Neoliberal Economic Globalisation the Subject

Neoliberal Economic Globalisation

The subject of this paper is "Neoliberal economic globalisation is the solution to world poverty." This paper will choose to support this statement. It consists of three parts: a definition of neoliberal economic globalisation, a look at the evidence of the improvement in world poverty, and a prediction on the future of world poverty and its interaction with economic globalisation.

Defining Neoliberal Economic Globalisation

Neoliberalism" is simply the revitalisation of "liberalism" in the sense used in Great Britain in the late 1700's and early 1800's. This term is best embodied by the economic philosophers of Great Britain and the United States, who postulated that all would benefit from improvements in wealth due to innovation and specialisation. In Adam Smith's work (Smith, 1909), he sided with the labourer, who increased his wages over time:

It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordingly, in the richest countries, but in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest.

Liberalism was refined as religious and philosophical theory by Hobbes, Locke, Thomas Paine and John Wesley. Religion, economics and culture followed the growth of rationalism as characterized by the English and French in the 1700's, and following tremendous increases in agricultural wealth which created both capital for investment and surplus labour available for urban industrialisation.

Neo-liberal" has emerged in the past 25 years as a resurrection of the old "liberal" term. It stands for freer global trade, reduction of government's role in the formation of new business, freedom to hire and fire and to found new businesses.

In reaction to the ideas of Say, Marx and Galbraith, the neoliberal ideal was forged during the 1960's in the Chicago School of economics, and pushed further by the clear association between technological progress and jobs and income growth (Burkett, 2005).

Neoliberalism, which was first an epithet amongst the global left, became popular with three "proofs" of the 1980's: the fall of communism, the continued growth of the United States from 1982 forward, and the similar freeing and successful growth of the United Kingdom. By the 1990's, the strength of neoliberal reforms was demonstrated in the freeing of nearly 3 billion people -- 40% of the world's population, due to neoliberal reforms which had begun in the 1960's.

Impact of Neoliberalism on Global Poverty

There are two eras in which neoliberalistic ideals were applied and demonstrated their success in eliminating poverty. In the late 1950's and early 1960's, Korea, Japan and Taiwan were poor nations. Korea and Taiwan in 1960 had a per capita income no higher than Kenya at the time (CIA, 2007). Now, South Korea's income has moved to the top 12 in the world. Taiwan and Japan experienced similar growth. All three countries benefited primarily from freeing their currency, reducing barriers to company formation, and focusing their government policies on increasing productive capacity.

The second, and more dramatic, application of neoliberalistic ideas was in China and India. China's revolutionary changes started with Deng Xiao Ping's reforms in 1977-1981, in which he freed the peasants from communal farms; this followed from the 1965 reforms which allowed peasants 1/3 acre for their own cultivation. The latter action increased Chinese agricultural production by 30%, while the former (freeing the peasants) resulted in an increase in real peasant income in China by 40% during the 1980's. Few recognize that this was the first and most dramatic move in China, which preceded the economic liberalisation in the cities after (Zweig, 1997) (Prbyla, 1982).

What were the primary neoliberal changes in China and India? These included: (1) an opening to free trade, with admission to the WTO a centrepiece for both countries in 2000 and 2002, (2) allowing private enterprise, first through the institution of joint ventures (China: 1981, India: 1992), evolving to the institution of private capital, (3) nearly complete modernisation of the capital markets.