Economic Globalization
Deepening and widening of trade and investment flows around the world so that more and more places are integrated into economic processes that operate beyond the scale of the locality, region or state.
What has enabled globalization?
Cheap, fast transportation and communications
Global capital markets
Freer movement of capital, people (labour), goods, OTH
(Neoliberalism, which came after Keynesian Economics)
Changing roles of state governments and corporations
Fordism & Keynesianism
- A national economy based on standardized, mass production
- Protectionism & tariffs, government regulation
- Class compromise → stable workforce
- Large middle class, more equal society
- (white male) workers with job security are paid decent wages (high wages)
Neoliberalism
An economy based on consumption and the deindustrialization in the Global North.
Free trade, deregulation, globalization, capital mobility
low wages, little job security (“labour flexibility”), few benefits, hard to get EI, lower labour standard
Debt has increased
Neoliberalism
A theory of political economy which proposes:
-human well being is best advanced through
strong private property rights and free trade;
society should be shaped by the market
-the role of the state is to: promote
privatization and create a good climate for
business by lowering taxes, making resources
available, and not imposing environmental
laws or labour regulations
-states should manage and regulate
economies as little as possible based on
the idea that free markets and free trade
lead to economic growth and prosperity
Characteristics of neoliberalism
An economy based on consumption and the deindustrialization in the Global North.
Free trade, deregulation, globalization, capital mobility
Low wages, little job security (“labour flexibility”), few benefits, hard to get EI, lower labour standard
Labour unions crushed; workers disempowered
Debt has increased
Wealth & Income polarization (Inequality ↑↑; middle class ↓)
Ten commandments of neoliberalism
- Trade liberalization
- Privatize public services
- Deregulate business and finance
- Cut public spending and welfare-state policies
- Reduce and flatten taxes
- Encourage foreign investment
- De-unionize
- Export-led development
- Reduce inflation
- Enforce property rights
In neoliberalism, individuals… (moral point)
Individuals are responsible for their own welfare (no social safety net; if you’re poor, it’s your fault and your problem)
The discourse is that neoliberalism increases choice, but others claim that they restrict choice. HOW?
- Consolidation (lots of things are owned by few big companies)
- Can no longer choose public education
- Can no longer choose public transportation
Free Trade Characteristics (6)
- Elimination of tariffs
- Creation of “free trade zones” and taxes
- Reduction or elimination of controls on the movement of capital out of a country (so profits can easily be returned to the base country or a tax-haven)
- Reduction or elimination of subsidies for local businesses (so that overseas firms are more competitive)
- Open up to FDI (usually buying a controlling interest in a firm or setting up a subsidiary)
- Cheap land and skilled, but controlled, labour
Tarrifs
taxes on imported goods
Import Quotas
Limits on the amount of a product that can be imported
Free Trade Zones
Zones where there are small or no tariffs
foreign direct investment (FDI)
Is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
Free Trade
Free trade, also called laissez-faire, a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports). A free-trade policy does not necessarily imply, however, that a country abandons all control and taxation of imports and exports.
7 critiques of free trade policies:
- Free trade is not actually free
- Rich countries massively subsidize industries (and then dump over-accumulation on countries that can’t compete)
- FT agreements are unfair because the rich make the rules to benefit themselves, then force those rules on poor countries
- Inequality and environmental destruction = serious market “failures” that must be addressed through regulation for the good of society
- Value chains dominated by MNCs which don’t allow open competition
- Rich countries got rich in part through protectionism, strong unions, gov’t. management (Keynesianism), and investment (eg. education + health to create educated, healthy workers); unfair to prevent poor countries from doing the same thing
- FT increases corporate power at the expense of democracy
investor-state dispute settlement
or investment court system (ICS) is a system through which investors/companies can sue countries for alleged discriminatory practices.
Example of how ISDS are used
Occidental Petroleum Corporation sued the Ecuadorian government for cancelling a contract and Ecuador had to pay 1.8 billion dollars
Disaster Capitalism or the “Shock Doctor”
Idea that crises can facilitate the implementation of free trade. Crisis is required to rationalize policies that wouldn’t make sense in other situations.
Can neoliberalism (free market, free enterprise economy) live on forever?
We have finite resources, so we can’t run a linear system that is just taking and taking all the time.
Gentrification
Higher-Income/Middle-class settlement of renovated or redeveloped properties in older, inner-city districts formerly occupied by a lower-income population.
(Spatial expression of class inequality)
