The 1980s and 1990s were the age of neoliberalism in development economics, as encapsulated in the ‘Washington Consensus’. Since the mid to late 1990s this consensus has been increasingly called into question.
This paper from the University of Manchester asks whether neoliberal ‘new public management’ (NPM) reforms and regulatory models can be successfully transplanted from developed to developing economies. A review of the literature charts the shift from post-war Keynesian policies to the neoliberal tenets of liberalisation, deregulation and privatisation. It notes the rising tide of criticism from within international institutions such as the World Bank (Joseph Stiglitz, for example) and outside. The nature of NPM reforms in developed economies is discussed, and its effectiveness even here is questioned. The questions raised are carried through to the issue of reforms in developing countries, where it is argued that conditions of underdevelopment amplify such concerns. Corruption is used as an extreme example to illustrate the inappropriateness of an all- encompassing policy transfer.
- A lack of empirical evidence as to the outcomes of NPM in developed economies renders impossible an impartial judgement of real efficiency gains or losses; arguments exist on both sides and practitioners effectively make an ideological choice between them.
- The ‘hollowing out’ of state bureaucracy and its replacement with entrepreneurial activity paradoxically creates a need for ‘re- regulation’ to protect the public interest.
- Three kinds of accountability are involved in regulatory governance: financial (to ensure efficiency and probity); procedural (for fair and transparent governance); and substantive (justifying actions with reference to the public interest).
- NPM can incorporate the first two kinds but has difficulty with the third, as it is essentially a political, not technical, issue. Developed countries have strong civil societies to ensure substantive accountability; the same cannot be assumed of developing countries.
- Corruption is commonly seen as a malaise of the state, to be treated by cutting the number of state transactions and hence opportunities for graft. A sociological analysis reveals a more complex picture and shows that it can be equally rife in the private sector.
The promulgation of a particular development model worldwide fails to take into account the differences between developed and developing countries, and in each individual country’s specific circumstances.
- Developing countries may in fact need stronger, not weaker states – to lead them through the transition to a modern industrial economy.
- ‘Good governance’ is generally held to include reforms such as privatisation, although its effects are contested and its application in countries with underdeveloped institutions (and/or different cultural systems) is likely to be problematic.
- The assumption of ‘rent- seeking’ behaviour in public service applies equally to the private sector in conditions of ineffective competition or regulation; such conditions also make institutions vulnerable to ‘regulatory capture’ by particular interest groups.
- Existing public methods of providing basic services such as water and energy are often inadequate, but a genuinely pro- poor agenda requires more research into the effects of privatisation on universal access before making crucial state/market decisions.
- Country- specific empirical research is essential so that reforms can be tailored to local political, social and economic realities.
