Neo-Liberal Economic Policies - Assignment Example

What is the neo-Marxist assessment of neo-liberal economic policies and to what extend do you agree with this assessment? ‘Neo-liberalism’ are the words that are rarely heard in United States, however, the rest of the world , particularly Asia, Africa and South America, a new word-‘neocon (for neo-conservatives)’ too is pretty common in debates and discussions. Certainly the word ‘neocon’ is a ladder above the notion given by the word ‘neo-liberal’. The implicit scorn, disdain and contempt is indicative of the kind of neo-liberal impact on the ordinary lives, politics, society, equality and so on. Neo-liberalism, like any other ‘neo-ism’ traces its roots in the old school of thoughts. The ‘original’ liberal school of economic thoughts was propagated and established in Europe in 1776 with the publication of The Wealth of Nations, a treatise by Adam Smith, an Scottish economist. The basic premise was- the abolition of government intervention in economic matters. He and others advocated removal of all restrictions on manufacturing, no barriers to commerce, no tariffs, and strongly presented free trade as the best way for a nation's economy to develop. Such ideas were "liberal" in the sense of no controls. It encouraged "free" enterprise," "free" competition -- which came to mean, free for the capitalists to make huge profits as they wished. However, no economic thought is found to be purely economic. Liberalism was actually an economic extended application of already –prevalent individualism. Democracy, competition, free labour, integrated production networks, division of labour, Bretton-woods system (IMF-World Bank) and finally the freer world trade –all were appended to it. All was going well, however the times changed, giving birth to the neo-liberalism. Although the neo-liberalism can be traced in the writings and debates of 1970s, it was enforced into reality by the Bretton Woods Institutions since the 1980s. In one form or another, the IMF-World Bank pumped the neo-liberalism in the shape of recommendations to developing countries, but strictly tied to binding conditionalities. These conditionalities were so harsh that even if national policymakers go against the grain with the recommendations, they were bound to implement them. As the debt relief or concessional lending, or even grant-based technical assistance to their country from IMF- World bank was tied to these recommendations. These recommendations were characterised by the deregulation, privatisation, free market, reduced controls, limited intervention, undistorted (unsubsidised) market prices, privatisation, and competitive exchange rates. Sure, the IMF- World bank conditionalities were always there, i.e. even before the 1980s, but the national policymakers had some degrees of freedom in how they picked up the pieces thereafter. Of course, the early conditionalities just applied to macroeconomic policies. Since the 1980s the conditionalities were applied to broader structural issues, i.e., structural adjustments. In effect, the overall development strategies of the recipient countries were soon forced to tail after the economic strategies of the IMF- World bank. These structural adjustments imposed heavy social costs in the countries on which it was imposed.efforts by the national governments and the IMF- World bank assistance for the same failed to deliver the goods. Neo-liberal economies have created disparities this promoting the many cases of social and political and social conflicts. Practically all the social security nets failed. The adverse impact of adjustment continued to be ubiquitous through the early 1990s and b By mid 1990s, these social safety nets were forced to be upgraded to national poverty reduction strategies. Reconciliation of poverty reduction programmes with neo-liberal policies was almost impossible, yet there was no alternative. These poverty reduction programmes were ill equipped to undo the detrimental effects of neo-liberal policies—e.g., economic stagnation, growing underemployment, increasing vulnerability, intensifying insecurity and widespread poverty. For the poor states, who were already burdened with poverty, the neo-liberalism proved to be one of the most dangerous political economic ideologies of the 21st century. The neo-liberal capitalism, equipped with freedom from the national policy makers and guided by the institution of free market fundamentalism, is even worse than what Marx has seen of the capitalism. As against the old capitalism, this goes beyond one national, and the proverbial power was actually in the hands of the tran-national corporations. Large nations are now exploiting the poor and smaller nations in the world in the name of political and economic liberty. Under the new form of capitalism everything is for sale. This increased competition to the exploitation of the poor nations. This is threatening to individual freedom also as the powers are embodied on particular corporations. “It was then an instrument of indoctrination, whose destructive results was dependent on the specifics of the given country, and did not leave behind any significant intellectual components. Marxism itself, which justifiably rests in Western philosophical culture, mushroomed into an uncountable quantity of interpretations, and there still exist philosophers claiming inspiration from this source”. Under neo-liberalisation the state co-ordinates all its activities with the corporations. The reason is that due to globalisation there has been an influx of trans-national or multination corporations. This free market economy has really encouraged worker exploitation. The social unity is in the verge of disappearing following neo-liberalism that cuts across nations. This neo-liberalism decreases the government participation as the market laws are of the international nature. The human rights are not catered for at the local level. Thus is neoliberalism. Its fundamentals are- 1. THE RULE OF THE MARKET. Liberating "free" enterprise or private enterprise from any bonds imposed by the government (the state). This ‘liberation’ includes- international trade and investment, as in NAFTA, reduction of wages by de-unionizing workers and eliminating workers' rights nee labour reforms, an end to price controls, and all in all, total freedom of movement for capital, goods and services. The government is supposed to be limited to the maintenance of necessary order, legality, and stability. 2. CUTTING PUBLIC EXPENDITURE FOR SOCIAL SERVICES like education and health care, even maintenance of roads, bridges, and water supply -- again in the name of reducing government's role. 3. DEREGULATION. profit is the mantra and any thing coming in the way must be deregulated, including protection to the environment and the job security. 4. PRIVATIZATION. Neoliberalism advocates frantic sell of the state-owned enterprises, goods and services to private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water. Done in the name of greater efficiency, this privatisation has led to concentrating wealth and power in a few hands and squeezing the public even more. 5. ELIMINATING "THE PUBLIC GOOD" & "COMMUNITY" at conceptual level and replacing it with the concept of "individual responsibility." Putting the poorest people in a society to find solutions to their health care, education and social security all by themselves. Even the private insurance corporations refuse to serve the vulnerable sections. Even in the United States neo-liberalism is destroying welfare programs in a big way. Strict, rather fundamental in the belief that the market should be the organising principle for all political, social, and economic decisions, neoliberalism wages an uninterrupted assault on democracy, public goods, the welfare state, and non-commodified values. Under neoliberalism everything either is for sale or is plundered for profit. The neo-Marxism appealed to this situation. Since the fall of USSR, the Marxism had ceased to be advancing Socialism any more. However, in the situation created by the neo-liberalism, the leftist thinking, propelled by Marxism, is concerned in particular with the role of capitalist states' welfare institutions. The neo-Marxism incorporates elements from other intellectual traditions. Neo-Marxism is engaged in the opposition to inequalities experienced by Lesser Developed Countries in a globalized world. Subcomandante Marcos gave a memorable definition of this process. In August 1996 in Chiapas he said: "what the Right offers is to turn the world into one big mall where they can buy Indians here, women there ....". And a longtime civil rights activist and author of several books Elizabeth Martinez and Arnoldo Garcia commented on it that “ he might have added, children, immigrants, workers or even a whole country like Mexico.” Other neo-leftists, neo- Marxists too have been very scathing in their attack on neoliberalism. Susanne Soederberg says “ The gist of the new political content of neoliberal ideology was that not only was the self-regulating market more efficient and socially just than state intervention but also state involvement in the economy was an encroachment on the rational free-market system, disrupting its self-equilibrating tenden- cies and prolonging its natural healing processes.” These theorists rightly pointed the flow of squeeze from the ‘peripheries’ towards the ‘core’ or the ‘center’. Pondering over the question, (and that way doubting the very essence of the ‘free flow of trade and capital’) - why then does capital not rush from the centers and go to invest massively in the peripheries where the rate of exploitation of labour is higher, Susanne Soederberg says “This is the question which Brewer rightly asks (Anthony Brewer Marxist Theories of Imperialism: a critical survey (London 1980)). One must reply to him very simply: that capital cannot see the various rates of exploitation and decide on the basis thereof. “What capital sees is the rate of profit and the latter is equalised because the various rates of exploitation fix a price system-which is the basis on which capital bases itself in order to act-which equalises the profit rate.” “The transfer of capital to the periphery on the basis of the rate of exploitation which is in force there would, moreover, upset the balance which has to be recovered at the global level. Finally, this transfer is itself limited by the (indirect) forms of exploitation which are the condition of the high rate of exploitation.” The use of the words ‘center’ and ‘peripheries’ are in fact from the Immanuel Wallerstein, whose theory of The Modern World System provided a powerful tool to the neo- Marxists to comprehend and criticise neo-liberalism. Wallerstein analyzes the World System as a unit with single division of labour and multiple cultural systems. The exploitation of the vast majority of countries (the peripheries), by a handful of Neo-liberal capitalist countries (the center) is very well explained by Wallerstein. For Wallerstein, "a world-system is a social system, one that has boundaries, structures, member groups, rules of legitimation, and coherence. Its life is made up of the conflicting forces which hold it together by tension and tear it apart as each group seeks eternally to remold it to its advantage. It has the characteristics of an organism, in that is has a life- span over which its characteristics change in some respects and remain stable in others… Life within it is largely self-contained, and the dynamics of its development are largely internal" (Wallerstein, p. 347). A world-system is what Wallerstein terms a "world- economy", integrated through the market rather than a political center, in which two or more regions are interdependent with respect to necessities like food, fuel, and protection, and two or more polities compete for domination without the emergence of one single center forever (Goldfrank, 2000). Among the most important structures of the current world-system is a power hierarchy between core and periphery, in which powerful and wealthy "core" societies dominate and exploit weak and poor peripheral societies. Technology is a central factor in the positioning of a region in the core or the periphery. Advanced or developed countries are the core, and the less developed are in the periphery. Peripheral countries are structurally constrained to experience a kind of development that reproduces their subordinate status (Chase-Dunn and Grimes, (1995). The Neo-liberal weakening of the state is also elaborated. Skocpol says “The differential strength of the multiple states within the system is crucial to maintain the system as a whole, because strong states reinforce and increase the differential flow of surplus to the core zone” (Skocpol, 1977). Wallerstein called it the unequal exchange, i.e. the systematic transfer of surplus from semi- proletarian sectors in the periphery to the high-technology, industrialized core (Goldfrank, 2000). This leads to a process of capital accumulation at a global scale, and necessarily involves the appropriation and transformation of peripheral surplus. In fact Wallerstein draws heavily from dependency theory, a neo-Marxist explanation of development processes. Dependency theory centers on considering the “periphery” by looking at core-periphery relations. It is from a dependency theory perspective that many contemporary critiques to global capitalism come from. References: Mark Kirby (2000) similarities and differences between marxism and neomarxism: Sociology in Perspective. Harcourt Heinemann Publisher Harvey, David (2007) Neoliberalism as Creative Destruction, The ANNALS of the American Academy of Political and Social Science M. Shamsul Haque (1999) Restructuring Development Theories and Policies: A Critical Study. SUNY Press Mark Kirby (2000) similarities and differences between marxism and neomarxism: Sociology in Perspective. Harcourt Heinemann Publisher Marxist Theories of Imperialism: a critical survey (London 1980), Anthony Brewer Immanuel Wallerstein, The Modern World System: Capitalist Agriculture and the Origins of the European World Economy in the Sixteenth Century (New York: Academic Press, 1974) Abu-Lugod, Janet (1989), "Before European Hegemony: The World System A.D. 1250-1350 The Moral Sentiments of Neoliberalism, Morton Schoolman, Political Theory, Vol. 15, No. 2 (May, 1987), pp. 205-224 Dollars and Sense Magazine, July / August 2000, p 37 Neoliberalism and the Demise of Democracy: Resurrecting Hope in Dark Times by Henry A. Giroux On the Contradictions of the New International Financial Architecture: Another Procrustean Bed for Emerging Markets? Susanne Soederberg Third World Quarterly, Vol. 23, No. 4. (Aug., 2002), pp. 607-620 Read More