Extract from a course diary prepared as part of a graduate course on Development Theory and Practice taught by Dr

Peadar Kirby at Dublin City University, 1998.

Lecture 8: Trade, Aid and the Magic of the Market

By Rob Kevlihan

‘Making markets work better’- the new mantra of development theory. Moving beyond blind
adherence to the allocative effects of the market to a recognition that society and the state need to
ameliorate market failures.

The strange thing is that the need for regulation has been recognised in certain sectors for many
years. In that heart of conservative neo-liberalism that is the accountancy profession, it has been
recognised that the market could not be trusted to ensure the best outcome for society for almost
30 years. In the wake of a number of financial scandals in the late 1960’s, the profession began
developing standards of accounting and disclosure of financial information that companies must
adhere to. These standards have developed to become ever more complex to reflect the
increasing complexity of the business world. The accountancy profession has done this
voluntarily, seeking to pre-empt state interference in the regulation process. There has been a
clear consensus in the profession that regulation is not just a nice thing to have, but that there is
an economic need for standard setting (1).

It is somewhat surprising then, that the ideology of the unrestrained free market has taken such a
grip on policy makers over the last 20 years. That perhaps there is now a slow realisation that
some regulation is required in the wake of the East Asian currency crisis is beyond doubt (2). It is
unfortunate that the powers that be only seem to be capable of putting regulation in place after
the horse has bolted, so to speak (financial scandals in the accountancy profession, currency
crisis in the financial markets).

In many ways, the resurgence of laissez faire was an ideological backlash to the failure of social
democracy to sustain economic prosperity in the face of market shocks and growing in-
efficiency in industrialised economies. It is in some ways depressing that it appears that in order
to remain efficient, fear of failure – of redundancy, making losses, company rationalisations etc,
must be part of the motivational package. This realisation means that the market cannot be
ignored, that it must be the centre of attention in an economy. But, it cannot be allowed to
overshadow the common good, or dictate policies that create gross inequalities in the system.

Making markets work better – and being clear about what ‘better’ means, is where development
studies should offer fair and just solutions to the current inequalities imbedded in the global
political economic system.

References

1. Kevlihan, Robert, 1993: A Critical Appraisal of the Accounting Standards Committee 1970-1990,
Dissertation submitted in part fulfilment of the degree of Master of Accounting, University College Dublin.

2. The threat of moral hazard that now exists was recognised by Peter Sutherland in his address to the
Trocaire conference, Working towards a Global Ethic, held in Dublin on 30th October 1998. In his keynote
address, Mr. Sutherland recognised the need for stricter regulation of the international financial markets to
combat this risk.
Extract from a course diary prepared as part of a graduate course on Development Theory and Practice taught by Dr
Peadar Kirby at Dublin City University, 1998.