Globalisation and Power
FES Participants 6th to 9th Feb 2013
The word ‘Globalisation’ has evolved over time, but it has assumed more prominence since the end of the cold war and rapid liberation of emerging economies. Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Globalization describes the interplay across cultures of macro-social forces. These forces include social, technological, cultural/religion, politics, and economics. Globalization can erode and universalize the characteristics of a local group . Advances in transportation and telecommunications infrastructure, including the rise of the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities. Globalisation also entails various governance issues that are determined by very powerful operators in form of institutions and groups. While it may be perceived negatively, there are still a number of opportunities that come with it and third world actors should put in place strategies to overcome the challenges.
1.1 Concepts Globalisation and Neo-Liberalism
1.1.1 Globalization is derived from the word globalize, which refers to the emergence of an international network of social and economic systems. Globalisation means different things to different people and thus it has been used in several ways in the literature. It is a process of integrating not only the economy of nations but also their culture, technology and governance. Generally, it refers to the widening, deepening and speeding up of world-wide interconnectedness in all aspects of contemporary social life. It therefore reinforces that the world is one globe. Though several scholars place the origins of globalization in modern times, others trace its history long before the European age of discovery and voyages to the New World. Some even trace the origins to the third millennium BCE. Since the beginning of the 20th century, the pace of globalization has proceeded at a rapid rate.
The term was used in increased sense since the mid 1980s and especially since the mid 1990s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge as will be expounded later. Further, environmental challenges such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are linked with globalization. Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment.
The concept of globalization revolves around other new realities and terminologies such as Information Technology, Deregulation, Trade liberalisation, Economic competition or free enterprises and an emergent political structure/system that is people oriented.
1.1.2 Neo-liberalism is a political philosophy whose advocates support economic liberalization, free trade and open markets, privatization, deregulation, decreasing the size of the public sector and increasing the role of the private sector in modern society. The term was introduced in the late thirties by European liberal scholars to promote a new form of liberalism after interest in classical liberalism had declined in Europe. In the decades that followed, neoliberal theory tended to be at variance with the more laissez-faire doctrine of classical liberalism and promoted instead a market economy under the guidance and rules of a strong state, a model which came to be known as the social market economy. In the sixties, usage of the term "neoliberal" heavily declined. When the term was reintroduced in the following decades, the meaning had shifted. The term neoliberal is now normally associated with laissez-faire economic policies, and is used mainly by those who are critical of legislative market reform.
More explicitly, the above terms Globalisation and neoliberalism refers to a process of increasing economic openness, growing economic interdependence and deepening economic integration between countries of the world. It is associated not only to phenomenal spread and volume of cross-border economic transactions, but also with an organization of economic activities which transcend national boundaries. In other words, it refers to the increasing integration of economies particularly through trade and financial flows around the world. The term also refers to the ‘movement of people i.e. labour, knowledge and technology across international borders’. There are also cultural, political, environmental spiritual and criminal dimensions of globalisation.
1.2 Trends in Globalisation and Neoliberalism
The term globalization became more real in mid 1980s and more pronounced especially since the mid 1990s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge . Further, environmental challenges such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are linked with globalization.
Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment. In the 20th century, road vehicles and airlines made transportation even faster, and the advent of electronic communications, most notably mobile phones and the Internet, connected billions of people in new ways leading into the 21st century.
Globalization took a big step backwards during the First World War, the Great Depression, and the Second World War. Integration of rich countries didn't recover to previous levels before the 1980s. After the Second World War, work by politicians led to the Bretton Woods conference, an agreement by major governments to lay down the framework for international monetary policy, commerce and finance, and the founding of several international institutions intended to facilitate economic growth multiple rounds of trade opening simplified and lowered trade barriers. Initially, the General Agreement on Tariffs and Trade (GATT), led to a series of agreements to remove trade restrictions. GATT's successor was the World Trade Organization (WTO), which created an institution to manage the trading system. Exports nearly doubled from 8.5% of total gross world product in 1970 to 16.2% in 2001. The approach of using global agreements to advance trade stumbled with the failure of the Doha round of trade-negotiation. Many countries then shifted to bilateral or smaller multilateral agreements, such as the 2011 South Korea–United States Free Trade Agreement .
Since the 1970s, aviation has become increasingly affordable to middle classes in developed countries. Open skies policies and low-cost carriers have helped to bring competition to the market. In the 1990s, the growth of low cost communication networks cut the cost of communicating between different countries. More work can be performed using a computer without regard to location. This included accounting, software development, and engineering design. In late 2000s, much of the industrialized world entered into the Great Recession, which may have slowed the process, at least temporarily.
1.3 Global Institutions and Power
1.3.1 Legal and Institutional framework
There are various actors at all levels that have a vital role in the globalisation dispensation. These have both the legal mandate and the capacity to deliver on some of the key aspects of globalisation. At International levels include:
United Nations is the major power and actor in the globalisation framework. UN and its agencies like Office of the High Commissioner for Human Rights, (Human Rights Council replaced Commission on Human Rights in 2006), International Criminal Court, International Labour Organization, The World Trade Organization (WTO), are the influencers of foreign policies and currently the democratic processes throughout the world.
With various instruments like Universal Declaration of Human Rights, International Convention on the Elimination of all forms of Racial Discrimination (1965), International Convention on Economic, Social and Cultural Rights (1966). Other key instruments include: Convention on the Elimination of all forms of Discrimination Against Women (1979), Convention on the Rights of the Child (1989), International Convention on the Protection on the Rights of all Migrant Workers and Members of their Families (1990), Convention on the Rights of Persons with Disabilities (2006), United Nations Convention Against Corruption (2004) -http://www2.ohchr.org/english/law/ , the world power space has been occupied. World powers like USA and the G8 influence trends and processes of globalisation.
On the other hand Regional bodies and instruments that have a great influence on globalisation and neoliberalism include Common Wealth, African Union, European Union, Association of South East Asian Nations, East African Community, Economic Community of West and African States, South African Development Community, Common Market for East and Southern Africa, Inter-Governmental Authority for Development, OPEC etc
The enabling legal instruments include: European Convention for the Protection of Human Rights and Fundamental Freedom (1950), European Social Charter (1961 –amended 1966), American Convention on Human Rights (1969, African Charter on Human & Peoples’ Rights (1981), Protocol to the African Charter on Human & Peoples’ Rights on the Rights of Women in African (2003), African Charter on the Rights & Welfare of the Children (1990), African Youth Charter (2006), African Union Convention on the Prevention & Combating Corruption (2003), African Court of Human & Peoples’ Right (1998), East African International Court of Justice, Peace & Security Council of African Union (2002), Court of Justice of the African Union (2003), African Commission on Human & Peoples’ Rights (1981) formally installed Nov. 1986, ECOWAS Court of Justice etc.
1.3.2 Bretton Woods Institutions
Of special mention however is the famous Bretton Woods Institutions, namely the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (referred to as the World Bank). These institutions have had a system of monetary management that established the rules for commercial and financial relations among the world's major industrial states in the mid-20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.
They emerged out of the need to rebuild the international economic system as World War II was still raging and its aftermath. About 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated during 1–22 July 1944, and signed the Agreement on its final day.
Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments. On 15 August 1971, the United States unilaterally terminated convertibility of the US$ to gold. This brought the Bretton Woods system to an end and saw the dollar become fiat currency . This action, referred to as the Nixon shock, created the situation in which the United States dollar became a reserve currency used by many states. At the same time, many fixed currencies (such as GBP, for example), also became free floating. Since then the WB and IMF have been viewed as Uncle SAM’s conduits and they are treated with suspicion by the Least Developing world.
2.0 Key aspects of globalisation and Neoliberalism
2.1.1. Global business organization
As indicated above, with improvements in transportation and communication, international business grew rapidly after the beginning of the 20th century. International business includes all commercial transactions (private sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundary. Usually, private companies undertake such transactions for profit. Such business transactions involve economic resources such as capital, natural and human resources used for international production of physical goods and services such as finance, banking, insurance, construction and other productive activities.
International business arrangements have led to the formation of multinational enterprises (MNE), companies that have a worldwide approach to markets and production or one with operations in more than one country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as Tullow Oil for Uganda, MTN, Mobil, Shell and BP. Most of the largest corporations operate in multiple national markets . Businesses argue that survival in the new global marketplace requires companies to source goods, services, labor and materials overseas to continuously upgrade their products and technology in order to survive increased competition.
2.1.2 International trade
Globalization aids international trade. An absolute trade advantage exists when countries can produce a commodity with less cost per unit produced than could its trading partner. By the same reasoning, it should import commodities in which it has an absolute disadvantage. While there are possible gains from trade with absolute advantage, comparative advantage—that is, the ability to offer goods and services at a lower marginal and opportunity cost—extends the range of possible mutually beneficial exchanges. In a globalized business environment, companies argue that the comparative advantages offered by international trade have become essential to remaining competitive.
2.1.3 Tax havens
A tax haven is a state, country or territory where certain taxes are levied at a low rate or not at all, which are used by businesses for tax avoidance and tax evasion. Individuals and/or corporate entities can find it attractive to establish shell subsidiaries or move themselves to areas with reduced or nil taxation levels. This creates a situation of tax competition among governments. Different jurisdictions tend to be havens for different types of taxes, and for different categories of people and/or companies. States that are sovereign or self-governing under international law have theoretically unlimited powers to enact tax laws affecting their territories, unless limited by previous international treaties. The central feature of a tax haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions.
2.1.4. Global information system
Multinational corporations face the challenge of developing global information systems for global data processing and decision-making. The Internet provides a broad area of services to business and individual users. Because the World Wide Web (WWW) can reach any Internet-connected computer in the world, the Internet is closely related to global information systems. A global information system is a data communication network that crosses national boundaries to access and process data in order to achieve corporate goals and strategic objectives.
2.1.5. International tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes". There are many forms of tourism such as agri-tourism, birth tourism, culinary tourism, cultural tourism, eco-tourism, extreme tourism, geo-tourism, heritage tourism, LGBT tourism, medical tourism, nautical tourism, pop-culture tourism, religious tourism, slum tourism, war tourism, and wildlife tourism. Globalization has made tourism a popular global leisure activity. The World Health Organization (WHO) estimates that up to 500,000 people are in flight at any one time. In 2010, international tourism reached $919B, growing 6.5% over 2009. In 2010, there were over 940 million international tourist arrivals worldwide, representing a growth of 6.6% when compared to 2009. International tourism receipts grew to US$919 billion (€693 billion) in 2010, corresponding to an increase in real terms of 4.7%. Uganda got 800 million Dollars in tourism alone.
2.1.6. Economic globalization
Economic globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology and capital. Whereas the globalization of business is centered around the diminution of international trade regulations as well as tariffs, taxes, and other impediments that suppresses global trade, economic globalization is the process of increasing economic integration between countries, leading to the emergence of a global marketplace or a single world market. Depending on the paradigm, economic globalization can be viewed as either a positive or a negative phenomenon.
Economic globalization comprises the globalization of production, markets, competition, technology, and corporations and industries. Current globalization trends can be largely accounted for by developed economies integrating with less developed economies, by means of foreign direct investment, the reduction of trade barriers as well as other economic reforms and, in many cases, immigration.
2.1.7 Socio-cultural globalization
Globalization has expanded recreational opportunities by spreading pop culture, particularly via the Internet and satellite television as well as film industry. Religious movements were among the earliest cultural forces to globalize, spread by force, migration, evangelists, imperialists and traders. Christianity, Islam, Buddhism and more have taken root and influenced endemic cultures in places far from their origins. Language has also played a big part in driving globalization: English, French, Chinese, Spanish etc are now spoken in very many countries.
In general, globalization may ultimately reduce the importance of nation states. Sub-state and supra-state institutions such as the European Union, the WTO, the G8 or the International Criminal Court, replace national functions with international agreement. Some observers attribute the relative decline in US power to globalization, particularly due to the country's high trade deficit. This led to a global power shift towards Asian states, particularly China, which unleashed market forces and achieved tremendous growth rates. As of 2011, China was on track to overtake the United States by 2025. Increasingly, non-governmental organizations influence public policy across national boundaries, including humanitarian aid and developmental efforts.
2.1.9 Media and public opinion
A 2005 study by Peer Fiss and Paul Hirsch found large increase in articles negative towards globalization in the years prior. By 1998, negative articles outpaced positive articles by two to one. In 2008 Greg Ip claimed this rise in opposition to globalization can be explained, at least in part, by economic self-interest. The number of newspaper articles showing negative framing rose from about 10% of the total in 1991 to 55% of the total in 1999. This increase occurred during a period when the total number of articles concerning globalization nearly doubled.
Both a product of globalization as well as a catalyst, the Internet connects computer users around the world. From 2000 to 2009, the number of Internet users globally rose from 394 million to 1.858 billion. By 2010, 22 percent of the world's population had access to computers with 1 billion Google searches every day, 300 million Internet users reading blogs, and 2 billion videos viewed daily on YouTube. An online community is a virtual community that exists online and whose members enable its existence through taking part in membership ritual. Significant socio-technical change may have resulted from the proliferation of such Internet-based social networks.
2.1.10 Food and Population growth
It is becoming increasingly difficult to maintain food security in a world beset by a confluence of "peak" phenomena, namely peak oil, peak water, peak phosphorus, peak grain and peak fish. Growing populations, falling energy sources and food shortages will create the "perfect storm" by 2030, according to UK chief government scientist John Beddington. He noted that food reserves were at a 50-year low and the world would require 50% more energy, food and water by 2030. The world will have to produce 70% more food by 2050 to feed a projected extra 2.3 billion people and as incomes rise according to the United Nations' Food and Agriculture Organisation (FAO). Social scientists have warned of the possibility that global civilization is due for a period of contraction and economic re-localization, due to the decline in fossil fuels and resulting crisis in transportation and food production. Helga Vierich predicted that a restoration of sustainable local economic activities based on hunting and gathering, shifting horticulture, and pastoralism.
Global health is the health of populations in a global context and transcends the perspectives and concerns of individual nations. Health problems that transcend national borders or have a global political and economic impact, are often emphasized. It has been defined as 'the area of study, research and practice that places a priority on improving health and achieving equity in health for all people worldwide'. Thus, global health is about worldwide improvement of health, reduction of disparities, and protection against global threats that disregard national borders. The application of these principles to the domain of mental health is called Global Mental Health.
The major international agency for health is the World Health Organization (WHO). Other important agencies with impact on global health activities include UNICEF, World Food Programme (WFP), United Nations University International Institute for Global Health and the World Bank. A major initiative for improved global health is the United Nations Millennium Declaration and the globally endorsed Millennium Development Goals. International travel has helped to spread some of the deadliest infectious diseases. Modern modes of transportation allow more people and products to travel around the world at a faster pace, but they also open the airways to the transcontinental movement of infectious disease vectors.
Globalization has continually increased international competition in sports. The FIFA World Cup is the world's most widely viewed sporting event; an estimated 715.1 million people watched the final match of the 2006 FIFA World Cup held in Germany.
2.1.13 Global natural environment
Environmental challenges such as climate change, cross-boundary water and air pollution and over-fishing of the ocean, require trans-national/global solutions. Since factories in developing countries increased global output and experienced less environmental regulation, globalism substantially increased pollution and impact on water resources.
The distances are shrinking between continents and countries due to globalization, causing developing and developed countries to find ways to solve problems on a global rather than regional scale. Agencies like the United Nations now must be the global regulators of pollution, whereas before, regional governance was enough. Action has been taken by the United Nations to monitor and reduce atmospheric pollutants through the Kyoto Protocol, the
Changes in natural capital are beginning to erode the economic logic of one major aspect of economic globalization: an international division of labor and production based on global supply chains. Over time, peak oil and climate change will result in "peak globalization," measured in terms of decreasing ton-miles of freight transported, particularly across oceans and continents. The economic logic of the comparative advantage of global supply chains will be overcome by both increasing transportation costs and interruptions and delays in the transit of freight.
2.1.14 Labour/Global workforce
The global workforce is the international labor pool of immigrant workers or those employed by multinational companies and connected through a global system of networking and production. As of 2005, the global labor pool of those employed by multinational companies consisted of approximately 3 billion workers. The current global workforce is competitive as ever. Some go as far as to describe it as "A war for talent." This competitiveness is due to specialized jobs becoming available worldwide due to communications technology. As workers get more adept at using technology to communicate, they give themselves the options to be employed in an office half way around the world. These newer technologies not only benefit the workers, but companies may now find highly specialized workers that are very skilled with greater ease, as opposed to limiting their search locally.
However, production workers and service workers have been unable to compete directly with much lower-cost workers in developing countries. Low-wage countries gained the low-value-added element of work formerly done in rich countries, while higher-value work remained; for instance, the total number of people employed in manufacturing in the US declined, but value added per worker increased.
3.0 Support and criticism on globalization and Neoliberalism
Reactions to processes contributing to globalization have varied widely with a history as long as extraterritorial contact and trade. Philosophical differences regarding the costs and benefits of such processes give rise to a broad-range of ideologies and social movements. Proponents of economic growth, expansion and development, in general, view globalizing processes as desirable or necessary to the well-being of human society.
Antagonists view one or more globalizing processes as detrimental to social well-being on a global or local scale; this includes those who question either the social or natural sustainability of long-term and continuous economic expansion, the social structural inequality caused by these processes, and the colonial, Imperialistic, or hegemonic ethnocentrism, cultural assimilation and cultural appropriation that underlie such processes.
The dominant propaganda systems have appropriated the term "globalization" to refer to the specific version of international economic integration that they favor, which privileges the rights of investors and lenders, those of people being incidental. In accord with this usage, those who favor a different form of international integration, which privileges the rights of human beings, become "anti-globalist." This is simply vulgar propaganda, like the term "anti-Soviet" used by the most disgusting commissars to refer to dissidents. It is not only vulgar, but idiotic. Take the World Social Forum [(WSF)], called "anti-globalization" in the propaganda system – which happens to include the media, the educated classes, etc., with rare exceptions. The WSF is a paradigm example of globalization. It is a gathering of huge numbers of people from all over the world, from just about every corner of life one can think of, apart from the extremely narrow highly privileged elites who meet at the competing World Economic Forum, and are called "pro-globalization" by the propaganda system.
Critics argue that globalization results in:
Poorer countries suffering disadvantages: While it is true that free trade encourages globalization among countries, some countries try to protect their domestic suppliers. The main export of poorer countries is usually agricultural goods. Larger countries often subsidies their farmers (e.g., the EU's Common Agricultural Policy), which lowers the market price for foreign crops.
The shift to outsourcing: Globalization allowed corporations to move manufacturing and service jobs from high cost locations, creating economic opportunities with the most competitive wages and worker benefits.
Weak labor unions: The surplus in cheap labor coupled with an ever growing number of companies in transition weakened labor unions in high-cost areas. Unions lose their effectiveness and workers their enthusiasm for unions when membership begins to decline.
An increase in exploitation of child labor: Countries with weak protections for children are vulnerable to infestation by rogue companies and criminal gangs who exploit them. Examples include quarrying, salvage, and farm work as well as trafficking, bondage, forced labor, prostitution and pornography.
3.1 Policy implications
Globalization and Neoliberalism seeks to transfer control of the economy from public to the private sector, under the belief that it will produce a more efficient government and improve the economic health of the nation. The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's "Washington Consensus", a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the International Monetary Fund (IMF) and World Bank). The list included ten points:
Fiscal policy Governments should not run large deficits that have to be paid back by future citizens, and such deficits can have only a short term effect on the level of employment in the economy. Constant deficits will lead to higher inflation and lower productivity, and should be avoided. Deficits should only be used for occasional stabilization purposes.
Redirection of public spending from subsidies (especially what neoliberals call "indiscriminate subsidies") and other spending neoliberals deem wasteful toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment.
Tax reform– broadening the tax base and adopting moderate marginal tax rates to encourage innovation and efficiency; part of this in Uganda resulted in formation of Uganda Revenue Authority
Interest rates that are market determined and positive (but moderate) in real terms;
Floating exchange rates; This included a free foreign exchange market and liberalization of Forex bureaus where there is an open market for other currencies. Uganda has an open policy on this and has liberalized the financial market economy.
Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; thus encouraging competition and long term growth. Uganda like other COMESA countries has removed tariff and non-tariff barriers for improved trade.
Liberalization of the "capital account" of the balance of payments that is, allowing people the opportunity to invest funds overseas and allowing foreign funds to be invested in the home country. Uganda now has an open policy on Foreign Direct Investment.
Privatization of state enterprises; Promoting market provision of goods and services which the government cannot provide as effectively or efficiently, such as telecommunications, where having many service providers promotes choice and competition. Uganda privatised most of her state enterprises to the extent that she has attracted criticism from social actors. Sectors like transport-Railways, Airlines, and other social services have been put in private hands.
Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;
Legal security for property rights; these are reforms that reflect capitalistic tendencies on ownership and tenure system of items like land.
4.0 Reach and effects
4.1 Effects urbanization
Between the 1930s and the late 1970s most countries in Latin America used the import substitution industrialization model (ISI) to build industry and reduce the dependency on imports from foreign countries. The result of ISI in these countries included rapid urbanization of one or two major cities, a growing urban population of the working class, and frequent protests by trade unions and left-wing parties. In response to the economic crisis, the leaders of these countries quickly adopted and implemented new neoliberal policies due to prospect theory.
In the area of urban systems and primacy two tendencies were revealed in the data. The first was continuing growth in total size of urban populations while the second tendency was the decline in size of the principal city with decreased migration flows to these cities. Therefore, when calculating the urban growth rate each of countries there was a similar trend or decline in growth. Although the relationship between the open-market and the transformation of urban systems has not been proven to be a perfect one-to-one relationship, the evidence supports the acceleration or initiation of these two tendencies following neoliberal changes.
4.2 Effects on global health
The effect of neoliberalism on global health, particularly the aspect of international aid involves key players such as Non-governmental organizations (NGOs), the International Monetary Fund (IMF), and the World Bank. Neoliberal emphasis has been placed on free markets and privatization which has been tied to the "new policy agenda", an agenda in which NGOs are viewed to provide better social welfare than that of a nation's government. International NGO's have been promoted to fill holes in public services created by the World Bank and IMF through their promotion of Structural Adjustment Programs (SAP's) which slash government health spending and are an unsustainable source of foreign aid. The reduced health spending and the gain of the public health sector by NGOs causes the local health system to become fragmented, undermines local control of health programs and contributes to local social inequality between NGO workers and local individuals.
4.3 Effects on Political freedom
In Capitalism and Freedom (1962), Friedman developed the argument that economic freedom while itself an extremely important component of total freedom, is also a necessary condition for political freedom. He commented that centralized control of economic activities was always accompanied with political repression. In his view, the voluntary character of all transactions in an unregulated market economy and wide diversity that it permits are fundamental threats to repressive political leaders and greatly diminish power to coerce. Through elimination of centralized control of economic activities, economic power is separated from political power, and the one can serve as counterbalance to the other. Friedman feels that competitive capitalism is especially important to minority groups, since impersonal market forces protect people from discrimination in their economic activities for reasons unrelated to their productivity.
It is important to take into account, however, that an early neoliberal regime was attempted in Chile under what some would consider a military dictatorship and severe social repression. Chile now enjoys the highest rate of GDP per capita in Latin America; this lends strong credence to the assertion that economic freedom is more important to prosperity than are democratic institutions. Also, increased economic freedom put pressure on the dictatorship over time and increased political freedom.
4.4 Other negative effects:
Opponents of globalization and neoliberalism commonly argue these following points:
• Globalization can subvert nations' ability for self-determination.
• Accountability to the stakeholders, who depend upon the service provided by the privatized entity, is lost as a consequence of business secrecy that is normally adopted by private investors.
• The replacement of a government-owned monopoly with private companies, each supposedly trying to provide the consumer with better value service than all of its private competitors, removes the efficiency that can be gained from the economy of scale.
• Even if it could be shown that neoliberal capitalism increases productivity, it erodes the conditions in which production occurs long term, i.e., resources/nature, requiring expansion into new areas. It is therefore not sustainable within the world's limited geographical space.
• The fact that in neoliberal economies, such as Australia, sovereign communities, including federal, state and local governments, are legislatively prevented from owning entities which produce wealth or provide services, even when public opinion is overwhelmingly in favour, shows that the term 'free market', often used to describe the neoliberal economy, is misleading.
• Exploitation: critics consider neo-liberal economics to promote exploitation.
• Negative economic consequences: Critics argue that neo-liberal policies produce inequality.
• Increase in corporate power: some organizations believe neoliberalism, unlike liberalism, changes economic and government policies to increase the power of corporations, and a shift to benefit the upper classes.
• There are terrains of struggles for neoliberalism locally and socially. Urban citizens are increasingly deprived of the power to shape the basic conditions of daily life.
• Trade-led, unregulated economic activity and lax state regulation of pollution lead to environmental impacts or degradation.
• Deregulation of the labor market produces flexibility and casualization of labor, greater informal employment, and a considerable increase in industrial accidents and occupational diseases.
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t. Taylor C. Boas and Jordan Gans-Morse, Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan, Studies in Comparative International Development (SCID), Volume 44, Number 2, 137–161
u. Philip Mirowski, Dieter Plehwe, The road from Mont Pèlerin: the making of the neoliberal thought collective, Harvard University Press, 2009, ISBN 0-674-03318-3, p. 12–13, 161
v. Oliver Marc Hartwich,Neoliberalism: The Genesis of a Political Swearword, Centre for Independent Studies, 2009, ISBN 1-86432-185-7, p. 19
w. Hans-Werner Sinn, Casino Capitalism, Oxford University Press, 2010, ISBN 0-19-162507-8, p. 50
x. François Denord, From the Colloque Walter Lippmann to the Fifth Republic, in Philip Mirowski, Dieter Plehwe, The road from Mont Pèlerin: the making of the neoliberal thought collective, 2009, p. 48
y. http://folk.uio.no/daget/What%20is%20Neo-Liberalism%20FINAL.pdf : This article makes this point rather well, and shows how these problems influence neoliberalism