How Has Neo-Liberal Policy at Both the Domestic and International Level Helped Drive Globalisation - Coursework Example

How has neo-liberal policy at both the domestic and international level helped drive globalisation? Word Count: 2037 Introduction Neo-liberal policy or neoliberalism is an economic policy that involves minimal government intervention in business by having a free market scenario where the allocation of resources is determined by the forces of demand and supply. There is a link between neoliberal policy and capitalism – an economic system in which a country’s trade and industry are under the control private owners who aim to make profit from their activities, rather than the state having control over trade and industry activities. The link between neoliberal policy and capitalism is seen through the fact that when there is a free market environment, private firms are able to grow and compete with each other, innovate and look new markets for labour and their products. As firms grow at both local and international levels, they look for opportunities to adopt better technologies, get cheaper labour and expand the markets for their products or services. This is partly what had driven the concept of globalisation, the phenomenon whereby the world is becoming increasingly interconnected due to increased trade and cultural exchanges between people across the globe. Based on the background information above, this essay will review how neoliberal policy at both the domestic and international level has helped in driving globalisation. The essay will define the concepts of neoliberalism and capitalism as found in literature and relate the concept of neoliberal policy to the growth of globalisation. Definition of neoliberal policy Neoliberalism can be loosely defined as the conduct of human affairs in an environment in which a ‘free market’ is prioritised (Castree, 2010, p. 1726). This means that in a neoliberal economic environment, producers are free to produce goods or services and sell them to buyers, who also have the freedom to choose what to buy and at what price. As noted by Castree (2010, p. 1726-1727), under neoliberalism, producers are depicted as having a free hand to deliver services and goods at a competitive price because if they fail to do so they would get few of no buyers to sell to and make profit. Similarly, consumers are depicted as having a free hand to determine from which manufacturers to buy which items, based on their ability to buy those items. Neoliberalism has also been defined as a political economic theory that proposes that the wellbeing of human beings can best be achieved by having individual entrepreneurial skills and freedoms within an institutional setting that is characterised by free markets, private property ownership and free trade rights (Park & Lo, 2012, p. 156). This means that neoliberal policy advocates the creation of an institutional framework that promotes the freedom for people to use their skills to own property, to trade and to engage in other entrepreneurial activities that are beneficial to the society. This implies that governments have to promote free market ideas by promoting the creation of policies and institutions that reflect a free market environment (Kotz, 2015, p. 8). Such include reducing taxes to encourage businesses to invest and deregulating sectors such as manufacturing, banking, education and transportation so as to attract private capital in general and foreign investment in particular (Ha & Kim, 2015). Neoliberalism and Capitalism It has been argued that “neoliberalism drives neoliberal capitalism and neoliberal globalisation” (Howard, 2008, p. 60). In essence, neoliberalism drives capitalism because for capitalism to thrive, private citizens (capitalists) need to have the freedom to invest in different businesses with little interference from the government. This means that firms need to have the capacity to make decisions regarding resource allocation, with the government only intervening in the market to create an environment that ensures efficiency and fosters competitiveness. At the local level, governments have to remove barriers such as overregulation, taxation and stringent requirements for starting businesses. At the international level, governments have to remove barriers such as protection of local industries to attract foreign investors. The free market environment that is created by neoliberal policy enables firms to be able to innovative in order to be competitive and to be seen by consumers of the products that they produce. As Baumol (2002) notes, innovative activity is mandatory under capitalism. In turn, the environment that is created in a free market system also promotes growth of capitalism since it speeds up the spread of various phenomena such as technology. That is, when things like technology and other resources become readily available as a result of openness within and across countries, this spurs growth since it creates more opportunities for other firms to be established. How neoliberal policy has helped drive globalisation Globalisation can be defined as the tendency of various aspects of the world (economies and national institutions) to move towards increased economic, political, cultural, and technological interconnectedness (Wild & Wild, 2015, p. 31). The key characteristic of globalisation is denationalisation (i.e. national borders becoming less relevant) (Wild & Wild, 2015). Today, globalisation can be seen in terms of increased movement of people across different countries, the spread of cultures from one region to another, the shared use of technologies such as the Internet, the growth of brands that are accepted globally, and so forth. Thus, it should be noted that globalisation entails much more than the expansion of trade and investment among nations (Wild & Wild, 2015, p. 31). For instance, globalisation of markets is characterised by the convergence of buyer behaviours, such that consumers from across the world can buy products that have the same features being sold globally. For example, companies such as Samsung, Apple, Nike, Toyota, and many others produce products that are globally recognised. Neoliberalism and globalisation are different concepts, but they are intertwined (Ziai, 2016, p. 82). The link between neoliberal policy and globalisation can be seen in the point that on the one hand, neoliberal policies open political and economic entities to globalisation; and on the other hand, globalisation fosters neoliberalism by ensuring that more free markets are opened across the world. For instance, opening up the domestic market of a country makes it possible for the local firms to compete with each other and even look for new markets in other countries. At the international level, the growth of free markets has enabled firms to produce services and goods and sell them globally. For instance, the Coca-Cola Company is a global phenomenon when it comes to the production of soft drinks. McDonald’s, an American fast food chain, has helped spread the fast food culture among people across the world and today, there are many fast food restaurants that are offering fast food services the world over. In the financial sector, the liberalisation and interconnection of financial and telecommunication services has enabled companies such as MasterCard and Visa to spread the use of electronic payment and other card-related services globally. Globalisation can be seen to be driven by neoliberal policies that promote trade, the growth of multinational corporations, foreign investments and international finance (Siddiqui, 2012). For example, the removal of investment of barriers in a country’s domestic market can enable the entry of foreign firms into the local market. The opening up of local markets in different countries to investors has enabled companies such as Coca-Cola, General Motors, Shell, and Toyota to establish their presence in different counties across the world. The aforementioned companies and others illustrate what is referred to as globalisation of production. Globalisation of production means the spreading of production functions to areas that help companies to minimise their operating costs (Wild & Wild, 2015, p. 32). For instance, many companies such as Apple and Nike have their production units in China and other countries in Asia since these countries offer cheaper labour costs. Talking of Nike, the company has become a global brand in regard to the manufacture of sports apparel. The company is one of those that have been described as the core mediums of globalisation and representations of the global economy (Kazi, 2011). Nike shoes are made from many components that are manufactured in different countries and assembled into one shoe, thus epitomising globalisation (Kazi, 2011). For instance, the Air Max Penny basketball shoe is assembled using 52 components that are made in five different countries (Kazi, 2011). The relocation and dispersal of manufacturing operations by multinational companies such as Nike has been made possible by the fact that foreign countries (such as China and others) were willing to accommodate such companies through the removal of barriers to foreign investment. These countries have also invested in education to ensure that their people have the skills that are required in the manufacturing sector. At the international level, having membership to international organisations such as the World Trade Organisation (WTO) helps countries to operate within the rules set by the WTO. For example, through the WTO, member states are able to determine when to increase barriers or reduce barriers so as not to harm the domestic economy or other countries (Deardorff & Stern, 2002, p. 413). As noted above, globalisation is not just seen through areas such as trade but also involves other aspects such as culture and language. Park and Lo (2012) have documented a case that shows how neoliberal policy regarding language can help drive globalisation. Park and Lo (2012) note that South Korea has experienced neoliberalisation that has seen the state vouch for the use of the English language as a way of making the country embrace globalisation better. In 1995, Kim Young-sam, the then president of South Korea, stated that the nation had entered an “era of globalisation” (Jeon, 2010, p. 161). One of the major challenges that the country faced was how to equip students with proficiency in English given that the language is used internationally (Jeon, 2010, p. 161). The need to adopt the use of English in South Korea was also propelled by the increasingly high competition for jobs in the country (Park & Lo, 2012, p. 156). It was hoped that adopting the use of English would enable skilled people from South Korea to explore job opportunities in other parts of the world as a result of globalisation (Park & Lo, 2012, p. 156). As such, the South Korean government started the “English Program in Korea” (EPIK) through which Koreans were taught English to enable them become capable of advancing Korea, to help in developing strong ties between South Korea and other counties, and to improve Korea’s image in the advent of the information age as well as globalisation (Jeon, 2010, p. 161). Without doubt, it can be argued that South Korea’s decision to have its people learn English enabled the country’s population to be more in touch with the rest of the world through the use of English as a global language. The use of English in South Korea not only enables the country’s graduates to be internationally literate and able to work in a global business environment (Austrade, 2014), but also helps in opening up market opportunities for the country’s products and services (technology, electronics and many others). This shows how domestic and international neoliberal policies by South Korea have helped the country to drive the globalisation agenda. Conclusion In conclusion, it can be seen that neoliberal policy helps in driving globalisation by promoting capitalism and hence globalisation-related phenomena such as globalisation of markets and globalisation of production. With the creation of markets that have fewer government-related restrictions and barriers, companies are able to expand both at the domestic level and internationally. As companies expand, they look for new technologies, labour and markets for their products across the world. This helps in creating global markets, cultures and brands, as seen through various multinational companies such as Coca-Cola, Nike and Apple. Also, various strategies by states, such as having membership to the WTO (which advocates for the removal of trade barriers between countries), help in creating more trade and interaction opportunities between people from different countries. Some countries like South Korea have also implemented deliberate neoliberal policies with respect to areas such as language. By promoting the use of English in South Korea, the country has been able to make its population more capable of working in a global business environment. This has also helped in opening up South Korea to markets from other countries, thus helping to deepen globalisation. References Austrade. (2014). South Korea. Retrieved from https://www.austrade.gov.au/ Baumol, W. J. (2002). The free-market innovation machine: Analyzing the growth miracle of capitalism. Princeton, NJ: Princeton University Press. Castree, N. (2010). Neoliberalism and the biophysical environment 1: What ‘neoliberalism’ is, and what difference nature makes to it. Geography Compass, 4(12), 1725–1733 Deardorff, A. V., & Stern, R. M. (2002). What you should know about globalisation and the world trade organisation. Review of International Economics, 10(3)-404-423. Ha, E., & Kim, J. H. (2015). Global inequality. In E. Kavalski (Ed.), Encounters with world affairs: An introduction to international relations (chapter 11). London: Ashagate Publishing Ltd. Howard, C. L. (Ed.) (2008). The souls of poor folk. Lanham: University Press of America. Jeon, M. (2010). Globalisation and South Korea’s EPIK (English Program in Korea). In V. Vaish (Ed.), Globalization of language and culture in Asia: The impact of globalization processes on language (pp. 161-179). London: Continuum International Publishing Group. Kazi, T. B. (2011). Superbrands, globalization, and neoliberalism: Exploring causes and consequences of the Nike superbrand. Inquiries Journal, 3(2). Retrieved from http://www.inquiriesjournal.com/articles/604/superbrands-globalization-and-neoliberalism-exploring-causes-and-consequences-of-the-nike-superbran Kotz, D. M. (2015). The rise and fall of neoliberal capitalism. Cambridge & London: Harvard University Press. Park, J. S-Y., & Lo, A. (2012). Transnational South Korea as a site for a sociolinguistics of globalization: Markets, timescales, neoliberalism. Journal of Sociolinguistics, 16(2), 147–164. Siddiqui, K. (2012). Developing countries’ experience with neoliberalism and globalisation. Research in Applied Economics, 4(4), 12-37. Wild, J. J., & Wild, K. L. (2015). International business: The challenges of globalisation (8th ed). Pearson Education. Ziai, A. (2016). Development discourse and global history: From colonialism to the sustainable development goals. New York: Routledge. Read More