Neoliberal Globalization: Are the Times a-Changin’?

Neoliberalglobalization since the late 1970s has restricted the policy autonomy of national states through a variety of pressures that “discipline” governments implementing measures deemed hostile to free markets. Yet the world is changing fast and the rise of China in particular is shifting the global power balance. Strangely, however, remarkably little has changed in the global order beyond some reshuffling of the dominant players and somewhat greater national independence in decision making. This argument is made at length in Civilizing Globalization, which I recently co-edited with Ali Burak Guven.

The constraints deriving from global neoliberalism are well known. First, the Global North’s self-serving version of #freetrade – that perpetuates subsidies and trade barriers to protect their uncompetitive agricultural products and that outlaws infant-industry subsidization as “protectionist” – has reduced job-creating growth in many countries below the level it might be with a more level playing field. Secondly, cross-border #capitalmobility, fostered by banking deregulation, capital-account liberalization and trade agreements, not only leads to periodic financial instability but also threatens countries deemed inhospitable to investors with financial ruin. As of 2011, an advisor to the World Trade Organization (WTO) estimated that $3.7 trillion crossed national borders each day, equivalent to five percent of total annual global economic output. This capital mobility has augmented the power of transnational capital to punish governments adopting measures deemed hostile. Governments compete for scarce foreign investment, and those that stray from conservative monetary and fiscal policies or nationalize local assets risk capital flight, speculative attacks on their currencies, high unemployment and a jump in poverty. This threat attunes even Leftist governments to the demands of foreign investors for restrictive monetary and fiscal policies, often trumping the egalitarian demands of their own supporters.

Thirdly, many multilateral and bilateral #tradeagreements prevent governments from imposing special conditions on foreign investors and allow the latter to sue governments over laws, regulations or practices deemed to lower their profits for unacceptable reasons or infringe their intellectual property rights. NAFTA tribunals, for instance, have ruled that even environmental and health and safety regulations involved the “taking” of private property because they imposed unjustifiable costs on the owners. Finally, changes in the rules governing the international financial institutions since 1980 have empowered them to require neoliberal policy changes in exchange for certain types of loans and debt relief. In short, the global economic order is not friendly to countries of the Global South, especially those governed by Leftist governments.

This outcome is not the spontaneous outcome of economic forces. The United States government has used its powerful position to project globally its neoliberal agenda and discourage counter-hegemonic projects. It could undertake such an ambitious project for several reasons: the United States’ geopolitical position as the world’s only superpower following the collapse of the Soviet Union in 1991, its economic power as the world’s largest economy, its influence over the Washington-based international financial institutions (IFIs) and its cultural clout as exercised through its globally acclaimed universities, business schools and popular culture. Although President George W. Bush (2000-2008) did not originate the U.S. imperial system, he did expand it both by proclaiming a unilateralist approach and projecting military power into the Arabian Gulf, Central Asia and Africa. However, the United States’ massive relative power has begun to wane recently owing to several factors, especially the growing power of the BRICS group – Brazil, Russia, South Africa, India and especially China.

Although neoliberalism is still dominant, the global opportunity structure has shifted in the new millennium to accord greater national autonomy to Asian, African and Latin American states, especially the larger ones. On the one hand, America’s relative power has declined, owing to the country’s massive fiscal and trade deficits, its distraction by wars in the Middle East, its increasingly dysfunctional political system and the rise of the BRICS powers. The USA has become a major debtor nation, a fiscal situation exacerbated by major tax cuts and the cost of foreign wars. China’s remarkable economic growth since 1980 has fuelled its military power and rising influence in the world. Russia, until recently buoyed by oil and gas revenues, temporarily recovered from the collapse of the Soviet Union in the late 1990s. Its invasions of Georgia in 2008 and Crimea in 2014 demonstrated its newfound assertiveness. Also, the replacement of the G8 by the G20 in 2010 reflected the growing influence of the larger and more prosperous countries of the Global South and East.

On the other hand, the formerly dependent states of sub-Saharan Africa and Latin America have gained greater autonomy from the West as a result of a commodity boom, cheap credit and the availability of China and India as alternative sources of investment, aid, loans and trade. The influence of the IFIs fell (2000-2009), along with their loan portfolios. It is not coincidental that the rise of the Left in Latin America dates from the early 2000s.

The global financial collapse of 2008-2009 was a further blow to neoliberal globalization. That the worst effects were felt in the heartlands of neoliberalism in the United States and Western Europe contributed to a more skeptical view of neoliberal doctrine and American economic leadership. Emblematic of US decline was the appointment in mid-2008 of a Chinese national as chief economist of the World Bank, one moreover who espoused a “new structuralist economics” that assigned an important role in economic development to a pro-active state. Moreover, a number of governments in the Global South in 2010-2011 emulated the Malaysian and Chinese examples of capital controls. Changing global circumstances presented a potential opening to anti-neoliberal forces.

Yet none of the new economic powers championed more than a moderation of neoliberal doctrine. China, India and Russia, having learned how to benefit from the West’s neoliberal faith, were reluctant to press for an alternative path. Moreover, influential segments of national business classes worldwide have gained a vested interest in neoliberalism, which has buttressed their power and privilege. And capitalism’s culture of possessive individualism has expanded far beyond national business elites. High annual rates of economic growth in China, India, Latin America and Sub-Saharan Africa between 2002 and 2008, resuming in 2010 in many countries, have forged numerically large middle-classes of avid consumers. About a quarter of the populations of China and India (300 million people in each case) and perhaps 60 million Africans participate The era of global neoliberalism is thus far from over.

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