This article made comparison between ‘embedded liberalism' and ‘neoliberalism'. The article also traced the basis for the shift from ‘embedded liberalism' to the emergence of ‘neoliberalism'. In order for the government to intervene in economic policies matters; democracy was the driving force for the spread of embedded liberalism. Macroeconomics was introduced by the government of advanced economies to address three critical areas of the economic policies, namely: inflation, market output, and unemployment.
The other aspect of this period was to win the cold war and to empower the United States as the global hegemon. The departure from embedded liberalism to neoliberalism in 1971 was due to domestic economic pressure of the US. President Nixon’s administration ended the ‘convertibility of the dollar into gold' policy regime. The government had to float the dollar in the international market allowing market forces to determine the value of the dollar currency.
The administration of Reagan and Thatcher institutionalised ‘neoliberalism' as an alternative to ‘embedded liberalism'. The adoption of ‘neoliberalism' led both administrations to implement monetary policies which led to stripping labour from further threatening the economies of the United States and the United Kingdom with inflation. The overall implications were increased profits for capitalists or entrepreneurs as against employees of the labour market. The analysis revealed that there was an increased unemployment rate due to high-interest rates and deliberate policies to encourage recession in order to forestall inflation.
Table of Contents
1. INTRODUCTION
2. COMPARISON BETWEEN EMBEDDED LIBERALISM AND NEOLIBERALISM
2.1 Embedded Liberalism:
2.2 Neoliberalism:
3. REASONS FOR THE SHIFT FROM EMBEDDED LIBERALISM TO NEOLIBERALISM
4. CONCLUSION:
Research Objectives and Themes
This article provides a comparative analysis of the post-war economic era, defined by "embedded liberalism" and managed markets, and the subsequent rise of neoliberalism since the 1970s. The primary research goal is to investigate the historical catalysts, domestic economic pressures, and political shifts that prompted the transition from a Keynesian-regulated framework to a neoliberal global order.
- The historical development and characteristics of "embedded liberalism" post-WWII.
- The role of Keynesian macroeconomic policies in shaping early post-war economic growth.
- The mechanisms behind the transition to neoliberalism, including the end of dollar convertibility and the role of the Reagan and Thatcher administrations.
- The socio-economic consequences of neoliberalism, such as increased inequality, financialisation, and shifts in labour market dynamics.
- The ongoing influence of the United States as a global hegemon within international economic relations.
Excerpt from the Book
Embedded Liberalism:
Under the regime of ‘embedded liberalism,' there was sufficient control of capital flow and liberal trade arrangement that had a global economic impact. The concept of ‘embedded liberalism' was built on the Bretton Woods approach to global economic growth. Embedded liberalism reflects the combination of social democracy with capitalism. The approach to global economic analysis was very rapid after World War II to the 1970s (Helleiner 2006: 944). Furthermore, the International Monetary Fund ‘IMF' was created to address ‘short term balances of payments', setbacks. While the role of the World Bank was to provide loans for states developmental projects.
In the era of embedded liberalism, government economic policies were formulated to encourage the spread of liberal ideas as the option to counter communism. This trend, however, became unsustainable; thus ‘neoliberalism' was adopted by capitalists' nations like that which encouraged competition.
The Keynesian macroeconomic theory helped domestic economies generate high employment rate and developed safety net. In order words, the creation of Keynesian macroeconomic policies focused on domestic economic growth which in turn enabled states economic prosperity. Coupled the combination of the regulation of international capital flow and currency systems that helped steered global economic growth.
Summary of Chapters
1. INTRODUCTION: Provides an overview of the comparative scope of the article, introducing the transition from Keynesian-led managed markets to neoliberal economic paradigms.
2. COMPARISON BETWEEN EMBEDDED LIBERALISM AND NEOLIBERALISM: Examines the core tenets of both systems, focusing on how embedded liberalism balanced social democracy with capitalism, while neoliberalism prioritised market forces and deregulation.
3. REASONS FOR THE SHIFT FROM EMBEDDED LIBERALISM TO NEOLIBERALISM: Analyzes the specific factors—such as US budget deficits, the Vietnam War, and inflationary pressures—that forced a shift toward neoliberal policies in the 1970s.
4. CONCLUSION: Synthesizes the article's findings, reiterating that the departure from embedded liberalism was a result of domestic economic pressures and ideological shifts aimed at securing capitalist dominance.
Keywords
Embedded liberalism, Neoliberalism, Keynesian economics, Macroeconomics, Capitalism, Globalisation, Bretton Woods, Monetary policy, Labour market, Inflation, Financialisation, US Dollar, Cold War, Hegemony, Inequality.
Frequently Asked Questions
What is the central focus of this research?
The research examines the historical evolution from the post-WWII era of "embedded liberalism" to the emergence and dominance of neoliberalism from the 1970s onwards.
What are the primary themes discussed?
Key themes include the Keynesian macroeconomic framework, the transition to market-determined exchange rates, the impact of the Reagan and Thatcher administrations, and the structural consequences of neoliberalism on global inequality.
What is the core objective of the work?
The objective is to explain why and how the global economic paradigm shifted, focusing on the specific pressures that made the managed market model unsustainable.
Which scientific methodology is applied?
The article employs a historical-comparative analysis, evaluating economic policy shifts, literature reviews, and geopolitical factors through a constructivist and macro-economic lens.
What topics are covered in the main body of the text?
The main body contrasts the regulatory mechanisms of the Bretton Woods era with the deregulation and financialisation strategies typical of the neoliberal era.
Which keywords best characterize this work?
Important terms include embedded liberalism, neoliberalism, Keynesianism, financialisation, and global economic hegemony.
Why was the "embedded liberalism" model eventually replaced?
The author highlights that the model became unsustainable due to trade imbalances, the US budget deficit, and the inability of the US to maintain the dollar's convertibility into gold during the 1970s.
How does the author evaluate the impact of neoliberalism?
The author notes that while neoliberalism encouraged market competition, it also led to significant drawbacks, including rising social inequality, stagnation, and vulnerability to global financial crises.
- Quote paper
- Nathaniel Stevenson Odusola (Author), 2019, A comparative Analysis of the post-war era of managed markets and the "embedded liberalism" with the subsequent era of neoliberalism since the 1970s, Munich, GRIN Verlag, https://www.grin.com/document/923223
