The neoclassical counterrevolution was a response to the interventionist dependence revolution of the 1970’s which has diagnosed the problem of underdevelopment to be due to the predatory behavior of the developed world. The neoliberal school of thought redefined underdevelopment instead to be a result of poor allocation of resources brought about by the distortionary price controls and regulations used as tools of state intervention. It posited that too much state involvement in the economy is at the root of slow economic growth. The fundamental assumption in this perspective is that an unregulated market performs better than one with government regulation. It is convinced that although markets also run the risk of failing; market failure is much less costly than government failure.
Where the dependency theorists advocated the reform in the international economic system, the counterrevolution thinkers insist that the speedy solution is the promotion of free markets that are supported by permissive governments that allow the market to perform its self-regulating functions. The prescription of the neoliberals to stimulate economic growth include not only the promotion of competitive free markets but also the privatization of state-owned enterprises, the promotion of free trade, the expansion of trade through advancement in exports and the well reception of investors, and the elimination of government regulations on prices.
Commanding Heights: Battle of Ideas puts together the arguments of the neoliberal school of thought as it emerged and influenced economic policy in the 20th century. The documentary particularly contrasted neoclassical counterrevolution approach to the structurialist-interventionist modes that depicted socialist struggles in the developed world. The Keynes-Hayek rivalry of ideas also surfaces as the major themes for the battles in economic thought, much of what we see going on in the ongoing struggle in today’s world for economic balance and success.
Socialism and its variants basically adhered to the policy of state intervention or central planning to promote equitable development. Soviet Russia has marked history to be the pioneering nation to unite against the market economy and smash capitalism. Lenin had introduced the tenants of state control on what he called the commanding heights of the economy- steel, railroads, coal, the heavy industries which are obviously the capital goods needed in promoting industrialization. Stalin had furthered the agendas through central planning, the control of every aspect of the economy by the government. Almost a third of the world followed Russia’s example and commanded Communist regimes with China as the best example.
These historical results seem to suggest that indeed the neoclassical counterrevolution perspective seems to get it right, at least for the developed world. But how can the relative economic success of the communist/socialist states of Russia and China be explained? Today, these grey areas suggest that there is no one way of handling the affairs of nations although ideas that fuel economic thinking have serious implications on development. It seems as if we are literally living on economy that hasn’t seemed to find the right balance and longevity. Prior economic situations worked and simply because during their time, there was war and with war came many jobs. However, when war is over, it seems the economy hits a high inflation rate and before we know it, starts spinning out of control and people are losing houses, not paying bills and not spending money which we know creates supply and demand.
So the question is, then, how do we take past examples of economic success and mold them to fit today’s economy properly, without losing GDP and having to outsource all our jobs? Presidents such as Kennedy, Nixon, and Carter even tried to use old tactics and only temporarily succeeded. Free markets still make up a chunk of the economy in today’s world, and it just goes to show there is an ongoing battle between the powers of government and the forces of the marketplace over who gets to control the economies of the world’s greatest nations. From this film and the concepts we have learned in class, I have gathered that even the most brilliant of minds have trouble ‘balancing’ out an economy and it truly does depend on the ‘Invisible Hand’ theory; situations in an economy will work themselves out-eventually.
The PBS website provides video documentation at (http://www.pbs.org/wgbh/commandingheights/hi/story/ch_menu.html.)