Introduction: Neoliberalism Under the Microscope
Neoliberal orthodoxy has dominated global economic thinking for decades, promising stability and growth to the Global South. However, the reality has been different: the forced adoption of these principles often leads to an explosion of unemployment and the deepening of social inequalities. This article deconstructs myths regarding the free market and highlights how macroeconomic dogmas stifle the potential of developing nations. Readers will learn why the universal prescriptions of international institutions fail and what role an active state must play in building sovereignty.
The Washington Consensus and the Dogma of Low Inflation
Neoliberal macroeconomic policy is based on a "holy trinity": low inflation, fiscal balance, and central bank independence. In developing countries, an obsessive focus on price stability often comes at the expense of the real economy. High interest rates, while pleasing to rentiers, stifle investment and limit employment. Central bank independence becomes a facade that relieves policymakers of responsibility for the social costs of their actions.
Institutions such as the IMF and the World Bank, through structural adjustment programs, force pro-cyclical fiscal discipline on nations. This means spending cuts during recessions, which, instead of healing the budget, deepen the crisis and destroy public services. For the Global South, public debt should be an investment in infrastructure; meanwhile, the neoliberal straitjacket forces governments into austerity measures that perpetuate the development trap.
Foreign Investment: Development or Exploitation?
Foreign capital is not monolithic. Portfolio investments are speculative and unstable capital that flees the country at the first sign of crisis, triggering financial catastrophes. Conversely, foreign direct investment (FDI), while theoretically bringing technology, is often limited to creating low-value-added assembly plants. Transnational corporations rarely share knowledge and use transfer pricing to avoid paying taxes in the host country.
Developed countries employ a strategy known as "kicking away the ladder." They built their own power through protectionism and state support, yet today they forbid poorer countries from using those same tools. The liberalization of capital flows often displaces local investment and prevents the emergence of a strong domestic industry. The nationality of capital matters—decision-making and research centers almost always remain in the corporations' home countries.
Free Trade as a Myth and the Role of the Developmental State
Free trade is a narrative masking deep market asymmetry. The World Trade Organization (WTO) system imposes rules favorable to technological leaders, labeling attempts to protect local markets as the "sin of protectionism." Economic anthropology teaches us that trade is not an abstract mechanism but a relationship embedded in culture and power hierarchies. Without their own strategy, developing countries remain trapped as suppliers of raw materials and cheap labor.
The solution lies in returning to the concept of the developmental state. The state must be an active strategist that selects investors and negotiates terms firmly: technology transfer, local hiring, and profit reinvestment. Development does not happen magically through the "invisible hand of the market." It is created by efficient institutions and conscious policy capable of framing global capital within the national interest.
Summary: Toward Economic Sovereignty
Historical analysis proves that no economic power was built through blind obedience to neoliberal dogmas. Foreign investments are ambivalent—they can stimulate growth, but they can also deepen dependency and stifle local initiative. The key to success for the Global South is not unconditional border opening, but the courage to build its own independent path of development.
Will developing countries manage to cast off the straitjackets imposed upon them and regain their agency? The answer depends on the determination to challenge dominant narratives. Economic sovereignty requires tools: a wise state and a strategy that prioritizes social aspirations over abstract market indicators.
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