Consequences of Neoliberalism. Economic Consequences of Neoliberalism - Essay Example

? Consequences of Neoliberalism Neoliberalism Neoliberalism refers to a market-driven approach to the policy making process for running economy and society (Campbell and Pedersen, 2001, p3). The approach basically stems from the neoclassical theories of economics focusing upon the efficient role of the private enterprises, trade liberalization and establishment of open markets. Neoliberalism supports maximum role of the private sector in determining the dimensions of the political and economic policies and priorities of a country (Klak, 1998, p76). Neoliberalism stresses upon the shift of control from the public to the private sector because it is based upon the belief that the greater involvement of public sector will allow efficient government and eventually the overall economic condition will also be improved by giving more control to the private sector. Neoliberalism proposes some crucial principles and policy proposals for transforming the traditional economic system (Touraine, 2001, p11). Neoliberal approach asserts that deficits should be avoided and used only for occasional stabilization purpose because large deficits little effect upon the employment level of the country whereas constant deficits generate high inflation and lower productivity. Similarly, this approach also demands transformation in the taxation system, floating exchange rate, redirection of public spending towards infrastructure development, education and healthcare etc. Privatization of the state enterprises is an important proposition of neoliberal approach because it is demonstrated by the neoliberal theorists that privatization will promote competition and increase the choices available to the people in several sectors like banking and telecommunication etc. Trade liberalization is proposed by suspending the regulations that act as barrier in market entry and restrict competition in the sector. These basic principles draw some very important and transformational impacts upon the societies and economies and after the implementation of neoliberal policies the world community has experiences some significant and critical impacts of this approach within their political and social system. The global spread of neoliberalism indicates its wide acceptance and popularity across the world however, despite this approbation there is consistent increase in the questions raised against neoliberal policies and the claimed benefits of this ideology have also frequently been challenged. There is mixed support for the neoliberal policies among the developed nations of the world and their economies and societies also reflect its benefits whereas the developing countries are not as open towards the neoliberalism as developed ones. The neoliberal policies are often challenged and questioned at global level. It is widely argues that neoliberalism has brought several positive and negative consequences to the economic, political and social systems of the countries. These consequences differ from country to country depending upon the level of enactment of the neoliberal policies. The consequences of neoliberalism could be examines from social, political and economic point of views because the systems of different countries have been responded towards neoliberal policies in distinct manner (Chomsky, 1999, p32). In the modern economic system the neoliberal policies are often challenged by the new institutional economics and evolving concepts of economies of information, risk and uncertainty. In developed countries like U.S and U.K. neoliberalism is often blamed for damaging the social safety nets whereas the developing nations including some African countries complain that adopting neoliberalism policies provide little benefit to their economies and there is inclusive or significant contribution made by these policies to the economic, social and political growth of these countries. In fact, it is also claimed that neoliberal policies have negatively affected the development policies and growth process initiated before the adoption of neoliberal policies and reforms. Consequences of Neoliberalism Ideally speaking, the neoliberal policies make the economic landscape of the countries very open, business friendly and supportive to the economic activities. It insists cut back on the taxes and the spending of the government. It also instructs elimination of the tariff and other duties etc. that act as barrier to the free trade. The reduced regulation of the labour and financial market allows the state to focus more upon the microeconomic policies so that the inflation rate could be controlled. The economic activities and levels of income is also expected to be increase resulting from neoliberal policies however, the evidences from the analysis of economies of the world tell that there is great difference in theory and practice and in real the countries are not experiencing these great benefits of neoliberalism within their economic, social and political system (Elliott and Atkinson, 2008, p5). Neoliberal approach has the capability to transform the social and political system of the economies because it directly affects the theories and policies governing the socio-political systems of the countries. The consequences of neoliberalism are usually clearly visible on the economies because the changes led by these principles are transformational that altered the conventional systems. Neoliberalism has strongly been condemned and criticized by the economic experts, analysts and social scientists. It is often claimed that the political, social and economic consequences of neoliberalism are not usually favourable for the countries and many problems are penetrated within the societies after adopting neoliberalism. For instance, some experts and theorists observe that neoliberalism along with the notion of globalization has worked to sabotage the capabilities of the governments to seek self-determination because it make them dependent upon the other countries for trade operations (Brenner, 2002, p11). Neoliberalism is also criticized of being another form of capitalism. It increased the productivity in short term while giving little importance to the other factors related with the production process. In long term the countries often face the problems in expanding production to the new areas due to limited geographical space whereas neoliberalism places no limit upon business expansion and stresses upon maximum productivity and expansion of businesses cross border while neglecting several important factors (Macpherson, 1964, p43). The spread of neoliberal trade practice has also resulted in the exploitation of the workers has also become common because the production entities commonly enter the low wages labour market to get their work done at low cost giving little importance to the fulfilment of the labour laws. This claim also raise questions about the social consequences of neoliberalism because at one place the conditions of the low wages market is expected to improve through the provision of employment opportunities but on the other hand the cases of labour discrimination talks about the widely practiced discrimination of the work force as a result of neoliberal policies. It implies that neoliberalism affected each and every facet of the economy. Moreover, it also has some direct and some indirect impacts upon the political and social progression of the nations. Some of the consequences and effects of neoliberalism are controversial because the advocates of neoliberal policies view it a source of enhancing international trade whereas the opponents look on the dark side and talk about the negative consequences that the countries, economies, societies and their political systems have to encounter after adopting the neoliberal policies. The issue of consequences of neoliberalism is an enduring debate that could be steered from different perspectives (Ong, 2006, p42). Some of the economic, political and social consequences of neoliberalism are discussed below. Economic Consequences of Neoliberalism The economic consequences of neoliberalism possess great importance for the countries because this approach closely works with the economic system and change it at first place. The evolution of the neoliberal movements has eventually altered the economies of the world in so many different ways. The advocates of the neoliberal ideology argue that with the advent of neoliberalism there is considerable growth recorded in the international trade volumes and flow of cross border capitals because due to liberalized and open trade policies different countries have better market access and their international trading activities are also increased. However, some economic analysts also argue that the extent of trade liberalization of often overstated as compared with the actual level of liberalization of trade at international level (Ulrich and Elisabeth, 2001, p19). The adoption of neoliberal policies also worked to remove the trade barriers through enacting soft policies and tariff structure. There is considerable reduction observed in the public sector employment because the labour has widely shifted towards the private sector after witnessing the growth of more and attractive employment opportunities in the private sector. The efficiency of several public owned enterprises is also increased after their privatization. Some economies have also reported reduction in the size of the government as a result of adopting neoliberalism policies because the power has been distributed among the public and private sectors (Prasad, 2000, p4). Some of the consequences of the neoliberalism could be observed very clearly upon the economic scenario of the countries that adopt it. The corporate power significantly increases as a result of neoliberalism because it promotes the policies and economic changes that give more power and authorities to the corporations and large scale businesses whereas the benefits that upper class enjoys over the lower class also significantly increase from the neoliberal policies and lower class has to bear these negative consequences of neoliberalism that further worsen their deprived conditions. The countries of Latin America stand as important example of examining the consequences of neoliberalism upon the economic systems of the countries. During 1930 to 1970 some of the Latin American countries including Brazil, Chile, Mexico, Peru, and Uruguay adopted the import substitution industrialization model (ISI) with the intention of building strong industrial based and to reduce their dependency upon the import of goods from different foreign countries (Portes and Bryan, 2005, p21). Eventually these countries experienced rapid pace of urbanization of major cities and the population of the urban working class was also significantly increased. At the same time, there were frequent episodes of protests and campaigns led by the left wing parties and trade unions that indicate widespread dissatisfaction and economic turmoil in the counties. The economic progression of these countries show that the long run and short run consequences of neoliberalism are very different and the benefits of neoliberalism availed in short run after appear to be disadvantages of neoliberalism in long run (Pollin and Robert, 2003, p92). The situation resulted in the generation of great economic crisis. In order to came out from this critical situation the leaders of these countries decided to adopt the neoliberal approach and consult towards the policies and ideologies divulge by neoliberalism to make their countries open for the international trade. As a result of implementation of neoliberal theories these countries experiences some major changes within their urban system growth and expansion, employment level of the urban cities, crime rate, poverty and economic inequity (Portes and Bryan, 2005, p22) It was found that there was continuous decline in the total size of the urban population due to decline in the migration flow of these countries. These countries witnessed transformation of their urban systems due to neoliberalism policies because the major urban cities became less attractive for the population due to factors associated with the end of ISI. The poverty level was also affected from the neoliberal policies in these Latin American countries. These policies added to overall poverty within the countries however, the upper classes became the recipient of the benefits provided by neoliberalism and the gap between rich and poor was further widened in these societies (Foucault, 2008, p143). There was considerable increase recorded in the income level of the upper class and other people that eventually led towards increase in crime rate and victimization in urban and suburban areas. It implies that neoliberalism supported the economies of these countries by increasing the earnings of the one class but the overall poverty was increased in the countries and common people suffered from negative consequences of neoliberalism (Ong, 2006, p76). The negative consequences of neoliberalism are also widely claimed by the economic analysts and experts. It has been observed that neoliberalism results in inequality within the economic system because it provides the opportunities of growth to the larger and established businesses whereas the small or struggling businesses find no support from the neoliberal policies and often went one step backward in the race of business competition and the gap between giant businesses groups and small businesses is widened due to the implementation of the neoliberal policies that do not give equal opportunities to all the businesses scales (Colin, 2010, p3). Neoliberalism is also alleged with generating an uneven economic system where the corporates are getting maximum opportunities to ptodice regardless of the market demands and the geographical conditions and limitations. “ Meanwhile, capitalism rewards efficiency and punishes waster, Profit hungry companies found ingenious ways to reduce the natural resources inputs necessary to produce all kinds of goods, which in turn reduces environmental demands on the land and the amount of waste that flowed through smokestacks and water pipes: (Heynen, 2007, p1) The working class also encounters some major consequences of neoliberalism in both positive and negative way. Neoliberal economies promote flexible working conditions and informal employment and provide more working opportunities to the people in different fields but at the same time there is considerable increase recorded in the industrial accidents and occupational diseases because neoliberal policies stress upon increased productivity often having negative impacts upon the labour conditions. The exploitation and discrimination of labour is also increased in the neoliberal economies. Social, Cultural and Political Consequences of Neoliberalism The effects of neoliberalism are not obvious upon the economic systems of the world community but the social, cultural and political landscape also widely exhibit the consequences of neoliberalism in form of evolution of different notions and change in people preferences and behaviours. The economic experts as well as social scientists have also observed prominent consequences of neoliberalism upon the social and political spehre of the societies. It is believed that "we are in the midst of a fundamental change in the nature of society and politics. This change hinges around two processes: globalization and individualization” (Ulrich and Elisabeth, 2001, p14). These fundamental changes in nature of society and politics are brought by capitalism and neoliberal ideas that eventually evolved individualism and the societies across the world widly witnessed changes backed by the neoliberal ideology. Neoliberalism is considered to be closely connected with the political freedom. Friedman (1962) developed an argument in his book Capitalism and Freedom that political freedom could not be attained without gaining economic freedom because economic freedom is an integral component of the political freedom. The argument was supported by the evidences showing that when there is centralized control over the economic activities the countries also experience spells of political repression (Harvey, 2005, p24) In case of reducing central control over the economic activities the economic and powers are separated from each other and both of these are used to provide counterbalance to each other. The reduced control also allow competitive capitalism where people are protected from the economic discrimination as impersonal market forces work for brining diversity and equality within the economies. These arguments were basically directed to make the point that liberal policies are necessary to expect political freedom because political and economic systems work together and strongly depend upon the progression of each other. The promotion of neoliberalism also brings several changes within the political system and the societies encounter major consequences of neoliberal policies upon the political structure and patterns. The political system is affected from neoliberalism because it proposes change in the power structure and insists upon giving more power to the private sector. In some countries of the world, this approach is also used to begin and fuel up the political campaigns and movements run for demanding change of regime. It is widely observed that the problems led by neoliberalism are spreading in the nation and societies like epidemics. The people are affecting from neoliberal policies very quickly and strongly. The bad market place of today makes people unhappy despite the fact that it gives them more choices and accessibility that eventually make them suffered from Affluenza, a socially transforming condition that add more debts, anxiety, and overload upon the minds and lives of the people (Oliver, 2007, p3). The link between neoliberalism and social system has also been proved from different studies based upon the evidences collected from different countries that adopted the neoliberalism approach. Economic freedom and liberalization is supposed to have positive effect upon the prosperity level of the country. For instance, Chile adopted the neoliberal policies and take necessary steps to make its trade policies open and liberal towards international trade. There were several interventions made to the economic system to make it open and liberal for international trading activities (Harvey, 2005, p5). The entire transformation was conducted during the regime of military dictatorship but despite this objectionable context the country showed increase in GDP level and soon it became the Latin American county with highest GDP rate. The example of Chile asserts that economic liberty is closely connected with the prosperity within the societies and it could also being change within the social and political system by putting pressure upon the dictatorship for granting political freedom in the country. It is often argues that economic control is linked with the control of all systems and liberalization of economy affirm freedom in the political and social system as well. The social setbacks of neoliberalism are also observed upon the individuals and their consumptions patterns. In the wake of neoliberal ideology based market system the notions like self-branding have evolved due to which the construction of market persona has become the central strategy in highly complex corporate environment of the present day market place (Alison, 2008, p217). The globalization of the capitalist economy has also affected the roles of the national governments in controlling inflation and providing support to the home grown markers. The relationship between the political and economy have also taken new turn due to the advent of neoliberal policies (Colin, 2003, p10) Neoliberalism has also resulted in the creation of new state forms that have compelled the political forced to get engage in better management in order to provide better solutions to the problems of the welfare state (Clarke and Newman, 1997, p26). The relations between the state, welfare and nation have also considerable changed due to adoption of the neoliberal ideas that eventually requires the world community to rethink about the changing state structure and changing concept of welfare (Clarke, 2004, p43). In this changing environment the problems and fears of the people have also changed that need to be addressed from the perspective of changed social structure bestowed by neoliberalism. The changing relationship between the individuals and the society is backed by the changes brought by neoliberal ideology (Bauman, 2001, p32). The contemporary society evolved from the neoliberal approach is more complex than one might think and it is not easy to understand the society heading towards extreme makeover. The common people are facing more challenges in the capitalist society after having more choices and options. The new form of governmental rationality has allowed more freedom to the people but they are also given the responsibility to govern themselves due to minimized government interventions in the matters of the free market and individualism (Ouelette and Hay, 2008, p4; Biresi and Nunn, 2005, p54) The state centric approach towards neoliberalism explains that neoliberal ideas minimize the state’s role in the market place because it propose reduction in taxes, decline in the social spending, privatization of the public entities and deregulations to encourage trading activities. If all of these principles are practices within an economic system then it is obvious that the role of the government would be limited and the private sector will come in front to plat its role in the economic progression of the country (Ong, 2006, p54). The state centric approach argues that when the role of state is reduced it means that the role of political entrepreneurs is also decreased that formulate and implement neoliberal policies in the state. According to this approach the neoliberal ideas spread not only because of the willingness of the politicians or state actors but because they fit in the frame of the preference of the voters and people belonging to business community and middle class realize that neoliberal policies will assist them improving their conditions(Foucault, 2008, p184). Neoliberalism is generally welcomed in the countries where the industrial and trade process is not progressing due to strict government policies and taxes however, the countries where industrial growth, social welfare and business process has been doing well, the people don’t feel the need of implementing neoliberal policies and remain reluctant towards it. For instance, In Germany and France the businesses didn’t strongly supported neoliberalism because people widely consider the government policies supportive the business activities and social welfare system is also established to support middle class. On the other hand, people in UK and US widely welcome neoliberalism because they viewed it a source of improving their social, political and economic landscapes. Since neoliberalism stresses upon deregulation the environmental and social impacts of these policies could not be overlooked. Neoliberalism supports conveyance of unregulated economic activities where the government has no responsibility to look at the matters of pollution and other issues related with the production process. In this deregulated environment the chances of degradation increase within the economies and negative environmental impacts also increase in terms of lack of waste management policies and pollution regulations etc. It affirm that the regulations from the government are essential to manage the matters of the production process and reducing state role invites several problems within the economy and environment. The cultural consequences of neoliberalism could be observed in form of changing public preferences and lifestyles that has eventually resulted in proliferation of self-branding that has induced a system where "work on the self is purposeful and outer-directed; self-production is heavily narrated, marked by the visual codes of the mainstream culture industry, and subject to the extraction of value" (Hearn, 2008, p197). The corporate environment is getting more and more complex whereas the notion of personal or self-branding has reached the daily lives and preferences of the common people. The entire discussion could be sum up with the conclusion that neoliberalism transforms the economic, political and social systems of the countries. The analysis of different economies shows that neoliberal policies have resulted in different outcomes in different countries. The overall impression of neoliberalism is that of an open system giving maximum opportunities of growth, employment and business however, in practice the working class and middle class has to bear several strong negative outcomes of neoliberalism in terms of wide gap between upper and middle class and exploitation and discrimination of working class in low wage labour markets. Hence, neoliberalism could not be credited for economic progression because several severe allegations are also associated with the practice of neoliberalism. References Alison, H. (2008). “.” Journal of Meat, Mask, and Burden: Probing the Contours of the Branded Self Consumer Culture 8 (2): 197-217 Bauman, Z. (2001). The Individualized Society, London: Polity Brenner, N. (2002). Spaces of neoliberalism: urban restructuring in North America. London, NY: Wiley-Blackwell Biresi, A. and Nunn, H. (2005). Reality TV: Realism and Revelation. London: Wallflower Campbell, J.L. and Pedersen, O.K. (2001).The rise of neoliberalism and institutional analysis. UK: Princeton University Press Chomsky, N. (1999).Profit over people: neoliberalism and global order. London: Seven Stories Press Clarke, J. and Newman, J. (1997). The Managerial State: Power, Politics and Ideology in the Remaking of Social Welfare. London: Sage Publication Clarke, J. (2004). Changing Welfare, Changing States: New Directions in Social Policy. UK: Sage Publications Ltd. Colin, L. (2003) Market Driven Politics: Neoliberal Democracy and the Public Interest, London: Verso Colin, C. (2010). The Strange Non-death of Neo-liberalism, Polity Press. Elliott, L. and Atkinson, D. (2008) Gods that Failed: How Blind Faith in Markets Has Cost Us Our Future. NY: Bodley Head Foucault, M. (2008) The Birth of Bio politics: Lectures at the College de France. London: Palgrave Harvey, D. (2005). A Brief History of Neoliberalism. NY: Oxford University Press Heynen, N. (2007). Neoliberal environments: false promises and unnatural consequences. London: Taylor & Francis Klak, T. (1998). Globalization and neoliberalism: the Caribbean context. NJ: Rowman & Littlefield Portes, A. and Bryan R. (2005). "The Free-market City: Latin American Urbanization in the Years of the Neoliberal Experiment." Studies in Comparative International Development: 43-82 Pollin, R. (2003). Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. New York: Verso Prasad, M. (2000). The Politics of Free Markets: The Rise of Neoliberal Economic Policies in Britain, France, Germany and the United States. University of Chicago Press. Macpherson, C.B. (1964). The Political Theory of Possessive Individualism: Hobbes to Locke. Clarendon Press Ong, A. (2006). Neoliberalism as exception: mutations in citizenship and sovereignty. Duke University Press Ouelette, L. and Hay, J. (2008). Better Living through Reality TV. UK: Blackwell Publications Oliver, J. (2007). Affluenza, London: Vermilion Touraine, A. (2001). Beyond neoliberalism. UK: Wiley-Blackwell Ulrich, B. and Elisabeth B. (2001). Individualization: Institutionalized Individualism and its Social and Political Consequences. UK: Sage Publications Ltd Read More