Question

5. What is the link between neo-liberalist policies (such as structural adjustment program) and the development / operation of free trade or export processing zones?

Answer 1

Neo-liberalism is a school of political philosophy with profound implications on the economy and society. Neo or the new form of liberalism maintained the ideological structure of the early or classical Liberalists like Adam Smith, Thomas Hobbes and John Locke. The point of departure of Neo-liberalism form Liberalism is where the earlier version was a broad spectrum of doctrines like liberty, self-interest maximization and individual as the primary unit of concern, neoliberalism was more specific. The neoliberals, laid more emphasis on the market and the policies that would target the economy towards a more efficient allocation of resources. Gary Becker was one of the main proponents of the neoliberal school of thought. The neoliberalist policies consider the economy and market to be sacrosanct and self-interest maximization rule would efficiently control the market, without any external intervention; i.e. in a laissez faire economy.

Like Liberalism and later Neoliberalism, Keynesianism, Marxism and other political schools of thought have, at various points of time, due to changing strategic needs have come into prominence . Neoliberalism is mostly a late 19th and 20^th century political thought, that found prominence in the aftermath of the Second World War and great depression (1938). After the collapse of the Bretton woods system of international currency system and trade, International Monetary Funds and other global organizations were created to tackle the chaotic international financial and trade situations. This was a concrete step towards a more market oriented and neoliberal economy across the globe.

Structural adjustment programs were undertaken for debt ridden countries with limited or no resources to satisfy the needs of the nation and its population. This is where the discourse of development might have oriented. From mere economic growth without a sustainable solution, development became the primary issue across the economic and also non-economic sectors. However, it should be noted that development is a concept that moves beyond market, into areas of human rights and justice.

Structural adjustment programs were targeted towards the economic restructuring of a country that is not self-sufficient and is incapable of coping up with the process of globalization trade and global integration. the countries provided with SAP are mostly dealing with a dire fiscal situation. Funds were provided to create market in spaces of missing markets, privatization, liberalization and globalization (LPG) were the main propaganda for the structural adjustment program, as in India. Structural adjustment program targets towards an economy free from political and state control, with competitive industries; the traditional modes of living and occupation are substituted by modern and technology oriented economy; that would be increasingly globally integrated. During the late 1980s and the early 1990’s India as an economy was on the brink of bankruptcy in terms of foreign reserves. Thus India had to resort to IMF and World Bank, which led to the formulation of the liberalization program in India in the year 1991. Hence structural adjustment program, as in India, led to the Liberalism of erstwhile mixed economy of India, into the new LPG Indian economy. The liberalization tenet of the LPG signifies a global integration in trade through reduced trade barriers like tariff and quotas.

Open market operation when considered at a global level is translated into free trade internationally. Free trade was advocated by Liberals like Adam Smith (Absolute advantage), David Ricardo (comparative advantage) and many more. It is again a main tenet of neoliberal thought. Free international trade, according to the neoliberal philosophy, would generate trade gains in terms of increased and efficient output, greater specialization and division of labor. All these again lead to a more market oriented and efficient economy. Thus, free trade and market operations, no state control and increased self-interest maximization based competition; all is part and parcel of the same philosophy that drives the structural adjustment programs (SAPs) by IMF.

The 'structural adjustment program (policies), special export processing zones (like SEZs) with other development initiatives' is a common package for the economically weaker countries like India. Structural adjustment programs like the SEZs and are targeted towards the development of the nation through open market and trade operations. The linkage can be studied like the said, whereby the related policies towards Neoliberalization targets market integration of the entire economy. And Export processing zones are parts of the specialization for international scheme for an efficient and more productive economy through export earnings and improvement of the balance of payment.

Finally, this target of increasing efficiency and foster development through SAP and other globalization policies often ignore the strategic needs, the basic differences in the economies and the differences in the life style and presences of the targeted beneficiaries. And due to this mismatch in the approach and philosophy between the LPG proponents (through SAP) and the indigenous life style we experience incidences like eviction of Vedanta corp. from Niamgiri (Odisha), the Coca-Cola case of the Plachimada district (Kerala) and other places due to dislocation of indigenous people, environmental issues and other forms of market distortions led adjustment problems.

In absence of free trade and Neoliberalism, for instance a in a socialist economy, due to government control over market and other spheres of the economy, in absence of laissez faire, often it is seen that actual aspects of development, like health, education, road and transportation, that are not provided by the market or the neoliberal economy, are provided by the state moreover that is accessible to the actual beneficiaries. Thus, like this the evils of the supremacy of market that lies at the heart of SAP, Neoliberalism and development and also the linkage between them, can be overcome.