Chapter

Economic Theory and Orthodox Reform

Howard Stein

in Beyond the World Bank Agenda

Published by University of Chicago Press

Published in print August 2008 | ISBN: 9780226771670
Published online February 2013 | e-ISBN: 9780226771656 | DOI: http://dx.doi.org/10.7208/chicago/9780226771656.003.0003
Economic Theory and Orthodox Reform

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Despite the increasing types of conditionality introduced by the World Bank and the IMF during the 1990s, the core program of adjustment with its trinity of stabilization, liberalization, and privatization remained intact. Moreover, the same problematic economic microfoundations, or theoretical propositions, that underlie adjustment continued to be present in many of the new strategies added to the World Bank agenda in the 1990s—a disconcerting fact given adjustment's poor performance and noted failures. This chapter explores the neoclassical economic roots of adjustment and includes a critical analysis of this strategy, focusing on errors generated by overreliance on the methodology and content of the economic theory embedded in structural adjustment policies. It is argued that the strict adherence to neoclassical economics methodology is largely to blame for the Bank's failure to question, adapt, or abandon policies despite the overwhelming evidence of downward economic trends among adjusting countries.

Keywords: World Bank; structural adjustment; neoclassical economics; economic theory; stabilization; liberalization; privatization

Chapter.  11517 words. 

Subjects: Financial Markets

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