Advantages and Disadvantages of Neoliberalism and Globalization

As an economic and political program, neoliberalism promises that everyone will be able to gain from the benefits of globalization but in practice there is clearly great disparity. Discuss with the reference to the advantages and disadvantages of neoliberalism and globalization.

Introduction

According to Klack (2000), neoliberalism and globalization are two common words used to mention the currently international trend of development in global scene. Globalization is now powerful at the worldwide level; however, this word is almost meaningless on its own (George 2007). George also indicates that “neoliberlism” is necessary to make the meaning of “globalization” is more clear. Basically, the purpose of this philosophy – neoliberalism is to liberate the capital accumulation process. Many international organizations and governments in the world consider neoliberlism as a prominent political force which is needed to be counted in their development plan and it is a driving factors of international economic operation (Braedly & Luxton 2010). There is a point of view that, neoliberalism, as an economic and political program, will bring benefit of globalization to everyone, especially developing countries. In other words, over the time, neoliberal globalization – the definition of globalizing process without being bounded by governments’ policies, contribute to decrease the level of inequality in the global context. Nevertheless, in another opinion of Lindio-McGovern and Wallimann (2009), neoliberal globalization is supposed to intensify not only domestic but also worldwide disparity. An example of the significant inequality is provided through this statistic: in 1995, 20% world population in richest nations has 82 times the income of the same amount poorest, but it was only 30 times in 1960. In fact, over thirty years in which globalization and neoliberalism had become more popular, the gap between developed and developing countries has been getting more serious. Thus, this report will discuss both concepts: globalization and neoliberlism in term of pros and cons of each and the connections between them in order to identify whether or not neoliberalism helps everyone able to gain from the benefits of globalization.

Discussion of Neoliberalism

Neoliberalism, in the explanation of Dean (2008), is a political and economic practice considers market exchange as a guide for all actions of human. By the accordance with economic expectation and criteria, the philosophy redefines ethical and social life proposes that human freedom can be best achieved through market operation. According to Harvey 2005 (p.22), neoliberalism is a theory indicating that human well-being is highly developed “by liberating individual entrepreneurial freedoms and skills within an institutional framework characterize by strong private property rights, free market and free trade”. The key role of state or government in neoliberalism concept is to create institutional framework suitable for the market, establish policies of rights and contract. In general, through neoliberalism, governments take part in operating market by producing conditions for and subjects of the market, protecting the market without interfere with the market.

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In reality, neoliberalism is revealed both advantage and disadvantage. Dean (2008, p.54) said: “neoliberalism relies on the fantasy of free trade”. Fridell (2012) also points out that according the theory of “neoliberalism”, in the whole world, greatest social benefit can be gained from limiting governments’ interventions at international as well as national levels and removing trade barriers. Besides free trade, other benefits of neoliberalism shown Klack (2000) are less states’ intervention and greater market competition, privatisation to private investors and reducing public expenditure on and taxation.

However, although neoliberalism is expected to decrease difference between developed and developing countries, but it even creates a more serious situation (Klack 2000). In fact, because of a larger political power and greater influence in international negotiation, rich countries gain more benefit of free trade than the poor. Therefore, environment pollution, resources and labour exploitations are common issues due to big companies, which mostly come from rich nations, use their right negatively in developing countries while they have just derestricted their regulation after applying free trade.

Discussion of Globalization

According to Ritzer (2011), globalization is the most significant change in human history. It is a Trans planetary set of processes in which liquidity increases; multi-directional flows of information, people, places and objects grow; structures that people create and encounter. There is another term closely related to and imply characteristics of “globalization”, it is “transnationalism”. Transnationalism is explained by Ritzer (2011) that processes of interconnecting social groups or individual across particular geo-political boundaries. These two term “globalization” and “transnationalism” are interchangeable but in fact, processes happens in ““transnationalism” are clearly more delimited than ones in “globalization”. In globalization, interconnections between objects are not only to cross geo-political borders, but also a wider range of other trans-planetary processes. Globalization makes boundaries for goods, idea, music and even people transcended. By globalization, these factors are able to move freely with little limitations of traditional barriers which used to separate places, language, people, culture and currency (Torres 2008).

Metz (2013) discusses advantages and disadvantage of globalization. Firstly, globalization narrows the traditional division between the rich and the poor in the world. By removing barriers in term of tax, regulations and so on, nations, especially developing countries can attract foreign investments which go along with modern technology and employment. Trans-national organizations investing in setting plants and applying new technology providing jobs and working condition in high standard for local people. In return, these companies can exploit raw material and labor at a low cost. Furthermore, in a global and open market, products and natural resources are able to move across nations. Indeed, globalization always brings benefit to customers, they have chance to approach products from other countries. In this world widely intensive market, anyone can satisfy their demand with more competitive price than before.

On the other hand, author – Klack shows some disadvantage of globalization. According to Klack (2000), benefit of globalization are concentrated in core countries while the “lagging” countries occupy the major proportion of the world. In fact, at the begging of 90s, 50% of foreign investment flow from developed countries to developing ones went to China, Mexico and Argentina. In another period, a group of twelve “lagging” countries achieve 89% of the whole world’s foreign investment and South Korea, Turkey, Portugal and Hungary are named in the list. Thus, there is other ways to interpret the globalization’s benefit, it benefit the highly selective countries which are already better than others. Moreover, even advantages mention above are revealed the reverse sides. Cheap labor are exploited in developing countries. There are cases that children and prisoners are detected working in heartless condition by oversea employers who deliberately ignore safety requirement to save manufacturing cost. Moreover, many international organizations take advantage of legal loophole in developing countries to avoid paying tax. Therefore, the rich become richer and poorer countries loose a significant revenue of tax Metz (2013).

Connection between globalization and neoliberalism – the effects

While globalization refers to international and interrelated trade as well as capital flow, core values of neoliberalism are free trade, privatization, deregulation and globalization. Both terms goes together embody a definition which is “capitalism without borders” (Klack 2000).  Globalization is also explained that it is a simply international trend of movement from social-democratic interventions to market-oriented neoliberalism. In fact, there is evidence proving that: although growth of neoliberalism and globalization lead to lower barriers of trade and as a result, investment flow goes to poor countries in which the competition is less and rate of return is expected to higher, but capital mobility cannot narrow the gap between the rich and the poor. According to Lindio-McGovern and Wallimann (2009), after globalization and neoliberalism, the disparity between nations even increases. In the national scale, the income of people in developing countries which occupies 75% of population is now distributed more unequally than it was in the 90th decade. In the global view, there is a statistic showing that lifetime income per capital in Melbourne today is over 70 times of the income in developing countries while it was 11 times in last century and 30 times in 4 decade ago. In our world, there currently is a half of global’ population which is over 3 billion have less than 2 dollars per day to survive, 1 in 7 children cannot go to school, over 1 billion people cannot approach safe water and nearly 1 billion being malnourished. Whereas, property keeping going to richer countries. However, in developed countries as The U.S, the inequality between classes also happen. Because of the inflation, real wage of high-school educated workers decreases and price level increases. Over the recent 30 years, top 20 percent of American household achieve the majority of income growth in the countries and a huge amount within this income benefits top 1 percent of the population. In New Zealand and the United Kingdom, the similar disparity is also recorded (Lindio-McGovern & Wallimann 2009).

Conclusion

Although neoliberalism and globalism are well-known economic term in recent discussion, there is mixed opinions about their effect on the global situation. There is an idea that benefits of globalization to everyone are same by neoliberalism in which all countries have an equal to countries approach capital flow and economic improvement. However the reality has proved the opposite, some companies from the richer world are recognized take advantage of lower barriers and their power over others to exploit natural resource and labor in developing countries with a little performance of duty and responsibility to the local. Environment pollution, low working condition and tax evasion are common issue of neoliberalism and globalism indicated in recent reports.

References

• Braedly, S & Luxton, M 2010, ‘Neoliberalism’, McGill-Queen’s Press – MQUP
• Dean, J 2008, ‘Enjoying neoliberalism’ Cultural Politics, vol.4, no.1, pp.47-72.
• Fridell, G 2012, ‘Free trade and fair trade’ in Haslam, P., Schafer, J., Beaudet, P. (2012) ed. Introduction to International Development: Approaches, Actors and Issues. (2^nd ed) Oxford: Oxford University Press: 279-294.
• George, S 2007, ‘Down the great financial drain: how debt and the Washington Consensus destroy development and create poverty’, Development, vol. 50, no. 2, pp. 4-11.
• Harvey, D 2005, A Brief History of Neoliberalism, Oxford University Press, Oxford, England.  
  Lindio-McGovern, L & Wallimann, I 2009, Globalization and Third World Women: Exploitation, Coping and Resistance, Ashgate Publishing, Ltd., Aldershot, United Kingdom
• Klack, T 2000, Globalization and Neoliberalism: The Caribbean Contex, Rowman & Littlefield Publishers, Maryland, The United State.
• Metz, F 2013, ‘Globalization. Advantages and Disadvantages, GRIN Verlag’, München.
• Ritzer, G 2011, Globalization: The Essentials, John Wiley & Sons, The United State.
• Torres, C 2008, Education and Neoliberal Globalization, Routledge Research in Education, Routledge