NEO-CLASSICAL THEORY OF DEVELOPMENT, NEO-LIBERALISM AND EXPERIENCE OF KENYA

Kishore Kulkarni and Ms. Kathleen Fogelberg

The IUP Journal of Applied Economics, 2005, vol. IV, issue 3, 15-26

Abstract: Neoclassical models of economic development are currently in fashion in policymaking circles. The experience of developing countries, notably Kenya, decreases the validity of this model. Kenya at independence invested in small-scale agriculture, where the majority of its population was employed and an import substitution strategy. In addition, their earlier emphasis on health provided care to the majority of its population. However, when the country adopted the policies and ideals embraced by neo-liberalism, their economy and society took a turn for the worse. Neo-liberalism relies on the market for growth, but when a large percentage of the population cannot participate in the economy because of AIDS or other health problems, how much growth can be achieved? And who will be the beneficiaries of this growth? A more effective model of growth for Kenya may prove to be a human capital approach put into practice. Real investment into human capital is necessary in a country where AIDS is somewhat responsible for declining productivity, and definitely responsible for declines in life expectancies, which will inherently affect macroeconomic growth and development.

Date: 2005
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