Globalization and Protectionism in Our Century - Case Study Example

Globalization and Protectionism in the 21st Century Globalization is an international phenomenon with far-reaching consequences in the social, political and economic realms. Economic globalization, namely the spread of neoliberalism and capitalist-inspired consumerism as the dominant engine of economic growth, has both supporters and detractors. The world is becoming more and more interdependent and whether you think globalization is a good or bad thing, it is here to stay. Many people in developed countries argue in favor of protectionism because foreign wages are much lower and domestic producers cannot compete. The result is that jobs are lost as employment trends shift overseas. Seeking to explore the present international economic situation with an eye to the main theoretical approaches to the globalization phenomenon, different theoretical paradigms will be analyzed. Mexico, a developing country in the Western Hemisphere and member of the North American Free Trade Agreement (NAFTA), will be used as a case study to explore the ramifications of realist-inspired neoliberalism and the effects of globalization on a country in the developing world. Interdependence and the Emergence of Globalization Globalization, as it exists today, rests largely on the shoulders of neoliberal economics and the global entrenchment of capitalism as the dominant economic system in the world. Inspired by Realist ideological doctrine, neo-liberalism is the belief in laissez-faire economics and its early proponents were Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States in the 1980s. US President Ronald Regan famously remarked “government was not the solution but the problem” (Hobsbawm 1994). Neo-liberals put all of their faith in the distributive capabilities of the invisible hand of the free market, and believe that business was inherently good and that government bad. The government was longer interested in the provision of welfare but existed to stimulate the capitalist economic market. The United States under Ronald Reagan was thus described as the “greatest of the neo-liberal regimes” (Hobsbawm 1994). Accordingly, The essence of neo-liberalism, its pure form, is a more or less thoroughgoing adherence, in rhetoric if not in practice, to the virtues of a market economy, and, by extension, a market-oriented society. While some neo-liberals appear to assume that one can construct any kind of ‘society’ on any kind of economy, the position taken here is that the economy, the state and civil society are, in fact, inextricably interrelated (Coburn 2000). How did neoliberalism, the dominant political and economic ideology of the West since the Reagan years make inroads around the world and into the formerly Communist countries of Eastern Europe? The Second World, consisting of the global Communist community during the Cold War, was severely undermined by economic and political crises which began in the late 1960s. The result was political and economic disorder. Economic crises undermined the political foundations of states like China and the USSR – particularly after the deaths of men such as Mao & Brezhnev – and the centrally planned economic systems of these countries remained under stress and increasingly precarious. The Soviet world was also not immune to global economic crises as evidenced by effects of the OPEC crisis of 1973. These aftershocks paved the way for perestroika and glasnost in the USSR, the implosion of Yugoslavia and popular Chinese dissent expressed in Tiananmen Square and captured live on camera. The political and economic fragilities of the Second World were exposed following 1968 and slowly led to political decay, leading to the eventual implosion of the Soviet Union (Harvey 2007). Criticisms of the Globalization Phenomenon What are the criticisms of globalization and how do proponents of globalization respond to these critiques? Critics of globalization argue that this phenomenon is thinly disguised neo-imperialism and actually represents an insidious attempt to spread Westernization and Western concepts of capitalism, exploitation and greed across the globe. Marxists and World Systems theorists would argue that globalization does nothing more than entrench the dominant economic position of the developed countries of the West while perpetuating an unequal global distribution of wealth thus ensuring the continued subservient status of the developing countries of the world, within the current global economic system. Global economic institutions such the World Bank (WB) and the International Monetary Fund (IMF) often bear the brunt when it comes to criticizing the global economic system and the state of global affairs. These organizations are routinely criticized as being anti-democratic, exploitative in nature and often as agents of Western imperialism. Members of the anti-globalization movement represent a backlash against the dominant economic ideologies of our time including capitalism and neoliberalism as the economic order of the day. Proponents of globalization argue for that many criticisms of globalization are unfounded. Accordingly, they point to the fact that there is a wholesale lack of evidence for many of the claims put forth by anti-globalization activists and argues that capitalism and neoliberal economic principles have benefited people all around the world, including those in the so-called Third World. The embrace of capitalist ideals by nearly all of the countries of the former Soviet Block is seen as evidence of the appeal of neoliberalism and capitalist economic principles (Hobsbawm 1994). Protectionism and the Anti-Neoliberal Backlash Protectionism is the anti-thesis to the free trade neoliberal ideology espoused by the forces of globalization today. Protectionism is an economic policy which promotes a strong role for the state in regulating economic policy and advocates restrictions on the international flow of goods. Tariffs and restrictive quotas are important components of protectionism behavior and the this concept has its roots in the early theories mercantilism, prevalent during the early years of US Independence. Aimed at discouraging imports and the prevention of foreign goods flooding domestic markets, protectionism today stands in stark contrast to free trade and the policies of economic liberalization. National barriers to global trade are enforced through protectionist policies and this phenomenon has gained new credence in an era of anti-globalization. Prior to the modern globalization phenomenon, key Asian countries such as South Korea employed Import Substitution Industrialization (ISI) as a form of protectionism to shield domestic producers from foreign competition. In today’s global economic marketplace, there are increased calls for the imposition of tariffs and other regulatory measures to protect domestic producers and jobs from foreign take-over. Although detractors exist, as has been evidenced above, many economists argue for strong international trade to provide competition and stimulate domestic producers. NAFTA, (the North American Free Trade Agreement), was established in the late 1980s to stem the tide of protectionism and promote the free movement of goods within the states of North America. Has free trade and economic liberalism worked in the case of Mexico? It is to this question that we now turn. Case Study: Mexico First and foremost, economic globalization has raised the standard of living in Mexico. This rings true around the world and the benefits of economic liberalization can be found in nearly all countries which have embraced free trade and economic growth. Due to the interconnectedness of global markets today, more people are employed, more money flows between countries and subsequently people’s standards of living are being raised. Mexico, a developing country which has embraced economic liberalization and is now a member of NAFTA, has exhibited recent economic gains since joining this regional trade block. With a population of 108.3 million and a GDP of $839 billion, Mexico has benefited tremendously from economic liberalization and market-oriented growth. In response to its inclusion in NAFTA, employment has risen consistently over the past decade and a half and annual GDP growth over a ten year period from 1997 to 2007, is estimated at 3.7%. This level of steady and consistent growth over a period of 10 years is remarkable for a country which has remained underdeveloped relative to its North American counterparts since its creation nearly two centuries ago. Accordingly, as a percentage of its labour force, the average Mexican unemployment rate from 1995 to 2006 stood at a low 2.8%. Compare that with Mexico’s neighbor to the south, Columbia which still does not have a free trade agreement with the world’s largest economy, the United States, and the results are astounding. Over the same period, Columbia had an average unemployment rate of nearly 15% (The Economist 2009). Concluding Remarks Globalization has been propelled by capitalism and the internationalization of the capitalist economic system. The main effect of globalization is the world-wide spread of neoliberalism and the entrenchment of capitalism as the dominant – some would say sole – viable economic system for the world economy. This essay has traced the antecedents to the current wave of globalization and economic development with an emphasis on the Reagan and Thatcherite regimes in America and Britain. Economic realism is the backbone of the current global economic system while Marxism, as a guiding economic force, has been largely discredited as a viable alternative following the collapse of the Soviet Union. Accordingly, neoliberalism was given a huge boost following the collapse of the Berlin Wall and the fall of communism in Eastern Europe in the late 1980s. Entrenched as the dominant economic ideology across the globe, neoliberalism is the underlying force behind the current wave of globalization. Protectionism, based on early mercantilist principles, is often conceived of as a backlash to the forces of neoliberalism and economic liberalism. Despite numerous detractors on all corners of the globe, globalization remains an important force in modern society and a key component of continued and sustained economic growth on a global scale. Economic globalization is based upon the principles of neoliberalism, free trade and unhindered markets. Mexico, a developing country with strong economic growth over the past decade, exemplifies the positive attributes of economic globalization and reinforces the argument that protectionism is a thing of the past and that the neoliberalist forces of the globalization phenomenon have overall been positive (Harvey 2007). References Clark, GL & WB Kim 1995, Asian NIEs & the Global Economy: Industrial Restructuring & Corporate Strategy in the 1990s, Johns Hopkins University Press, New York. Coburn, D 2000, ‘Income inequality, social cohesion and the health status of populations: the role of neo-liberalism’, Social Science & Medicine, vol. 51, no. 1, pp. 135-146. Harvey, D 2007, A Brief History of Neoliberalism, Oxford University Press, London. Hobsbawm, E 1994, Age of Extremes: The Short History of the Twentieth Century: 1914-1991, Abacus, London. Pugel, T, 2009, International Economics, New York: McGraw-Hill. Strayer, RW, 1998, Why Did the Soviet Union Collapse?: Understanding Historical Change, I. E. Sharpe, New York. The Economist, 2009, Pocket World in Figures, 2009 Edition. London: Profile Books. Read More