How Does Neoliberalism Legitimise Globalism?
How does Neoliberalism Legitimise globalism?
Neoliberalism legitimises globalism in that it promotes the complete breakdown of barriers and regulatory controls to the flow of capital, market access and international trade. At the core of neoliberal theory is the doctrine of free trade, liberalisation, deregulation and privatisation. It is these policies that will be individually explored and shown that when pursued and implemented, they will inevitably result in an increasingly globalist and globalised world. Neoliberal theory sees the market as being the best allocator of all resources and that government intervention should be as little as possible. We examine how this results in no only a globalised world but one where the sovereignty of states are eroded away and monolithic system of international relations emerges.
We will understand globalism to mean the institutions and laws that enforce and propagate an increasingly open system of capital flow and accumulation. We see how the core neoliberal fundamental of free trade legitimises globalism in that institutions such as the IMF, World Bank and WTO enforce strict conditions of trade liberalisation and breakdown of trade barriers (Hart-Landsberg). Since the formation of the Bretton Woods institutions in the post Second World War years, the direction of the institutions has drastically changed and adopted a strict neoliberal stance (Stiglitz, 2002: 12). Thus the conditions of the IMF on desperate countries include an open policy towards foreign trade which in turn results in the flooding in of western corporation products, often resulting in detrimental effects to the local producers as was the case in Jamaica in 1977 (Black, 2001).
However we see a degree of hypocrisy by the western nations who push for free trade policies amongst the nations of the global South, yet still maintain strict protectionist policies themselves (Makwana, 2006). The result of these free trade policies and lower trade barriers is the erosion of the sovereignty of the state. The state is persuaded to give up all control over what enters and leaves its country and thus is made an essential puppet to the demands of the Bettons Woods institutions.
As neoliberal policies are followed and enforced, it is inevitable that a more globalised world will emerge as countries are forced drop protectionist policies. This is a result of the neoliberal policy of liberalisation and market access, which stems from the original theory of liberalism that sees trade as being a win-win situation, if not on equal levels. However, as countries are forced to open their markets, they find their markets increasingly dominated by foreign corporations who crush the local infant industries, controlling the market and providing little long-term benefit for the local economy or its people (Makwana, 2006).
Liberalisation also includes the flows of what Stiglitz calls ‘hot money’ (Stiglitz, 2002: 17). Before the seventies, there were strict capital flow controls, however, as the Washington Consensus took root, these are rejected as inhibitive to economic growth and development. However these massive flows of capital cause havoc for the economies involved, causing uncertainty not providing any real sustainable growth in that economy (Stiglitz, 2002: 17-18). This policy of liberalisation is essential to the creation of a globalist world where capital has no restrictions nor limits. Once again we see how the sovereignty of nations are whittled away as they (often unwillingly) subscribe to the Washington Consensus’ policies.
The neoliberal principles of privatisation and deregulation provide the framework for allow a greater global flow of capital to be possible. Privatisation is understood as being the transfer of ownership of production or services from the state or public to private companies and enterprises (Makwana, 2006). Deregulation is the means of removing restrictions and barriers to the activities of the private sector, nationally and internationally (Makwana, 2006). Whilst regulations seek to protect human rights, environmental concerns as well as ensure a handle of control over the national economy, they also are seen as restrictive to profit for corporations (Makwana, 2006). Thus as capital is to flow freely around the world to access markets, there is a definite need for deregulation on behalf of the national states in order to assist this. In addition to deregulation privatisation further legitimises globalism in that it transfers ownership to private entities, which in many case act in a transnational fashion.
Privatisation contributes to the erosion of the states sovereignty by removing the states role in the running of essential services and handing them over to private interests whose sole gain is that of profit and who are accountable to none but the shareholders. In the case of deregulation, sovereignty is seriously impeded to the case that the state becomes a powerless entity in the management of the economy and corporations have free reign to do as they please, regardless of any negative effects they may have.
In conclusion, we have seen how at the core of neoliberalism lie policies of free trade, liberalisation, deregulation and privatisation. It is the very nature of these policies that result in an increasingly globalised world and in particular a world where the flow of capital has no restrictions. However we have seen that with a more globalised world, the one institution that suffers as a result of this is the state and its sovereignty. The Washington Consensus has resulted in free trade policies being dictated upon struggling countries, the deregulation of controls and the privatisation of natural resources and services of these nations. The results are detrimental to these nations, whilst it is the international corporations that benefit, thanks to the neoliberal agenda being pursued by the international community’s institutions.
Bibliography:
Black, Stephenie. 2001. About “Life and Debt” Documentary. [Online] Available: http://www.lifeanddebt.org/about.html. [27/09/09]
Makwana, Rajesh. 2006. “Neoliberalism and Economic Globalization”, [Online] Available: http://www.stwr.org/globalization/neoliberalism-and-economic-globalization.html. [26/09/09]
Stiglitz, Joseph. 2002. Globalisation and its discontents. (Penguin Publishers. Great Britain.) P.4 -18.
