Is there a connection between globalisation, economic rationalism and neo-liberalism?
Defend your answer with examples


In this paper it will be argued that there is a connection between globalisation, economic rationalism and neo-liberalism and this relationship is based on the common aims and ideas of the three terms. To begin with all three terms will be defined, and then it will be argued that the aim of globalisation, economic rationalism and neo-liberalism is to create a free market where governments do not intervene and all barriers from governments are removed. Proponents of all three terms believe that there is no other way of adjusting and directing the economy of the world other than applying these rules and theories to markets. Countries such as America, Australia and Canada are some of those countries which their economic system works according to the ideas of globalisation and Australia is the country of economic rationalism.

Globalisation
Bell (1997) states that globalisation is defined “in terms of the increasingly worldwide spread of capitalist economic relations and in terms of the increasing international interdependence of the world economic system” (Bell 1997). It is argued that as a result of globalisation states lose their sovereignty and the autonomy weakens under the pressures from the global market (Bell 1997). Consequently policy makers’ power on decision making decreases by global governance arrangements (Bell 1997). According to the principles of globalisation, the market needs to be deregulated and globalised (IMF Strategies for an Alternative Globalisation n.d). Also the capital flow should be allowed to move and extent freely and much as possible in order to gain the intended benefits (IMF Strategies for an Alternative Globalisation n.d). The policies of globalisation are simply the policies of neo-liberalism which are continuously implemented by IMF, and the World Bank and these policies have not been successful in achieving their goals which is bringing about a better economy for the world (IMF Strategies for an Alternative Globalisation n.d). It is indicated that globalisation heavily relies upon the free market, privatisation, deregulation, and lessening the role of the governments (Global Policy Forum 1998).

The relationship between globalisation and Neo-liberalism

Globalisation means the spread of free-market capitalism to virtually every country in the world’ (Steger 2005, p.17). Nowadays markets are the driving force and free market capitalism is the driving idea behind globalisation (Steger 2005, p.17). Arguably these free markets are affecting the role of government (Steger 2005, p.17). The ideological sources of Globalisation are mainly two ideologies of neo-liberalism and neo-conservatism, however it is cannot be limited to either of them (Steger 2005, p.16). Historically, Neo-liberalism first came into economic politics in1973 in Chile (Werlhof 2008). The aim of launching this ideology was to make the neoliberal model of the Chicago Boys a reality (Werlhof 2008). Followed by that, Ronald Reagan and Margaret Thatcher introduced neo-liberalism in Anglo-America in the 1980s (Werlhof 2008). Then in 1989, the Washington Consensus was created which claiming that it would “lead to global freedom, prosperity and economic growth through ‘deregulation, liberalization and privatization’” (Werlhof 2008).

Arguably, neo-liberalism results in pushing out the Small, medium, even some bigger enterprises out of the market, then eliminated or mixed with international corporations (Werlhof 2008). However neo-liberalisation of markets which is the aim of neo-liberalism serves globalisation through providing a policy environment combined with the technological environment (You and Lee 1999, p.2). While Neo-liberal policies are promoting market forces and commercial activity they are opposing the role of the state as well as discouraging any government intervention into economic, financial and even social affairs (Makwana 2007). This ideology is driving the economic process of globalization, aiming at eliminating borders and barriers between states and thus enabling the market forces to drive the global economy (Makwana 2007). The primary demand of neo-liberal globalisation is free trade as it is believed to be a better and greater access to the emerging markets for businesses (Makwana 2007). These demands are opposing the original statements of free trade because the wealthy countries are still maintaining protectionist measures (Makwana 2007).

Globalisation from neoliberals view
Neoliberals view globalisation as a process which is driven by economic and should aim at protecting private ownership, promoting free trade and lessening political interference (Scholte 2005, p.1). Additionally, policymakers refer to globalisation as a process of creating a global liberalised market (Scholte 2005, p.1). It is strongly stated that Neo-liberal policies are generating enormous wealth for some people and living many in deep poverty (Makwana 2007) and this shows more similarity between globalisation and neo-liberalism as the same argument is stated in regards to the implications of globalisation on rich and poor. Statistics show that between 1980 and 2000 annual economic growth in developing countries from 3.2 percent dropped to 0.7 percent (Makwana 2007). During this period neo-liberalism was a prevalent ideology in global economic policy (Makwana 2007).

Economic Rationalism
Similar to neo-liberalism the doctrine of economic rationalism states that ‘economies, markets, and money can always, at least in principle, deliver better outcomes than states, bureaucracies, and the law’ (O'Hara 2001, p.249). In agreement, it is stated that economic rationalism is a doctrine which says that markets and money are the only reliable factors which can do everything much better than governments (Whitwell, n.d). “Economic rationalism is based on the classical liberal ideal of the super-ordinate value of an individual's liberty against the coercive powers of the state, and an individual's freedom to make private rational choices” (Murray, 1996).

The relationship between globalisation and economic rationalism

In order to pinpoint the relationship between globalisation and economic rationalism some sources have linked the beginning of globalization to the end of the cold war and the demonizing of communism by the leaders of the so-called free world, when there was a global struggle to define an alternative ideology or philosophy to economic rationalism (Gamage 2007). The alternative came out to be globalization and in that process many countries including developing ones started to open up their markets to the outside market and started creating free markets (Gamage 2007).

Conclusion

From the above arguments this could be concluded that all three terms globalisation, neo-liberalism and economic rationalism have common ideas and the core ideas are promoting free market or the so called free trade and decreasing the role of the governments. Supporters of neo-liberalism, globalisation and economic rationalism believe that their ideas are the only way to strengthen the economy and therefore reducing poverty. It is also believed that globalisation is another term for economic rationalism. The main similar point among all three concepts is the liberation of economy and all three claim that the idea of a free and deregulated market serves the economy of any individual country. America, Australia, and Canada are just some examples in which their economic system is based on privatisation and deregulation and promote free trade. They basically, enforce the core ideas of globalisation, economic rationalism and neo-liberalism.

References:

Bell, S 1997, Globalisation, neoliberalism and the transformation of the Australian state, Australian Journal of Political Science; Nov97, Vol. 32 Issue 3.

Gamage, S 2007, Globalisation, Economic Rationalism and Civil Society: What are the Negative Consequences?, viewed 2 may 2008,
.
Global Policy Forum, Statement on Globalization: UN Committee on Economic, Social, and Cultural Rights 1998, viewed 3 May 2008, <>.

IMF Strategies for an Alternative Globalisation n.d, viewed 3 May 2008, .


Makwana, R 2007, Neo-liberalism and Economic Globalization: An Introduction, viewed 1 May 2008, <>.

Murray G, 1996, Global 'Who-can-l-Kill-Today?' Capitalism: Top Business in the 90s, Social Alternatives, Vol 15, No.1.


O’Hara, P.A 2001, Encyclopedia of Political Economy, Routledge, London and New York.


Scholte J. A 2005, The Sources of Neoliberal Globalization, United Nations Research Institute for Social Development, program paper No.8, viewed 30 April 2008, .

STEGER, M.B 2005, Ideologies of globalization, Journal of Political Ideologies, Vol 10, NO.1.


You, J.I & Lee, J.H 1999, Economic and Social Consequences of Globalization:
The Case of South Korea, CEPA Working Paper Series I, Working Paper No.17.


Whitwell, G n.d, What is economic rationalism?, viewed 3 May 2008, .


Werlhof, C.V 2008, The Consequences of Globalization and Neoliberal Policies. What are the Alternatives?, viewed 30 April 2008, .