Neoliberalism & Globalization Research Paper Starter

Neoliberalism & Globalization

(Research Starters)

As America and Europe emerged from the wreckage of World War II, a new economic philosophy developed: neoliberalism. This was an updated version of the strong belief in the markets once endorsed by Adam Smith, with a new emphasis on global markets. Neoliberals hold that if the markets are allowed to work without excessive government interference, and free of burdensome social spending, democracy will flourish, and the best social good for the greatest number of people will be achieved. To implement that vision, several organizations were created at the Bretton Woods Conference, held in New Hampshire as the war was coming to an end; of these, the most critical were the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (which eventually was replaced by the World Trade Organization). Neoliberal programs have not always produced either the maximum benefit for the greatest number, nor has democracy always followed in the wake of free markets. In the twenty-first century, the push for global integration of markets has become intertwined with the neoconservative foreign policy of the post–9/11 Bush administration. All subsequent attempts at further agreement on global trade policy have ended in failure.

Keywords Absolute Poverty; Agreement on Agriculture (AoA); General Agreement on Tariffs & Trade (GATT); Globalization; International Monetary Fund (IMF); Neoconservative; Neoliberal economics; North American Free Trade Agreement (NAFTA); Structural Adjustment Programs; World Bank; World trade Organization (WTO); Neoliberalism & Globalization

Global Stratification: Neoliberalism


Neoliberalism is a return to an economic philosophy that grew out the thinking of John Locke and Adam Smith. The liberal economic outlook held two principle tenets: the free and democratic exercise of self-interest leads to the best outcome for collective social good, and markets know what is best. Private property is at the heart of self-interest. By the end of the nineteenth century, the excesses of self-interest based in private property were becoming well known; socialism offered an alternative path toward the collective good. In the United States, presidents from Woodrow Wilson to Franklin Roosevelt to John Kennedy and Lyndon Johnson understood that to co-opt the appeal of socialism, government must regulate the excesses of the market.

As Europe emerged from the devastation of World War II, a new social democratic compact developed with a shared belief that capital cannot have unlimited ability to shape politics; in addition, there was a common agreement on the desirability of universal access to health care and education. In "Why Social Justice Matters," Barry argues that as recently as 1980, that understanding did not seem utopian; rather it made for plain common sense. In the subsequent decades, that understanding has been badly eroded. His focus is on the re-emergence of nineteenth-century liberal economic philosophy:

Which idolize competition and the resulting disparities in wealth it brings, disparities which feed further competition on increasingly unequal terms…Its "success" rests on its ability to shift investment to spin short term profit out of the unraveling of the ecological and social fabric (Preda, 2007, p. 319).

The result is gross inequality of opportunity; Barry argues that this fact must be addressed if we are to preserve a democratic tradition and protect ecological resources from devastation (Preda, 2007). Of course, other economists see the results of globalization in far more positive lights. Naim urges further integration of global markets in order to lift millions more out of poverty (2007).

Neoliberal Reforms

It is taken as a matter of fact that neoliberal reforms will lead to good government; free markets and democracy became synonymous. Kagarlitsky argues that to believe this is to ignore historical reality. He uses Russia as an example. As post-communist Russia went through often painful economic changes that fit the prescription of neoliberalism, it slowly moved back to an authoritarian regime (cited in Job, 2001). China is another example of country praised by the World Bank for economic reforms, which have moved many Chinese out of absolute poverty. However, the poorest of the Chinese face significant cuts in social and health-related services and the loss of subsidized rents. Surely, no one is arguing that the Chinese government has become democratic in the process of implementing these neoliberal reforms (Petras & Veltmeyer, 2007).

Understanding neoliberalism is critical to grasping the philosophy that has driven development for decades and, though in retreat by the late 1990's, still holds sway in the World Bank. If the goal is good government; the critical function of the newly improved government is to get out of the way of the markets, allowing them to “get the price right” (Oniz & Senses, 2005, p. 264). Inherent in a policy of a reduced role for the state is "the privatization of public enterprises and services, and government spending cuts to social services such as health care, education, social security and public housing" (Hale, 2007, p. 149). These are referred to as Structural Adjustment Policies (SAPs), a necessary precursor to growth. The International Monetary Fund (IMF), created in conjunction with the World Bank, serves as an international observer of the macro economies of member nations, with particular interest in exchange rates and balance of payments. Often, it is to get these two issues under control that SAPs are implemented.

Free Trade

As neoliberal thinking expanded during the second half of the twentieth century, globalization of the world's economy resulted. Central to the philosophy of neoliberalism is free trade, or the elimination of market barriers. The World Trade Organization (WTO) is the international body charged with overseeing the implementation of global trading rules. WTO came into existence in 1995, replacing the General Agreement on Tariffs and Trade (GATT), a framework that had been in place for the preceding 50 years. Both GATT and WTO give the organizations the power to override protections enacted into law at the federal, state, or local level, if they are deemed barriers to trade. This has had the effect of negating laws designed to protect small-scale agriculture, the environment, and labor (Rauch, et al., 2007).

Globalism is merely a new "package" for neoliberal ideology, according to Steger. He sees it as a:

Market ideology endowing the buzzword "globalization" with norms, values, and meanings that not only legitimate and advance neoliberal interests, but also seek to cultivate consumerist cultural identities in billions of people around the world (2005, p. 32).

He argues that when combined with power behind the IMF and World Bank requirements, the constant refrain of the supporters of globalism during the 1990's was omnipresent. Bourdieu and Bauman add that the "strong" discourse on globalism was hard to ignore, as the message of deregulated markets, liberalized trade, and privatization of state-owned business were sold as "common sense," based on "an accurate description of 'objective reality'" (Steger, 2005, p. 32). New York Times columnist Thomas Friedman provides an example of prophetic nature of supporters of globalism:

The driving idea behind globalization is free-market capitalism — the more you let market forces rule and the more you open your economy to free trade and competition, the more efficient your economy will be. Globalization means the spread of free-market capitalism to virtually every country in the world (Steger, 2005, p. 34).


Advantages of Globalism

At the 1996 G-7 Summit in Lyon, France, the heads of state of the seven major industrialized democracies issued a statement on the advantages of globalism:

Economic growth and progress in today's interdependent world is bound up with the process of globalization. Globalization provides great opportunities for the future, not only for our countries, but for all others too. Its many positive aspects include an unprecedented expansion of investment and trade; the opening up to international trade of the world's most populous regions and opportunities for more developing countries to improve their standards of living; the increasingly rapid dissemination of information, technological innovation, and the proliferation of skilled jobs. These characteristics of globalization have led to a considerable expansion of wealth and prosperity in the world. Hence we are convinced that the process of globalization is a source of hope for the future (Economic Communique, 1996; Steger, 2005, p. 36).

While globalists admit that there might be an unequal global distribution pattern, they nevertheless insist that eventually the market will right these "irregularities." John Meehan, chairman of the U.S. Public Securities Association explains: "'Episodic dislocations' such as mass unemployment and reduced social services might be 'necessary in the short run', but, 'in the long run,' they will give way to 'quantum leaps in productivity'" (cited in Steger, 2005, p. 37).

Friedman's faith in the efficiency of markets was echoed by President Bill Clinton's Undersecretary of State for Economics, Business and Agricultural Affairs, Joan Spiro: "'One role [of government] is to get out of the way — to remove barriers to the free flow of goods, services, and capital'" (Steger, 2005, p. 34). Both stressed the inevitable march of globalization; that view was echoed by the elite of the Southern Hemisphere. Manuel Villar, the Philippines' Speaker of the House of Representatives, reflects that view: "We cannot simply wish away the process of globalization. It is a reality of a modern world. The process is irreversible" (Steger, 2005, p. 35). As proponents merged their view with inevitable world forces, opposition came to be seen as "unnatural, irrational and dangerous" (Steger, 2005).

A universal claim of the neoliberals is that globalism spreads democracy. Indeed, the case is made that "freedom, free markets, free trade and democracy are synonymous terms" (Steger, 2005, p. 37). Fukuyama argues for a direct relationship between globalism and democracy, explaining, "The level of economic development resulting from globalization is conducive to the creation of complex civil societies with a powerful middle class. It is this class and societal structure that facilitates democracy" (Steger, 2005, p. 37). A year after the 9/11 attacks, President Bush made this assertion:

As we preserve the peace, America also has an opportunity to extend the benefits of freedom and progress to nations that lack them. We seek a peace where repression, resentment and poverty are replaced with the hope of democracy, development, free markets and free trade (Steger, 2005, p. 37)....

(The entire section is 4916 words.)