Term Paper, 2007
18 Pages, Grade: 1,3
2.1 Historic development
2.2 Concluding remarks
3 Critics of Neoliberalism
3.1 Critizicing individuality
3.2 Critizising inequality
4 How should appropriate Global Governance be designed?
4.1 New developments
4.2 Global Governance - Conception and goals
4.3 Problems of Global Governance
List of Literature
As Globalization and Neoliberalism are mentioned in public mass media, these terms are mainly afflicted with extensive critiques. Neoliberalism is implied an egoist, reckless transfer of Darwin’s doctrine to Economy in which only the fittest can survive. This so called doctrine becomes more and more evident.
Besides other definitions of Globalization I will refer to a “general” definition which is sufficient as a required framework for this paper. I will define it as a term to “describe the growth and spread in investment, trade, and production, the introduction of new technology, and the spread of democracy around the world.” (Schaeffer 2003: 1) The degree of Globalization “would affect not only production, finance, technology, media and fashion, but also the international political system.” (Archibugi 2004: 438)
The logic of the market has undoubtedly penetrated other subsystems of societies.
In the overall concept of Globalization, Neoliberalism is the economic “Ideology” which coins globalization. Neoliberalism is “the” constitutive basis, the incentive of Globalization. Globalization explicitly implies the idea of worldwide free trade and global market economy. (Cp. Schäfer 2003: 36) „At the end of the twentieth century, it looks clear that there has been a kind of triumph o global capitalism.” (Langhorne 2001: 16)
This obvious development is frequently criticised all over the world dependent on socio- cultural and structural background of critiques. In Africa targets of criticism are mainly international institutions like the IMF, World Bank, World Trade Organization or the Group of 8, banks and stock exchanges in the US, Canada and Europe. (Cp. Wood 2004: 69-75)
This paper intends to elaborate Neoliberalism as the omnipotent market ideology and the inevitability of an evolutionary process. Outgoing from this thesis, neoliberalist-critics underestimate the importance of Global Governance as a concept of government on a global level. Instead, critics misguiding criticize the logic of a working system based on inequality. Hereafter this paper offers an appropriate concept of Global Governance which might be an opportunity to deal with apparent negative externalities in the global market system.
Neoliberalism is based on philosophical grounds of enlightenment and rationality and political Liberalism proclaiming freedom as “the” object, the rule of law, pursuit of happiness and self- determination. In short, classical economic ideology proclaims a minimum of state regulation and a maximum of individual freedom. Modern market economies were driven by differently coined view on which policy is the best to guarantee economic growth. In elaborating a short outlook on the ideological history of market philosophies this paper will show a learning process of testing market philosophies and, in case of a failure, the preparation of “updated ideas.” This paper will outline the important events and developments of the 20th century.
The familiar theories of Adam Smith and David Ricardo promote rational actors who follow their self interest in order to increase their own and common wealth. “The neoclassical paradigm is a utilitarian, rationalist, and individualist paradigm. It sees individuals as seeking to maximize their utility, rationally choosing the best means to serve their goals. They are the decision-making units; that is, they render their own decisions. The coming together of these individuals in the competitive marketplace, far from resulting in all-out conflict, is said to generate maximum efficiency and well-being.” (Etzioni 1988: 1)
But in 1973 the Breton Wood System of fixed exchange rates collapsed. The Keynesian way of “regulating” economy by the state failed. “These policies and the compromising character of political leadership in a mass democracy led to a feeling that government had lost its moral legitimacy.” (Hoover 2003: 201)
The following oil-crisis and stagflation, meaning a high inflation mutually to a weakness of inventions and growth, made up a turn in economic paradigms towards a restrictive World Bank policy. (Friedman 1987: 500) Keyne´s philosophy was focussed on the state whereas the upcoming Neoliberalism counted on market processes as medium to economic growth. Uncontrolled and exorbitant political influence was seen as a danger of a functioning economy.
In the 80ies and especially after the breakdown of the sowjet union the market ideology named Neoliberalism gained influence and marked a complete turnaround in economic policy. (Cp. Biersteker 1993: 106) During the side by side structure of socialism and capitalism there was no desire to discredit the common capitalist procedures. But “in the twentieth century, the free-market theories pioneered by philosopher-economist Friedrich von Hayek and his colleagues, including Milton Friedman, at the University of Chicago provided the intellectual underpinnings for the radical agendas of Thatcher and Reagan.”(Mittelman 2004: 48) Monetarism by Friedman is meant as a counterrevolution towards Keynesianism and promoted a completely different approach: “Our personal conclusion, reinforced by the evidence in that work though not stated therein, is that a rigid monetary rule is preferable to discretionary monetary management by the Federal Reserve.” (Friedman 1987: 502)
“Although Hayek had reservations about Friedman’s rationalist approach, they were both advocates of the market.”(Hoover 2003: 207) They both received Nobel prices in economy proclaiming “more market and less state” Besides WTO, World Bank and the IMF also institutions like universities, schools and lecture circuits and business faculties propagated Neoliberalism and helped to develop this idea. (Cp. Mittelman 2004: 49) The elections of Kohl, Thatcher and Reagan amplified this radical change promoting withdrawal of the state in economic affairs. The aim was to “reduce the politization of the national economy” and to reduce the states´ intervention which has grown everywhere in the 20th century. (Cp. Buchanan: 1991: 3)This agenda-setting was based on classical market- and price-theory. (Friedman 2001 s 37)
The idea of a state was “the invisible hand” as an actor, who brings individual actions into an emergent structure. Individual actions have no communitarian goal. It is in the logic within the economic system to follow self interest. As a “side-effect” the economic system creates wealth. Here Marx’s mistakes becomes obvious because he only focuses on the “negative” self interests without considering the macro level of general achievements of capitalist pursuance. The idea of man is individualism, which means a priority of the individuals´ interest and requires cooperation.
Besides that, Neoliberalists state, that this does not mean a fundamentalist market ideology at all. On the contrary, the market system requires law as a framework and no laisser-faire (Hayek: 1953: 3) which is the job of the state to elaborate “rules of the game.” Neoliberalists proclaim the equality of chance within these “rules of the game” The dichotomy of these terms, understandably difficult, liberty on the one hand and equality on the other hand, was controversially discussed by John Rawl´s “Theory of Justice” in 1971.
The main demand in the mentioned context is that Neoliberalists are merely consciousness to avoid overregulation of market competition and responsibility. To guarantee progress and economic growth individuals have to follow their own interests in order to create common goods and wealth. “Thus freedom is praised, not quiet for its own sake, but because it liberates knowledge and this redounds to the benefit of the community. In this sense Hayek is not an anarchist.” (Hoover 204-205)
The „ideology“ of the market has been criticized in many ways. Critics focus on the undermining of communitarian values, the vanishing powers of the state, deregulation and negative externalities of globalized market ideals. Negative Externalities are side-effects which arise although or just because individuals follow their self interest and affect third parties. On the first sight this critique seems to be right. Mass unemployment, poverty and conflicts seem to affirm these undeniable facts. But are these phenomena caused by the market system or is an answer more difficult to make?
One part of the critiques is focussed on the undermining of communitarian morals and the omnipresence of economic logics in nearly every societal subsystem. Here it has to be noted that it is, like Hayek mentioned, the logic of the economic system which is based on the pursuit of individuals´ interest which indirectly leads to a communitarian goal, namely wealth. But critics demand a general new-orientation of the market system.
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