International Trade: Neoliberalism and Development-as-Freedom

Essay Sections: Introduction — Neoliberalism — Development-as-Freedom — Conclusion

Introduction:

How can nations succeed in a globalized world?  “Globalized world” means the interconnection and dependence each country has on each other and comprising of the movement of goods, services, people, and ideas. A successful country, in general, equates to a developed nation[1]; countries that are not yet developed strive to be developed and are called developing nations[2] [3]. People all live on the same planet and the success or failure of one country affects everyone. The success of one country is less important than the whole world becoming successful (which is an idea strongly embraced in the book One World by Peter Singer). Moreover, a world filled with successful countries will benefit everyone. As such, if political realism, or the fact that countries only act in self-interest, is true then it’s in the developed countries’ interest to help developing countries through the means of globalization. The methods to go about globalization have changed throughout the ages and most recently a shift happened in the 1990’s from neo-liberalism to development as freedom.  Neoliberalism, “New-Liberal” or “the Golden Straight Jacket” are terms referring to the same thing, the necessity for free-market policies, minimal restrictions on the movement of goods and services between countries. The current era, “development-as-freedom” has a revolutionary way to think about development, where the increase in human freedoms and rights are valued above the increase in Gross Domestic Product (GDP)[4]. These two eras brought with them very different goals: neo-liberalism, to increase the wealth of the developed nations by confining developing nations to stringent terms and conditions, and development-as-freedom, to increase the Human Development Index (HDI)[5] for everyone.  To find how nations can succeed in a globalized world one must first understand what neoliberalism is and why some progressive economists are now touting out with the old and in with the new, development-as-freedom.

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Neoliberalism:

Why are some economics abandoning neoliberalism? Is there something wrong with neoliberalism?

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Neoliberalism precedes development-as-freedom and is insufficient in creating a successful country for multiple reasons. Neoliberalism started, in terms of it being practiced by the ‘Unholy Trinity’[6], in the mid-1970s and ended in the late 1980s. At the heart of neoliberalism is free trade (or Laissez-faire) policies which were inspired by Adam Smith, an 18th-century economist who wrote The Wealth of Nations (Chang 46).  Smith advocated for free trade in Britain because it was in their best interest at the time, not necessarily because free trade is always better. Free trade contrasts to the economic policy Britain was engulfed in at the time which was mercantilism, an economic policy that depends on the adoption of protectionist policies[7] while seeking to expand their markets abroad. These policies prioritize domestic interest (or nationalism) rather than fostering international relationships. Sen argues that mercantilism is the exact reason why Brittan became so wealthy and successful. It is by no means that free trade drove Britain to the point of success; it is the economic policies that preceded the idea of Laissez-faire economics, Import Substitution Industrialization (ISI) [8]and mercantilism, that drove Britain to the point of success. History shows (Brittan being only one example) that successful countries did not go from a developing country to a developed country through free-market policies. It is thus unjustified for the Unholy Trinity to impose demands on developing countries as if such demands will lead them to success. For this reason, many experts think neoliberalism policies are just a way for developed nations to increase their wealth and power while allowing no way for developing nations to catch up. This is precisely the premise is of Ha-Joon Changs book Bad Samaritan (debunking the idea that neoliberalism is good). Noam Chumsky, a philosopher, and author of Profit over People, says in his book, “[neo-liberalism] refers to the policies and processes whereby a relative handful of private interests are permitted to control as much as possible of social life in order to maximize their personal profit” (7). The paradox is, neo-liberalism advocates for Laissez-faire policies, all the while, these policies themselves are forced upon developing countries that are not ready for such policies. [9]The Unholy Trinity has prescribed neoliberal policies on a one-size-fits-all basis (Chang 31). Furthermore, neoliberal policies don’t allow countries to engage in protectionism (a key factor in what has previously made developed countries). These two downfalls in the economic policy era of neoliberalism have led to its demise and therefore have led to an inclusive economic policy known as Development as Freedom.

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What’s better than neoliberalism?

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The current economic policy era of Development as Freedom was inspired by Amartya Sen, an author of Development as Freedom. He urges us to look at Development from a different angle. That is, what makes development worthwhile is to expand peoples’ freedoms. This includes the right to transparency, access to credit and state protection. He mentions that an increase in GNP[10], median income, industrialization, education, etc. are all important elements to reaching freedoms, but not the essence. The goal of development should not be to increase economic measures. Rather, when expanding freedoms is our goal, the increase in economic measures naturally follows suit. Sen does not advocate for the neglecting of economic measures rather it’s simply not the priority nor root of development.  The importance of development as freedom is that in countries where citizens have few rights poverty is prevalent, compared to a society where people can elect their leaders. A successful country that will survive must have a government that is for the people rather than a select elite. For countries to become successful the Unholy Trinity and developed countries must help the adoption of development-as-freedom in developing countries.

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Conclusion:

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For over 2000 years’ people groups have tried and failed repeatedly in making successful territories.  Now, in the 21st century, with all knowledge about previous territorial failures, humanity is the closest it has ever been to securing freedom for everyone with the growing belief that the lack of freedom somewhere else affects the success of everyone else. Since we live in a globalized world the success of one country is only as strong as its weakest link; this calls for the collaborative efforts of all countries to become successful. For developing countries to become successful the Unholy Trinity must adopt an ideology that mirrors development as freedom; rather than neoliberal policies that prematurely opens their markets. [11]

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Reflection:

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The reading that left the strongest impression on me is the first chapter of, Open Veins of Latin America written by Eduardo Galeano. Maybe this is because I could easily find similarities from this reading to the Disney movie Pocahontas, where England set off to the New World in search of gold, while destroying anything in their way. This reading provided me with an insight I would otherwise not have. One example is on page 49, “Nature’s very generosity makes them targets of plunder and crime.” This seems somewhat contradictive at first glance and before I read this chapter I thought the more resources a country has equated to more power and wealth. Galeano makes the claim that the only thing plentiful resources does to a country is makes a country target for extortion; which is exactly what happened in Latin America, like San Luis Potosi. Galeano effectively debunked the myth that plentiful recourse equates to a wealthy country. He says the real reason Latin America is poor today is because of path-dependence theory[12].

[I wrote this while I was an Undergrad student at Temple University, Japan Campus in Winter 2017. My ideas are always changing]

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  1. Wealthy nations that are advanced relative to other countries in terms of technology and infrastructure (ex. USA, Japan, France)

  2. Poor nations that are relatively less advanced in terms of technology and infrastructure (ex. Brazil, Kenya, and the Philippines)

  3. I define a successful country simply as developed; this is out of simplicity. An in-depth definition of a successful country is not the focus of this paper; rather, providing you with this simple but sufficient definition will allow me to better discuss the class content. Note: Success is more of an unattainable ideal to strive towards rather than an achievable destination.

  4. The total dollar figure of all the goods and services produced within a country in a period of time.

  5. HDI considers three factors: life expectancy index, education index, GNI index (standard of living)

  6. This term is used by Chang to describe three very powerful multilateral organizations: International Monetary Fund (IMF), the World Bank, and the World Trade Organization (32). The IMF provides loans to any member country in distress. The World Bank provides loans to any developing member country. The World Trade Organization implements regulations and international trading laws.

  7. These policies advocate for domestic subsidies (governmental monetary aid), trade barriers (high tariffs on manufactured products and no tariffs on raw goods), quality control, quotas, etc.

  8. ISI is the idea that a country should reduce its dependence on other countries by producing products domestically rather than importing products (this is arguably the best way for countries to become self-sufficient, yet is not allowed under neo-liberal policies)

  9. Free trade is not inherently bad. However, when a country enacts these polices before they are self-sufficient and before they are ready then they are in a position that doesn’t foster growth.

  10. GNP is like GDP except for the former cares who owns the means of production (separated by citizenship) the latter cares where the means of production is (separated by borders)

  11. A successful country, or developed nation (as defined in this essay), may still lack in providing freedoms to its people.

  12. Path-Dependence theory is when a country present situation is rooted in the past with very little self-sufficiency, thus creating a cycle that is hard to break.