The neo-liberal world-wide conspiracy? Why globalisation is not only about liberal ideas

Photo by Brett Zeck via Unsplash

In the article “What Is ‘Neoliberalism’, and How Does It Relate to Globalization?”, Vilde Skorpen Wikan describes that neo-liberalism, a part of liberalism's set of ideas, is not the only reason for globalization in terms of increased economic, technological and social flows as during 1990-2010. This article is very interesting due to claims, often among political left-wingers as socialists, that globalization is a direct result of neo-liberalism and that neo-liberalism is the main “driving force” behind different economic policies.

Wikan describes that “economic neoliberalism is an economic theory and an ideological conviction that supports maximizing the economic freedom for individuals and thus reducing the amount of state intervention to the bare minimum.” Modern neo-liberalism means global and deregulated markets, low taxation rates and sizes of the public sector, higher levels of freedoms for individuals, and processes such as LPG - liberalization, privatization, and globalization of economic development.

Neo-liberalism, policymaking, and globalization

Wikan writes that neo-liberalism does advocate the elimination of government-imposed restrictions on transnational movements of goods, capital, and people. According to her, these aspects are considered important aspects of globalization. Still, the case is also that globalization is a much “richer and multi-dimensional process” that extends beyond transnational economic transactions.

When it comes to “the correlation between neoliberalism and globalization”, research shows that “policy and macroeconomic changes realized under the neoliberal policy regime are more complex than is often assumed.”

Regarding neo-liberalism itself, Wikan argues that it is not enough to describe neo-liberalism only in terms of deregulation, liberalization, global and transnational market flows, and trade. One reason is that neo-liberalism, compared to classical liberalism as during 1800s, does favor certain state/government/public intervention as for example when it comes to certain welfare and healthcare policies.

Neo-liberal institutionalism and international trade

Another example of understanding globalization is when it comes to “neoliberal institutionalism”. While economic neoliberalism is “minimal state/government” intervention, neo-liberal institutionalism is about advocating and maximizing total economic gains even by government intervention in terms of regulations to “correct market failures” and promoting global economic interdependence and creating international regimes and institutions.

Wikan argues that there is a “theoretical conflation” by mixing up economic neoliberalism (freedoms, market, individual) with neo-liberal institutionalism (regulations, trade agreements, international institutions as WTO). She argues that reductions in trade barriers and capital controls are often seen as evidence that globalization is primarily driven by “neoliberal doctrine”.

Instead, Wikan argues that globalization cannot only be understood “as a single process” nor through focusing on “extreme” liberal ideas, but by understanding several aspects as transformational, deterritorialization and syncronisation of social and economic activities.

Furthermore, Wikan argues that:

“Although globalization cannot in anyway be seen as synonymous with neoliberalism, it could in fact be a product of neoliberalism if this theory has instigated the political developments that have facilitated the current wave of globalization.

When it comes to trade, since the period of World War II, numbers of obstacles, barriers and tariffs have been reduced while the amount of trade worldwide has increased sharply in relation to GDP. As Wikan writes, this development is often attributed to the efforts made by the General Agreement on Tariffs and Trade (GATT), which became the WTO in 1995, and that in a historical perspective, reductions in protectionist measures have often been the result, rather than the cause, of increased international trade. This provides good grounds to argue that the GATT/WTO has indeed affected economic globalization. Nevertheless, barriers to trade, such as regarding agriculture and textiles, are still existing, thereby showing a complete shift toward a deregulated economy still not the case.

Wikan writes that economic neoliberalism supports foreign direct investments to ensure individual freedom and increase choices and options in business conduction. As with international trade, FDI and the presence of MNCs have increased dramatically since the end of the Second World War.

Finally, Wikan concludes that the empirical evidence supports the notion that policymakers and IFIs have been influenced by liberal economic theory. There is little empirical evidence to argue that these processes have developed out of a commitment to enhancing individual freedom. Instead, the economic policies adopted since the 1970s seem to have emerged as an attempt to increase economic gains. Therefore, globalization must be considered a separate and autonomous phenomenon from neoliberalism.

Liberalisation, Privatisation, Globalisation

Wikan writes that it is a common approach to argue that neoliberal policies were developed as a result of a series of economic crises during the 1960s and 1970s, resulting in “the denouncement of more interventionist state policies such as “Keynesianism” and that shift towards neo-liberalism was created by Thatcher (UK) and Reagan (USA) administrations with focus on lowering taxation, reducing public sector spending and overall governance, promotion of market privatizations, deregulations, and liberalization, and promotion of all of such policies globally.

According to Wikan, there are problems with this storytelling. One example as Wikan describes it is when it comes to privatization of state-owned enterprises (SEO) during the 1980s. According to “original” neo-liberalism, SEO:s should not be privatized but should be dismantled due to the “constraining effects” of an SEO on individuals’ freedoms to conduct business. While neo-liberal institutionalism would claim that privatization, by a private person buying an SEO, would be better since relying on market mechanisms is a better way to ensure correct pricing and economic efficiency due to competition.

Wikan writes that the implementation of privatization policies is considered to have followed as a pragmatic response to the economic difficulties of the 1970s (Euroclesoris, stagnation) and the need to reduce government expenditure, which was experienced by many people regardless of neo-liberalism. She writes that the Thatcher government in the UK became a model for the U.S. Reagan administration but that Reagan’s administration seemed more inspired by laissez-faire, neoliberal doctrine, and anti-government themes where privatization became a coherent policy strategy.

Neo-liberalism and the welfare state

Another aspect that Wikan is criticizing regarding “critical literature” is the case of the “Keynesian” welfare state. Because despite the ideological support for reducing or even abolishing the welfare state within the neo-liberal ideological set, the case is that the number of welfare states around the world has increased since the 1990s and that older welfare states as Sweden are today larger than ever, when speaking about institutions, resoruces, and programs.

Wikan writes:

“Some authors have found no evidence to support the notion that there has been a decline in redistributive taxation while some argue that there is evidence to suggest that worldwide, the size of the welfare state has in fact increased”.

Thereby, Wikan concludes that - there seem to be no clear empirical grounds to argue that the proliferation of neoliberalism has led, or will lead, to a reduction or dissembling of the Keynesian welfare state.

One can therefore say that despite all of “neo-liberal” development, the welfare states in the Nordic nations such as Sweden and Denmark, which are among the most globalized and deregulated globally seen, are for different reasons, still popular institutions and still being developed.

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