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Chapter6_Structural Adjustment Dvt Theory(Bis)

Chapter6_Structural Adjustment Dvt Theory(Bis) - Chapter 6...

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Chapter 6: Development Theory in the Wake of Structural Adjustment A new school of thought: the developmental-state theory which revived a very old ideal: the infant-industry model. Being an alternative to the neoclassical approach of development, it became popular among leftists. Even the World Bank, which were pretty into neoclassical theory, had to accept in the 1990s the need for an increasing state role in economic development. Many people started recognizing that not only the market required state management to realize its potential, but also that there might be some things that couldn't be left to the free market, such as env protection. Leftist theorists tend to conceive a long-term vision of the state's role in the economy, while neoclassical theorists were still anxious to minimize the scope and duration of state intervention which should never interfere with market forces. The neoclassical solution is to maintain the market mechanism- no state intervention in price setting- while tackling those parts of the market that are failing consumers. And for the poorest urban consumers that simply cannot absorb the price increase and so will reduce their consumption, we would have to identify them and to target food aid at them alone. However, one survey of programs found that while there were positive results, in some cases they reached only a tiny proportion of the affected population, and that men benefited more than women. Other critics maintain that targeting alleviates the misery of the poorest, but does little to reduce poverty itself. It doesn't improve their condition, which was already being worsened by structural adjustment. For this improvement, neoclassical still place their faith in the long-term workings of the market. It was not the old left of structuralism or dependency theory, but a new generation of leftist development thought formed in the wake of structural adjustment, that continued to maintain the importance of the role of the state. The NEOINSTITUTIONALISTS stress the regulatory role the state must play in a capitalist economy. Indeed, market would always require a detailed institutional framework. FOR EXAMPLE: In Russia, the absence of contract law in the wake of communism's collapse quickly forced business people to turn to criminal gangs to enforce their agreements. This created new costs for businesspeople, and spurred harmful phenomena such as protection rackets and extortion, which discouraged potential inverters from entering the market.
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Neoinstitutionalist also draw our attention to an economy's cultural milieu. The state must intervene to correct the "trust failure" and replace enforcement of contracts by traditional in-groups with impartial enforcement by state agencies. Otherwise, a freely flowing economy will have difficulty emerging, as agents restrict their business contacts to other members of their in-group. To them, markets arise from human design, and the
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Chapter6_Structural Adjustment Dvt Theory(Bis) - Chapter 6...

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