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Globalization and Neoliberalism


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Globalization and Neoliberalism
The process by which businesses or other organizations develop international influence or start operating on an international scale. Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation technologies and services, mass migration and the movement of peoples, a level of economic activity that has outgrown national markets through industrial combinations and commercial groupings that cross national frontiers, and international agreements that reduce the cost of doing business in foreign countries. Globalization offers huge potential profits to companies and nations but has been complicated by widely differing expectations, standards of living, cultures and values, and legal systems as well as unexpected global cause-and-effect linkages.
Globalization is not an inevitable process and there are risks and costs:
-Inequality: Globalization has been linked to rising inequalities in income and wealth. Evidence for this is a rise in the Gini-coefficient and a growing rural–urban divide in countries such as China, India and Brazil.
-Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Food price inflation (known as afflation) has placed millions of the world’s poorest people at great risk.
-Macroeconomic instability: A decade or more of strong growth, low interest rates, easy credit in developed countries created a boom in share prices and property valuations. The bursting of speculative bubbles prompted the credit crunch and the contagion from that across the world in from 2008 onwards. This had negative effects on poorer & vulnerable nations.
-In 2007-08, financial crises generated in developed countries quickly spread affecting the poorest and most distant nations, which saw weaker demand and lower prices for their exports, higher volatility in capital flows and commodity prices, and lower remittances.
-Threats to the Global Commons: A major long-term threat to globalization is the impact that rapid growth and development is having on the environment. Threats of irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and the fears of a permanent shortage of water are afflicting millions of the most vulnerable people are vital issues.
-Trade Imbalances: Trade has grown but so too have trade imbalances. Some countries are running enormous trade surpluses and these imbalances are creating tensions and pressures to introduce protectionist policies.
-Unemployment: Concern has been expressed by some that investment and jobs in advanced economies will drain away to developing countries. Inevitably some jobs are lost as firms switch their production to countries with lower unit labor costs. This can lead to higher levels of structural unemployment and put huge pressure on government budgets causing rising fiscal deficits.
-Standardization: Some critics of globalization point to a loss of economic and cultural diversity as giant firms and global brands come to dominate domestic markets in many countries.

Neoliberalism is an updated version of the classical liberal economic thought that was dominant in the US and UK prior to the Great Depression of the 1930s. From roughly the mid 1930s to the mid 1970s a new Ainterventionist@ approach replaced classical liberalism, and it became the accepted belief that capitalism requires significant state regulation in order to be viable. In the 1970s the Old Religion of classical liberalism made a rapid comeback, first in academic economics and then in the realm of public policy. Neoliberalism is both a body of economic theory and a policy stance. Neoliberal theory claims that a largely unregulated capitalist system not only embodies the ideal of free individual choice but also achieves optimum economic performance with respect to efficiency, economic growth, technical progress, and distributional justice. The state is assigned a very limited economic role: defining property rights, enforcing contracts, and regulating the money supply.1 State intervention to correct market failures is viewed with suspicion, on the ground that such intervention is likely to create more problems than it solves.

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