Neoliberal Globalization’s Race to the Bottom

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Despite the ample ridicule and contempt that neoliberalism warrants, it remains with us and affects millions around the world. It expounds on the classical laissez-faire ideas that market forces and individual liberty will triumph over the state. For the social sciences, neoliberalism describes much of the structural changes in global economics since the international, political and economic turbulence of the 1970s. Neoliberalism has shaped international power dynamics during the decline of capitalism’s “golden age” after World War II. Many social scientists are asking whether the 2008 economic and financial crisis marked a transition from the neoliberalism of the 1980s to a post-neoliberal era. Given that 2008 saw the worst capitalism-induced crisis since the Great Depression of more than 70 years and one world war earlier, it is remarkable that this question is still being considered.

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Although there is a general sense of what neoliberalism, or “neoliberal globalization,” is and how it works, there is no agreement on what these terms actually mean. This economic model’s general contours are shaped by three basic ideas: radically free markets — and not states — are the best avenues for the distribution of goods and services; for markets to work best, governments ought not intervene beyond securing property and protecting private ownership; and finally, only human interactions through markets can lead to true human freedom. The latter is perhaps the most extreme tenet. Today, the country that most closely follows this socioeconomic model is arguably the United States. How did the US become this philosophy’s enfant terrible?

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In the 1930s, certain continental European states challenged many 19th century laissez-faire Anglo-Saxon philosophies regarding a liberalized economy with completely self-regulating markets. This “neoliberal” challenge by the continental European states opposed the complete separation of political from economic domains: a fundamental assumption of their Anglo-Saxon predecessors. In the 1970s and 1980s, a new kind of neoliberalism emerged with many of the trappings of the 19th century laissez-faire system. This new outcrop would maim many of the world’s economies and have little in common with the 1930s neoliberal movement of the continental European states.

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After World War II, many states seemingly rejected the Keynesian economic style of demand management and state intervention. Once Margaret Thatcher in the 1970s and Ronald Reagan in the 1980s diverged from the continental European form of neoliberalism, there was everywhere a shift from that original mold. The US was the post-war hegemon, and it propelled the global spread of this revamped neoliberalism. Thatcher and Reagan hyped a new global market-based system that resulted in part from the stagflation of the 1970s and hinged on supply-side economics.

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The basic tenets of Thatcher-Reagan neoliberalism gave rise to changes in the British and American welfare systems that affected public policy and other areas of the state. Through direct US involvement, institutions such as the World Bank and the International Monetary Fund (IMF) employed neoliberal tactics to force fit the “development” of other nations. These institutions widely encouraged the privatization of public resources and implementation of economic programs of austerity, and they demanded changes in welfare as a precondition for least-developed countries (LDCs) to receive loans and other economic assistance. This calls to mind what experts plug as ‘disciplinary neoliberalism” and its extreme measures for consolidating governance within developing countries.

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Technological developments have probably also helped the US to become a model neoliberal state. In the US, the Federal Technology Transfer Act of 1986 heralded a vast promotion of technology transfer, promoting partnerships through the deregulation and privatization of government capacity. That so much state activity was delivered to the private sector is yet another interesting aspect of neoliberalism at work in the world. Inasmuch as the increased importance of technology and science have changed the international economic arena, the relationship between technology and science, and their role in economic liberalization, are merely one issue under the broad umbrella of neoliberalism.

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Opponents of neoliberalism criticize its elements, such as the recalibration of state and market dynamics, and also the privatization of trans-border governance. They point out the obvious role that the state has played in establishing the transnational association of governance that allowed a neoliberal order to emerge. Indeed they argue that, through that selfsame process, the state itself changed from a distributive entity to a competitive one. It would seem logical for neoliberalism’s detractors to regard the state as the seedbed of neoliberalism: without the state, the less-regulated markets could not fully pretend (or hope) to release the productive forces of capitalism that neoliberal apologists take for granted.

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Developing countries and their people have suffered the most harmful effects of the neoliberal metamorphosis of the last few decades. Their ecologies and biological systems have been depleted and destroyed. The poor and unskilled women of these countries have shouldered the greatest burden of this damage. Other enormous policy failures of neoliberalism include the intense privatization of the former Soviet Union (USSR) and Eastern European nations after 1989, as well as the East Asian Financial Crisis of 1997. These should not be so quickly forgotten as the world moves into the 21st century’s second decade.

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The grievous damage to many millions of people around the world calls into question the general ideal that economic, political and social spheres are separate or separable. Some proponents of neoliberalism assume, dangerously if not ignorantly, that there exist purely economic real-world processes. It is absurd to ignore the fact that all economic policies have social and political impacts within and between states. Neoliberalism’s many crusaders might yet choose to ignore the political and social dimensions of economic activities; wishful ignorance becomes impossible, however, once the unaccommodating political environments of both developed and least-developed countries (LDC) reveal the less-than-perfect realities in which capitalist markets try to function.

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Several Marxist thinkers regard neoliberalism, globalization and development as nothing more than an “imperialist exploitation” of the labor in LDCs. Many of neoliberalism’s critics in these countries have lamented the structural-adjustment programs pursued by non-state entities like the IMF and World Bank. They note the manifold connections of the ideology to gross global inequality, economic incongruence, increasing unemployment, social alienation, environmental degradation, and cultural assimilation. In their crusade to illuminate the negative realities that have resulted from the implementation of neoliberal policy, these thinkers have frequently spotlighted market fundamentalism and competitive deregulation, liberalization, and the toxic effects of privatization. Even the more generous critiques, in regions such as Latin America for example, proffer the disappointing conclusion that, despite any indication that neoliberalism has strengthened the sustainability of Latin American democracy, it has nonetheless lessened its value.

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A more extreme group of neoliberal stalwarts consider generally unrestrained competition to be a superior option to state-sponsored attempts to coordinate human energies. This camp touts the superiority of economic liberty over any intervention of the public sort. Still, market economies require states to act intentionally and do not merely arise from so-called natural market forces. These proponents of neoliberalism hold fast to the dream that unencumbered market forces will give rise to prosperity and peace, which they claim to be the two necessary conditions for human freedom.

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One theory argues that this undying commitment to liberalized governance and market reforms marks a shift from “embedded liberalism”, i.e. the post-World War II economic order established by the United States, to “disciplinary neoliberalism.” The latter is associated with the disciplinary measures that are imposed on current governments. Lending entities apply conditions, not only to secure commitments to market-based policies but also to preclude reform and changes to these commitments by future governments. Thus, a violation of state sovereignty ensues, usually with a general erosion of individual civil liberties guaranteed by the state.

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Market fundamentalists have encouraged the norms of supranational entities like the IMF, the World Trade Organization (WTO), the World Bank, and the Organization for Economic Cooperation and Development (OECD). These organizations and their practices have led to many catastrophes for poorer countries with regard to liquidity issues. The subsequent structural adjustment policies have brought on fiscal austerity programs, ostensibly to stabilize the macroeconomics of these nations, but these adjustments were intended to liberalize trade and free up the movement of capital.

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The success of certain state-envisioned economies, especially those of the Asian Tigers (Hong Kong, Singapore, South Korea, Taiwan), suggests that, compared to government involvement, the consideration given to radically liberalized markets should be minimal. This cannot necessarily be expected to work in every circumstance. Another important question to consider is whether the impetus for development is based on market orientation or state orientation. Effective or ineffective state economic policy might just be the lynchpin.

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The failures of neoliberalism have caused its significance to decline. Prominent Marxist scholars treat it as an ideological wave that has swept over the globe; indeed, they tend to view it as being a powerful ideology that has helped to disguise and mystify class relations as global wealth has become more concentrated and stratified. Nevertheless, class dynamics persist in their own right. As they assume new forms and meanings in the unfolding neoliberal global order, they will inevitably shape the future.

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Neoliberalism has been thoroughly discredited. There is no doubt about the harm that has been caused by the privatization of public services. Furthermore, the global ascent of powerful finance has wreaked havoc on the relationships of states with society. If the jury is still out on whether or not the world is entering a post-neoliberal era, what hangovers might continue to afflict us?

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Editor’s Notes: Photographs seven, eight, ten and fourteen by Thomas Hawk; one by Matteo Bittanti, two by Dean Chahim, three by Lorena Pajares, four from Ashley Wilson‘s archive, five by Shane Gorski, six from US Department of State, nine by Lelie Bloem, eleven by Mary Crandall, twelve by Barabeke, thirteen by Taber Andrew Bain, fifteen by Mirko Tobias Schaefer, sixteen by David Holt, and seventeen by Jef Safi.

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