This article aims to explain how standard economic theory—reflected in much of the popular policy folklore— has served to undermine the above propositions or runs counter to them. The first section shows how policies based on a neoclassical view of the labour market ultimately weaken workers' bargaining position because of pervasive market failures. The next two sections critically discuss the welfare and employment implications of a wider set of policies from capital market liberalization to pro-cyclical fiscal and monetary management— which are pursued on the theoretical assumption that efficiency and equity/distribution can be dealt with separately. The fourth section is a plea for labour to be seen as an end in itself, not a means of production, and development as a transformation of society; while the fifth section looks at the role of the international community in setting the objectives of socio-economic development. A concluding section sums up the discussion and offers some policy proposals aimed at providing full employment and better working conditions.