The General Assault on Development Planning and the State as an Agent of Economic Change: Neoliberalism, the IMF and the World Bank

By 1989, development planning, and with it the state as an agent of economic change, had been under comprehensive and sustained attack, in India and elsewhere, for two decades. The most savage line of assault, which gathered strength in the 1970s and had become hegemonic among orthodox, neoclassical economists by the 1980s, was that of neoliberalism. Neoliberalism found its intellectual formation, and its major practitioners, in the United States, although its influence soon spread pervasively from there. Its intellectual centre continues to be the United States. The assault, and its relentless anti-statism, was omnivorous: it was directed at advanced capitalist countries, less developed countries and socialist countries alike. All of these, it was postulated, were infected by the virus of state intervention. It made a determined onslaught on the interventionist state, which was portrayed consistently as a predatory state and one that inevitably, through its intervention, imposed crippling inefficiencies of resource use (allocative inefficiency) and spawned pervasive rent-seeking. It presented a virulent critique of planning, which was represented as simply the institutionalized means whereby the state pursued its predation, extended and reproduced its massive inefficiencies, and gave rise to growing and deeply entrenched rent-seeking. It advocated, as essential to economic health and economic development, the unfettered operation of the market. Its detailed policy prescriptions were summed up in its watchword, liberalization.

Such advocacy, in its turn, found powerful institutional support in the lending practices, with their insistent cross-conditionality, of the International Monetary Fund and the World Bank.