This analyses the three perspectives of globalisation in sections

This essay aims to define the phenomenon of globalisation using the three
main contrasting perspectives of neoliberalism, structuralism and Marxism. (Wetherly
and Otter, 2014). Globalisation has a definite group of visible manifestations
(for example, investment flows across borders). However, the positivity or
negativity of the effects are arguable in terms of theory and real life. This
essay analyses the three perspectives of globalisation in sections that
incorporate historical information, global context and relevant symptoms of a globalising
world economy.  The relevant and
supporting examples in this essay will vary in terms of spatial level – whether
it is by country, sector or organisation. 

The positive neoliberal view of
globalisation is underpinned by right-wing, supply-side economics that entrusts
the free market to solve global problems, especially poverty. Although Adam
Smith observed that Britain was the sole industrialising force in the 18th
century, he stated that division of labour and specialisation would increase the
productive efficiency of nations. This is demonstrated to be true on a
macroeconomic level. The UK and US provide world class financial services to
businesses all over the world. For example, a global European business can
exploit global markets by using a London finance firm to assist with asset
management. This lowers expenses, meaning the European company has more capital
left to reinvest into the production process, which drives productive
expansion. Productive expansion ultimately boosts consumer choice, employment
and incomes.

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This point of view suggests that, if
every nation embraced democracy, lowered tariffs and liberalised markets, the
global economy would comprise of countries that all specialise in producing
commodities that improve lives. Globalisation harnesses the constructive nature
of capitalism to advance all nations, using the world’s land, labour and
capital resources efficiently.

Since the ‘Washington Consensus’
regarding the inevitable prosperity of open global markets, nations have
embraced capitalism through economic reforms. Between 1990 and 2010, extreme
poverty (those earning below $1.25) has been halved (Ndaba, 2015). The sharp
decline was primarily a result of China’s shift toward capitalism, in which
global trade led to massive GDP growth and employment. Despite the fact that ‘State-owned
enterprises’ (SOEs) monopolize key industries ‘in the upstream’ (Wang, 2012:3),
China’s partial reform has exposed smaller industries to the free market. Although
this implies state-planning determined China’s success, it should be noted that
the downsizing of government in favour of private enterprise has allowed
Chinese entrepreneurs, particularly in the primary industry, to make profit-driven
decisions with efficiency (World Bank, no date). This contrasts today’s SOEs in
China, which despite economies of scale, have problems with over-capacity and
oversupply (Wildau, 2016). This is because the ‘invisible hand’ of price
mechanisms balancing supply and demand is more obscure to state-controlled
industries. An extrapolation from China’s recent progress suggests that
embracing globalisation further, with more neoliberal policies, would likely
allow China to accomplish economic goals akin to capitalist powerhouses like
the US and EU.

In every economy, the population is
vulnerable to the performance of two differing elements: state and free market.
Politics tend to determine which side dominates. China’s recent history
testifies that isolationist state domination can have catastrophic effects on
the population. The Great Chinese Famine (1958-1961) suggested that central
government isn’t as reliable as the free market at balancing supply with demand
(Branigan, 2013), which is dangerous when essential commodities like food is in
low supply. On the other hand, when populations of capitalist countries are
vulnerable to global free markets, they may experience negative stages of the
economic cycle such as recessions, but there’s still a general equilibrium
between supply and demand. Hence, when countries like China embrace capitalism,
they avoid mass starvation through efficient primary industries and import of
primary goods from other countries if necessary. This is reflected through
China’s enormous growth in GDP in the second half of the century, which
exceeded 8 trillion Yuan (1.23 trillion USD) in 2000 (China Statistical
Yearbook, 2005, cited in Tian, 2007). If regions with massive labour supply
(such as China, India and sub-Saharan Africa) embrace open trade, it is estimated
that the world will eradicate absolute poverty within a decade (Matthews, 2016).

 

However, this begs the question about
what ’embracing open trade’ actually means. Third world countries being
radically free market doesn’t guarantee catching up to the First World with
immediate progress and prosperity. The structuralist view of globalisation
acknowledges this as a potential flaw in the neoliberal school of thought. Structuralists
argue that globalisation only yields benefit when political and economic
structures are in place for Third World economies to industrialise and
integrate. Emphasis on the transition of poorer countries to a global market
system is important because a significant proportion of land and labour can be
found in developing continents like Africa. The UN estimates that half the
world’s population growth will take place in Africa (UN, 2017). As well as this
exploding labour supply, the continent contains around 30% of the planet’s
mineral resources (Al Jazeera, 2016).

Before prospective decisions are made
about how to develop Africa, economists need to consider what framework should
be built around this transition to beneficial globalisation. African nations
need to mobilise inclusive institutions that guide their domestic markets in
the early stages. These institutions need to regulate and fulfil the government
role of addressing market imperfections such as monopoly power and imperfect
information. This allows domestic businesses to grow in a competitive
environment, ensuring customer power and sovereignty.

One of the facets of globalisation is
the ‘globally organized production and investment flows’ (Wetherly and Otter,
2014:264). Prior to the 1997 Asian financial crisis, Thailand welcomed this
aspect by opening up external capital accounts to facilitate global investment.
However, the subsequent rise in demand and value of its currency (thus exchange
rate) resulted in the significant fall in exports (the engine of Thailand’s
economy). The following economic failure drove out investors and capital. The
inevitable recession suggests that there shouldn’t be blind faith in
globalisation to solve national issues of employment, wealth and growth. This
crisis taken root in structural deficiency. Structuralists like Amartya Sen argue
that developing countries should lay down social infrastructure as a foundation
for long-term free market success, such as democratic freedom (Sen, 1999). It’s
the state’s duty to provide facilities for services like education and
healthcare, as well as market regulation. Perhaps if Thailand had a larger highly-educated
workforce and more skilled entrepreneurs, the domestic market would be more
diversified and less export-dependent. This recession demonstrates how the unintended
negative effects of policy mistakes (e.g. skyrocketing currency value) can be
magnified by a global market.

Moreover, the integration of Thailand
into an East Asian market meant that there was a domino effect of economic
crisis. This ultimately triggered the 1997 Asian financial crisis. This
consequence highlights another problem with the neoliberal approach: one nation
can make independent economic decisions and still suffer the negative
consequences of another’s. This is a result of decades of globalisation binding
economic and political systems together, making them exist interdependently (Schuster and Copeland, 2006). The structuralist solutions to this international issue
would be about outlining boundaries to the free market. Cynical globalisation
policies might include stable capital controls that prioritise national
economic goals. On the other hand, pro-globalisation policies might include
domestic market liberalisation that breeds competitiveness and diversification.
This balance acknowledges the immense benefits of capitalism and neoliberal
economics, while at the same time acknowledging that global business needs
government-enforced limitations.

 

Since the rapid rise of capitalism in
the 18th century, the world has experienced many damaging financial
crises. From 1930 to 2008, the populations of capitalist countries have
experienced unpredictable economic changes as a result of the mistakes of
profit-driven capitalists. While structuralism acknowledges that global
business needs to be guided to avert market collapse, Marxism claims that,
whether the market collapses or not, capitalism is inherently flawed and
exploitative.

Great Britain’s early liberalisation
of markets removed legal restrictions for 18th century capitalists.
As the British Empire expanded across every inhabitable continent, the
unconstrained human desire for profit was displayed by invaded land, slave
labour and stolen capital. Even Britain’s domestic economy saw massive wealth
inequalities that stemmed from a lack of social mobility. A factory owner had
no interest in the welfare or skillsets of factory workers. Adam Smith’s theory
about mutual transactional benefit from a capitalist’s ‘regard to their own
interest’ applies to an era of small business. Contemporary markets are
dominated by mass producers, who don’t need to provide high quality products to
subsist. Corporate structures and the global market system mean that overseas
shareholders often overshadow customers as the stakeholder to satisfy most.
This is because fierce international competition wholly directs the attention
of businesses to finance and sales, at the expense of ethics and natural
environment.

Some Marxists argue that neoliberals
are window dressing global capitalism by making examples of expansionist
nations of the past such as Britain, the United States and France – all of whom
prosper from imperial foundations. Meanwhile, former colonies in South America
and Africa are encouraged to follow the same formula bearing a great
disadvantage. Economic growth isn’t as simple as the Western world’s when
fierce established competition from abroad can ruthlessly kill domestic businesses
and create market barriers against start-ups. Rugman and Collinson (2012) explain that US multinational companies will
remain as the world’s leading exporters for years to come. Disadvantaged
nations that expose their domestic markets to globalization will see an inflow
of international businesses from the Western world, that have immense amounts
of available capital to dominate the market in question. For example, the United
States’ is a world superpower in terms of exported goods and services. The
businesses in this vast domestic market are cultivated by factors such as heavy
foreign investment and extensive technological know-how (Perlberg, 2013). When
these companies transcend borders, they’re inclined to enter markets (in which
companies are less competitive) to exploit resources for profit – which is most
likely returned to the capitalist business leaders/headquarters back in the US.
Despite initial investments in other host countries, the long term return on
investment drains money out of countries, that experience a reduction in money
circulated in the economy, which would be maintained if the markets weren’t
exposed to global exploitation.

American monopolies and duopolies
such as Coca-Cola Co and PepsiCo use circumstances in other countries to their
advantage, particularly in the Third world. A CSPI (Centre for Science in the
Public Interest) report (2016) concluded that soda drink companies like
Coca-Cola are producing negative externalities in the lower-income countries
they operate in. The corporation has committed to large investment programs in
countries like Mexico ($12.4bn) and Brazil ($7.6bn). The report demonstrates
how marketing in these countries promote health problems and put strain on
health services, which are currently scarce in these economies with rapid
population growth. If the state intervened with regulations that enforced high
health standards, markets like these would be less damaging to its customer
base, regardless of whether there is customer sovereignty. Marxists believe that the state should
radically surpass the free market when addressing global and domestic problems.

 

In conclusion, the mainstream
neoliberal faith in the free market has generated massive wealth creation over
recent decades. Structuralist theorists believe that if flaws are mitigated
through universal frameworks, globalisation can direct worldwide capitalism to
benefit all nations. Marxists believe that intervention should take further
steps, to control a capitalist system that favours a broad distribution of
labour employment, but a narrow concentration of wealth among private owners
and investors. As the world experiences constructive waves of globalisation, it
will learn more about how to respond to the significant changes that follow,
through momentous trial and error. Currently in the midst of rapid
globalisation, it’s extremely difficult to set precedents of future waves of
globalisation when the previous ones are nothing alike. However, based on the
entrenched knowledge about economics that the world has developed over the past
three centuries, the best system to adopt in the next few decades is the
structuralist system. Caution should be taken when businesses work in
unpredictable markets and political systems. If economic frameworks are abided
by, democracy established and extreme poverty eradicated, the world should
shift toward neoliberalism, which has evidently improved mankind’s quality of
life.