the ANCs victory in the 1999 elections. There
is scant evidence that either growth or the promised new jobs have been
forthcoming: the countrys growth rate dropped from 3 percent in 1996
to 1.7 percent in 1997, 0.6 percent in 1998, and 1.2 percent in 1999; the
unemployment rate stands at 37.6 percent (South African Reserve Bank,
Quarterly Bulletin; Statistics South Africa). Yet the neoliberal GEAR
strategy has the backing of the elite fraction of the ANC, which controls
state economic policy, the business sector, and the leading media, as
with the business press. In the process, the civic organizations have virtu-
ally disappeared from sight and now play almost no role in inuencing
ANC development policy. In South Africa, democratic development (the
RDP) has been disciplined virtually out of existence by neoliberalism
(GEAR).
The main lesson to be drawn from post-apartheid South Africa is that
democratic development is realistically impossible in the present circum-
stances, and that neoliberalism, even when it conspicuously does not
work, is the only possible basis for growth and development policies.
Something is fundamentally wrong here. There is a need for widening
the space of possibility for democratic developmental alternatives.
Development theory needs to become politically active. This seems to
involve three deconstructive and contestational moments. By examining
these aspects of a liberative development theory, I bring this essay to a
close.

Tasks for a critical developmentalism

First, the critique begun by MacEwan might be deepened to disturb the
apparently neutral economic logic of neoliberalism by revealing the
political prejudices lurking behind the theoretical structure. What tech-
niques might enable critical deepening? Since the middle 1980s post-
structural social theory has extended Michel Foucaults (1972; 1973; 1980)
339
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

re-conceptualization of power, discourse, and knowledge to the question

of development. Arturo Escobar (1995) has extended discourse analysis
to development, identifying its strategies for dealing with problems of
underdevelopment, the practices generated by these strategies, and the
mechanisms by which practices operate in general the way develop-
ment enters a nexus of power-knowledge. In this way, Escobar says,
development can be seen not as a matter of scientic knowledge
concerned with the achievement of true progress, but as a series of polit-
ical technologies intended to shape reality by creating a type of Third
World underdevelopment that is politically and economically manage-
able. This leads Escobar to discard the whole idea of modernist devel-
opment; indeed there is a new attitude, post-developmentalism, based
in the rejection of the entire developmental paradigm (Rahnema with
Bawtree, 1997). However, it is possible to turn discourse analysis on
particular theories of development, like neoliberalism, without indulging
in the postmodern nihilistic excess of petulantly rejecting modernity and
development in toto. The idea would be to reveal neoliberalism as a
discourse structured, eventually, by multinational corporate interests as
a way of de-neutralizing its supportive theories and resultant policies.
The further idea would be to read neoliberal hegemony geographically
as a regional discursive formation, elaborated by a powerful central insti-
tutional complex, that achieves dominance in global space. The idea
nally would be to open the space of realistic appraisal so that democ-
ratic alternatives can be more fully considered and more adequately
protected once in motion. In other words, post-structural discourse
analysis should become a technique for widening the political space of
development in a critical modernism (Peet with Hartwick, 1999).
Second, MacEwans prescient notion that policy should widen the
scope of political action needs elaborating, extending, and practicing.
Globalization has been too readily conceded to the advocates of corpo-
rate competition and free trade, while opponents of free trade are too
easily caricatured as protectionist dinosaurs. Instead globalization might
be seen as a contested social and spatial process full of radical political
potential. For insight we might remember Marxs Grundrisse (1973),
specically the wonderful section on the apparent freedom and equality
involved in market exchanges. Marx said that in reaching out to others
as human beings through the exchange of products, people acknowl-
edge their common species-being (p. 243). But the common interest,
which appears to be the motive of the act of market exchange, proceeds
behind the backs of the individuals, for the general interest is the gener-
ality of self-seeking interests (p. 245). Marx found that market systems,
apparently full of bourgeois equality and freedom, are in fact systems
of compulsion in which social processes of exchange take external, alien-
ated forms (p. 248). Re-thinking these wonderful phrases almost 150
340
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

years later, we could argue that globalization exaggerates the social alien-
ation deriving from markets, trade and currency speculation. Yet also
the possibility exists for realizing a new kind of global common interest
between different peoples tied together not through imperialism or
conquest, but through trade. The most promising aspects of the current
contestations over globalization are social movements calling for fair
rather than free trade. Especially promising are the linkages facilitated
by global communication systems between First World and Third World
social movements. For example United Students Against Sweatshops
(USAS), the most active student organization on several hundred US
campuses, is linked with labour and human rights organizations in
Central America (Hartwick, 2000). Demonstrations against the policies
of the WTO in Seattle, the World Economic Forum in Switzerland, the
World Bank and IMF meetings in Washington DC, and the Organization
of American States meeting in Windsor Ontario in late 1999 and 2000,
are exactly contestations over development policy in an age when giants
rule the earth. These movements are led by people motivated by moral
sentiments of solidarity towards strangers. Marxs common species
beingis realized in political practice. We need a broader conception of
development policy that embraces a politics of common interest for a
global age. Students, environmentalists and workers show the way to
widen the space of development. Our main task as intellectuals is to
theorize the connections. That said, a bash on the head, and a lung full
of tear gas, is also an empirical verication of radical theorization!
Third, the economic imaginary has been paralysed by orthodox neolib-
eral interpretations of globalization to the point that alternative models
of development hardly exist as organized, theorized entities. As
MacEwan mentions, globalization is represented by neoliberals as a logic
that overwhelms countervailing forces. Power derives from the efciency
of the market in coordinating specialized economies. So, conventionally,
development essentially consists in exploiting the position allocated by
market forces in the global division of labour. Development policy facil-
itates a societys accommodation to forces beyond its control or, at most,
tries to nd ways of climbing to a higher rung in the existing ladder of
opportunities (cf. Balassa, 1981). This leaves little room for developmental
alternatives the Third Way (Giddens, 1998) is actually a slight diver-
sion along the One And Only True Way. So analysis has to reveal gross
deciencies in the neoliberal argument stemming exactly from the contra-
dictions of market-oriented economic growth its utter precariousness
for instance, the fact that miracles can become mirages in a month, the
devastating effects markets have on vulnerable populations and cultures,
or precarious natural environments. Analysis can also point to key areas
where state intervention and democratic planning need replacing in
development proposals. Here the crucial component vitally missing from
341
 REVIEW OF INTERNA TIONAL POLITICAL ECONOMY

many development alternatives is macroeconomic planning. This is an

area where specialized knowledge is presently used to subvert alterna-
tive policies. It is an area where an alternative macroeconomics can pro-
duce a different sense of economic realism. Radical accountants unite!
In other words, development studies have to become proactive in pro-
ducing ideas that combine theoretical rigor with political vision. Arthur
MacEwans democratic proposal begins a long process of research,
discussion and formulation aimed at producing alternatives notions of
development.
Richard Peet
Clark University, MA

References
ANC (1994) The Reconstruction and Development Programme: A Policy Framework,
Johannesburg: Umanyano Publications.
Balassa, B. (1981) The Newly Industrializing Countries in the World Economy, New
York: Pergamon Press.
Bond, P. (1997) Fighting neo-liberalism: the South African front, Southern Africa
Report 12(2): 1420
Dreze, J. and Sen, A. (1995) India: Economic Development and Social Opportunity,
Delhi: Oxford University Press.
Escobar, A. (1995) Encountering Development: The Making and Unmaking of the
Third World, Princeton: Princeton University Press.
Foucault, M. (1972) The Archaeology of Knowledge, New York: Harper and Row.
Foucault, M. (1973) The Order of Things, New York: Vintage Press.
Foucault, M. (1980) Power/Knowledge: Selected Interviews and other Writings,
19721977, New York: Pantheon.
Giddens, A. (1998) The Third Way: The Renewal of Social Democracy, Cambridge:
Polity.
Gordon, D. (1996) Fat and Mean: The Corporate Squeeze of Working Americans and
the Myth of Managerial Downsizing, New York: Free Press.
Government of the Republic of South Africa (1996) Growth, Employment and Redis-
tribution: A Macroeconomic Strategy (GEAR), Department of Finance, Republic
of South Africa.
Hartwick, E. (2000) Towards a geographical politics of consumption, Environ-
ment and Planning A 32: 117792.
Kiely, R. (1998) Neo-Liberalism Revised? A critical account of World Bank
concepts of good governance and market-friendly intervention, Capital and
Class 64: 6388.
Krugman, P. (1986) Strategic Trade Policy and the New International Economics,
Cambridge: MIT Press.
Marx, K. (1973) Grundrisse: Foundations of the Critique of Political Economy,
Harmondsworth: Penguin.
North, D. (1990) Institutions, Institutional Change and Economic Performance, Cam-
bridge: Cambridge University Press.
Padayachee, V. (1994) Debt, development and democracy: the IMF in post-
apartheid South Africa, Review of African Political Economy 62: 58597.
Peet, R. with Hartwick, E. (1999) Theories of Development, New York: Guilford.

342
 PEET: NEOLIBERA LISM OR DE MOCRATIC DE VELOPMENT?

Rahnema, M. with Bawtree, V. (eds) (1997) The Post-Development Reader, London:

Zed Books.
Williamson, J. (1997) The Washington Consensus rRevisited, in Louis Emmerij
(ed.) Economic and Social Development into the XXI Century, Washington: Inter-
American Development Bank.
World Bank (19992000) World Development Report, New York: Oxford University
Press.

343