Hi Madhav. I don’t mean to imply that adopting a balanced budget makes a regime neoliberal. I don’t mean to imply that colonialism is the same as neoliberalism. I only meant to point out certain similarities between economic policy in a colonial regime and under neoliberalism. Perhaps I have been a little looser with definitions than I would like, but my point is simply to point out the similarities in the conduct of economic policy under the two regimes. There will be differences; colonial policy would require a balanced budget, while neoliberalism would say that the deficit must be capped at 3% in India. But the differences, I would argue, would only be those of degree, and not of kind. I was interested here in the similarities, while in now way denying that historical specificities are important in defining the overall character of colonialism vis-a-vis neoliberalism.

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Hi Dr DeLong. Sorry for the late reply. I did not engage with the argument of neoliberalism as “counsel of despair” because I was interested in another aspect, that of the similarities between neoliberalism and colonial economic policy and hence the problems with thinking of neoliberalism as a positive policy solution for former colonies.

However, I did allude to this argument, where I mentioned how America often colluded to bring about the very same elites in power in several countries that would go on to render democracy unworkable, thereby rendering statements like “the prospects for stable political democracy in the political periphery are slim” extremely problematic. Moreover, I don’t think I can agree with the idea that neoliberalism represents a suitable policy for economies with heavy-handed governments, because neoliberalism has often made use of and supported those very same governments that go on to repress human rights and political freedoms. If neoliberals were committed to the idea that authoritarian governments are detrimental for an economy, Margaret Thatcher and Milton Friedman would never have engaged with Augusto Pinochet, but they did.

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>By the end of the 1970s, however, it was clear to all except blindered ideologues that something had gone very wrong with social democracy at the periphery. (And that even more had gone wrong with really-existing socialism at the periphery.) Stable political democracy proved far more to be the exception than the rule. Authoritarian rule by traditional elites, dictatorship by impatient army officers, and charismatic populist politicians ruling by virtue of carefully-prepared and carefully-staged plebiscites were much more common than were stable parliamentary or separation-of-powers democracies….

>As Marx wrote, the executive branchy of the modern state is nothing but a committee for managing the affairs of the ruling class—meaning, among other things, that a democratically-elected legislative branch turns the state into something better. But the prospects for stable political democracy in the periphery are slim. And thus the government becomes the tool of the ruling class—a ruling class that may be made up of army officers, or landlords, or urban elites, or those who profit as middlemen from the traditional channels of trade and exchange—who are not terribly interested in the success of social democracy or in rapid broad-based economic growth.

>Hence the policy advice of neoliberalism as a counsel of despair: get the state’s nose out of the economy as much as possible. When the state is neither an instrument of positive redistribution nor an instrument of growth-boosting investment, its interventions in the economy are likely to go strongly awry. And to the extent that a reduction in the economic role of an elite-controlled state can be required as a price for rapid incorporation of an area into the global economy, such a reduction should be required.

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