The 1980s were not only a period of diminishing returns in development thinking, as identified by Ranis and Fei (1988, p.10), but also the decade of the victory of neoliberalism, a pronounced backswing of the pendulum towards anti-Keynesianism, anti-interventionism and monoeconomics. Lack of theoretical impetus was compensated by more enthusiastic belief in the benevolence of ‘free’ markets, deregulation and privatization. This conservative tide virtually wiped out critical thinking in the social sciences, completely muting critical approaches in development studies. The breakdown of the Soviet bloc, allegedly the final victory of capitalism, contributed to a practically unchallenged rule of neoliberal ideology, first shaken in 1997 by the Asian crisis. Rodrik (1996, p.9) calls the extent of convergence about current fashions in economic development policy remarkable. What unites the ‘vast majority of professional economists in the developed world who are concerned with issues of development’ now is ‘faith in the desirability and efficacy’ of a strategy which ‘emphasizes fiscal rectitude, competitive exchange rates, free trade, privatization, undistorted market prices, and limited intervention’ (ibid.). The prevailing attitude towards price distortions illustrates this fundamental change in a nutshell. Streeten (1994) draws attention to the curious transformation of the expression ‘getting prices right’. In the 1960s, it meant the calculation of correct shadow or accounting prices instead of market or actual prices reflecting all sorts of distortions. Market power, externalities or highly imperfect markets in many SCs are reasons why actual prices are unlikely to reflect correct prices in the textbook sense. In an economy...
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