Neoliberalism and the Global World - Essay Example

Neoliberalism and the Global World Neoliberalist ideology, ly the spread of free markets and capitalist-inspired consumerism as the dominant engine of economic growth, is the force behind the current wave of globalization. Globalization is an international phenomenon with far-reaching consequences in the social, political and economic realms. The world is becoming more and more interdependent and while globalization has both its supporters and detractors, it is here to stay. What explains the global power of neo-liberalism over the last thirty years? Seeking to explore neoliberalism by looking back at this concept historically, this essay will analyze the important antecedents to globalization today. Much of this analysis will draw from the work of British historian Eric Hobsbawm, arguably one of the most prominent scholars of the history of globalization. We then conclude with an overview of the issues explored and argue that neoliberalism and globalization are intrinsically intertwined. A History of Neoliberalism Neoliberalism has been the driving force of the global economic order since the latter half of the twentieth century. The current state of world affairs has its precursors in the social revolution of the 1960s, economic crises in the 1970s culminating the collapse of the New Deal and the OPEC oil crisis, as well as the emergence of neo-liberalism as a driving political and economic force in the 1980s. Events from the late 1960s reverberated in the Communist world and finally came to a head in the 1980s with total economic and political collapse. The Soviet sphere, coupled with the former Yugoslavia, provide the best examples of this phenomenon. Additionally, the end of the Cold War has had important implications for the already precarious states of Africa and has coincided with the emergence of Asian economic “Tigers”: a global economic shift towards emerging East Asian powerhouses. Our current wave of globalization will be traced back to the late 1960s, beginning with the “social revolution” of that decade, and will end with today’s international state of affairs. The social revolution of the 1960s was also a cultural revolution. In fact, the “rise of a specific, and extraordinarily powerful youth culture indicated a profound change in the relation between generations” (Hobsbawm 1994, p. 324). Leading this cultural revolution were the young: teenagers started wearing jeans – prior to that only farmers wore them – and rock music became the voice of a generation (Hobsbawm 1994, p. 324). In fact, industries saw the potential of this young and increasingly powerful generation and catered to it through the “flourishing industries of cosmetics, hair-care and personal hygiene” (Hobsbawm 1994, p. 326). Hobsbawm asserts that the social revolution of the 1960s was as much a capitalist venture as a social and cultural revolution. The result of this “concentrated mass of purchasing power” (Hobsbawm 1994, p. 326) was the development of a sort of cultural hegemony, with blue jeans and rock music the identifiers of modern youth. Cultural symbols of identity thus perpetuated an Anglo-American global cultural hegemony. Additionally, "the cultural revolution of the latest twentieth century can thus best be understood as the triumph of the individual over society, or rather, the breaking of the threads which in the past had woven human beings into social textures" (Hobsbawm 1994, p. 324-330). Planned capitalism, expressed through governmental economic intervention and the Bretton Woods Agreements of 1944, exploded during the 1970s. Bretton Woods, which established both the World Bank and the IMF, symbolized the supremacy of the United States in setting international monetary policy. Hobsbawm argues that these two international institutions were “de facto subordinated to US policy” (1994, p. 274). When the United States pulled out of the Bretton Woods monetary system in 1971 and allowed its currency to float in international markets, it caused a chain reaction with unexpected global ramifications. Currencies were devalued across the board and the United States, as well as its Western allies, were ill equipped to deal with the resulting oil embargo implemented by OPEC two years later. When OPEC, the Organization of the Petroleum Exporting Countries, announced that it would no longer be shipping oil to countries which had supported Israel in its war with Egypt and Syria in 1973, it triggered an international calamity known as the Oil Crisis of 1973. The Yom Kippur War – as the war between Israel and the joint forces of Egypt and Syria in 1973 is now known – inadvertently led to a global economic crisis as OPEC members and Arab oil producing states used their economic leverage to embargo the West. Oil shipments to the Western world stopped and this was aimed at causing specific damage to the economies of the United States and its allies. Petrodollars, meaning money earned by Middle Eastern countries through the sale of oil to the West then re-invested in those same countries, were used to extract serious political leverage and made clear just how dependent the West has become on producers of oil. Describing it as the start of the “Crisis Decades”, 1973 represented an important turning point in global economic relations. The Crisis Decades were particularly harmful for members of the Third World. In fact, “since 1970 almost all of the countries in the region had plunged deeply into debt” (Hobsbawm 1994, p. 422). Deep debt – all of sub-Saharan Africa reportedly had debt in 1980 which exceeded its annual GDP – ensured that these countries remained at the bottom of the world capitalist economic system and remained there in semi-permanency. Foreign direct investment ceased to exist altogether and debt servicing, an average of 9.6% in 1982, kept these developing countries in servitude. According to Hobsbawm, “the main effect of the Crisis Decades was thus to widen the gap between rich and poor countries” (1994, p. 422-424). Neo-liberalism, the belief in laissez-faire economics, was best articulated by 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, p. 412). 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. Hobsbawm thus described the United States under Ronald Reagan as the “greatest of the neo-liberal regimes” (1994, p. 412). 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, p. 44). 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 so-called Second World of the global Communist community was severely undermined by the 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 (Hobsbawm 1994, p. 418-424). Africa, indebted since the 1970s and lacking sustainable investment infrastructure, was withering away (Hobsbawm 1994, p. 422). Following the collapse of the Cold War, Africa also lost geopolitical significance and the result has been economic retardation, political stagnation and continued population growth. Longtime US Cold War allies, such as the former Zaire’s Mobutu Sese Seko, were early casualties of the collapse of the Soviet Union but the overthrow of despots in Africa has not been matched with any serious economic growth. Global indifference to genocide in Rwanda and the current crisis in Rwanda emphatically demonstrate that in the post-Cold War world Africa has lost its strategic political value. East Asia has kept its global strategic value following the end of the Cold War and has emerged, surprisingly for some, as a region with consistent and impressive economic successes. In fact, much of East Asia has managed to achieve capitalist economic growth without undertaking political reform and has not felt the need to democratize. Countries such as Taiwan, South Korea, Japan and even Hong Kong, have also benefited from a special relationship with the United States since the end of the Second World War. Emerging economic countries such as India, Brazil, Russia, and South Korea have been challenging US economic hegemony for decades. While in East Asia, Taiwan, South Korea, Japan and Hong Kong remain important economic actors, "the most dynamic and rapidly growing economy of the globe after the fall of Soviet communism was that of Communist China, leading Western business-school lectures and the authors of management manuals, a flourishing genre of literature, to scan the teachings of Confucius for the secrets of entrepreneurial success." (Hobsbawm 1994, p. 213-214). China has benefited tremendously from increased interdependence and has established a strong manufacturing centre, shifting employment away from traditional manufacturing centers in the West. China remains the major challenge to US economic control as wages continue to remain low in China and Chinese products continue to flood the world’s global marketplace. China has remained competitive, commands one of the world’s largest economies and has established a working and viable example of authoritarian capitalism. This shifting of global production centers to the East has led hurt traditional manufacturing centers in the West, exemplified by the decay felt by the once-vibrant US automotive hub of Detroit, Michigan. 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 around the world 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 with an emphasis on the Reagan and Thatcherite regimes in America and Britain. 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. These important antecedents help explain the entrenchment of international neoliberalism and the spread of economic globalization over the past thirty-odd years 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. Accordingly, neoliberalism and globalization are intrinsically intertwined. As the world becomes more and more interdependent as a result of the forces of globalization, neoliberalism subsequently becomes further and further entrenched in all four corners of the globe. (Harvey 207, p.37). REFERENCES 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. Strayer, RW 1998, Why Did the Soviet Union Collapse?: Understanding Historical Change. New York, I. E. Sharpe. The Economist 2009, Pocket World in Figures, 2009 Edition. Profile Books, London. Read More