Unit 1: A Guided Introduction to Economic Globalization

10 points

This introduction has been compiled and edited in order to provide you with a concise introduction to the major events and ideas associated with development and neoliberalism. It draws considerably from "Chapter 3: The Economic Dimension of Globalization" from Manfred Steger's Globalization: A Very Short Introduction, my own notes and summaries, and includes some clips from documentaries.

Why learn this? Economic globalization is an incredibly complex topic, and this introduction barely scrapes the surface. However, in order to have some sense of how economic globalization impacts local communities (this is what anthropologists are largely interested in), you have to have some sense of the historical and "macro" view.

Instructions: Read the information, watch the clips, and answer the questions. Each response should be written in your own words, demonstrate engagement with details from concepts from the lectures/textbook readings, and be in between 3-5 sentences in length. Please type your answer in RED text, or another color which is not black and is easy for me to distinguish. You will lose 1 point if you do not type your answers in a color other than black.

Background: Setting the Stage

Following World War II, European nations were devastated and found it difficult to govern their colonies because of civil war or disobedience. Here we see the retreat of the colonial system in which foreign powers/invaders exercised direct political and economic control over territories.

As former colonies asserted new independent political sovereignty, they had to contend with the lasting effects of colonialism, including: poverty, war, and ethnic conflict. Multinational corporations (most headquartered in the West) still exercised influence and had vested economic interests. A push toward urbanization exacerbated these effects.

These new postcolonial nations were trying to get out of this mess. While establishing political and social institutions they were also trying to establish and grow their economies through: control of trade, and limits on foreign investment and ownership. This posed a problem for multi-national corporations and other powerful countries who had long profited from the unequal terms of exchange (colonies had been "suppliers" of cheap goods, labor, and markets).

Post-Colonial Development: The Emergence of the Global Economic Order

Part 1: Keynesian Economics & Strong States

There was an important conference held at Bretton Woods, New Hampshire (July 1944) that established a new international economic order. The United States and Great Britian lead the conference, and invited the major economic players from the Global North. They decided to get rid of the "old system" which was based on economics policies of the interwar period like protectionism (e.g. high tariffs on imports).

This Bretton Woods system or "new system" was different, especially with regard to trade. All the countries agreed to expand international trade. Watch this. They also established a stable money exchange system (aka "The Gold Standard"). Watch this. You can also read the Wikipedia entry.

Q1. After watching the video, what did the Gold Standard try to do?

Type your answer here in RED

Three international economic organizations were also established. Matchwhich option best describes the function of each organization.

Q2. International Monetary Fund (IMF): Type your answer here in RED

Q3. International Bank for Reconstruction & Development (World Bank): Type your answer here in RED

Q4. General Agreement on Tariffs and Trade (GATT), now World Trade Organization (WTO):

Type your answer here in RED

1. This organization is involved in fashioning multilateral trade agreements and settling disputes about trade policy. It eventually came to regulate and promote free trade among nations. It has the power to enact sanctions on countries who violate trade policies.

1. Originally established to provide loans for Europe's post-war reconstruction, this organization shifted to providing loans mostly to "developing" (post-colonial) countries to provide capital for development projects (e.g. infrastructure, modernization, etc).

1. Ad
2. minister an international monetary system including overseeing currency exchange and monitoring changes to countries' monetary policies. Issuing short-term loans to cover trade deficits (a trade deficit is where imports exceed exports).

This "new system" contributed to "the golden age of controlled capitalism" in which national governments controlled money flows into and out of their territories. High taxation rates on wealthy individuals and profitable corporations led to the expansion of the welfare state. Rising wages and increased social services in the wealthy countries of the global north appeared to offer workers entry to the middle class.

Part 2: The Debt Crisis

The "new system" began to falter in the 1970s, leading to what is known as the Debt Crisis. The debt crisis refers to accumulation of debt in peripheral countries and the resulting problems, such as: poverty, hunger, environmental devastation, disease and political unrest.

There are three contributing factors to the debt crisis:

A change in the meaning of money. In 1971, Richard Nixon gets rid of the Gold Standard, because of the cost of the Vietnam War and social programs. No longer bound to have the gold to pay for government spending, the US moves to a system of "unsecured credit." Unsecured credit is like a credit card and secured credit is like a debit card. Unsecured credit allows money to be "printed on demand." Now there is a lot more money available.

The oil boom. Oil producing countries (OPEC) make huge profits called "petrodollars" in the 1970s. This is due to price and demand. By keeping supplies controlled in a high-demand market (oil is needed for development and modernization), the price of oil skyrockets. OPEC takes those petrodollars to the banks, who need to loan them out to make interest payments. There is both pressure for developing countries to accept loans of money from banks AND to use those loans to pay for commodities like oil. This is called "oil dollar recycling."

The amount of money being lent. Because there is now a system of unsecured credit, loans are more available. In the beginning, many developing countries take loans and use that money to invest in their economies. They can afford the payments. However, most interest rates are adjustable (as opposed to fixed). Eventually, more and more money is lent to "developing" countries and the debt begins to accumulate beyond what can be repaid. Money owed by peripheral countries: $100 billion in 1971 to $600 billion in 1981 to $2 trillion in 1998.

Countries enter an economic "crisis" due to an accumulation of various factors. Some amass staggering debt loads. When interest rates are low, they may be able to afford the payments. However, inflation (related to unsecured credit and money that is "print on demand") can trigger recession concerns and the raising of interest rates. When this happens (and it always does), these countries suffer a "double-whammy." First, payments go up. Second, demand for exports usually goes down. So, many of these countries end up in a bind: their bills are higher and their income (via exports) is lower.

A couple more concerns

• Development loans for major infrastructure projects benefitted "developing" countries, but they also benefitted "developed" countries like the United States. Here's an example:
  • A small country wants to build a hydroelectric dam. It takes a loan from the World Bank. It doesn't have the know-how internally to actually design, engineer, and build the dam. It contracts with a large US company to design and engineer the dam. This company hires some local laborers but it oversees the project. The majority of the cost of the dam goes to the contractor. Only a small portion (wages for laborers) stays in the local/domestic economy. Even though the small country gets the dam, most of the money "flows through" it and back to the economic core, leaving it with a very large debt and not much money immediately in the local economy. This makes it more difficult for the country to pay back the loan.

• In some cases, corruption and government inefficiencies lead to the "siphoning off" of vast quantities of development loans. Corrupt leaders would literally steal some of this money and use it to purchase real estate and other valuable commodities in the Global North.

Part 3: Structural Adjustment Programs

What is the response to the Debt Crisis? When postcolonial nations found themselves mired in debt and on the brink of economic collapse, the Global North and (their) international economic organizations offered a solution called Structural Adjustment Programs (SAP).

When countries could not pay their debt service obligations on time, they could go to the World Bank or IMF and ask that their loans be rescheduled, restructured, or extended through additional short term loans.

For example, the IMF would then consider what loans were on the brink of default and then agree to reschedule the payments (e.g. restructure the debt). In return, the IMF imposes a set of conditions to address balance-to-payment problems (meaning that there's not enough money to cover the bills). Governments would need to alter their fiscal policies through "structural adjustments."

In the short-term, governments were asked to cut spending and raise capital. Here are some means of doing so:

1. Raise taxes on citizens
2. Sell state property (e.g. land, mineral resources, water, etc)
3. Increase exports
4. Cut social programs (e.g. education and medical care for citizens)
5. Devalue currency (i.e. make goods cheaper for consumers in other countries but more expensive for citizens)
6. Don't print money

As you can imagine, SAPs were not popular with the citizenry! These "austerity" programs had severely negative impacts on citizens. Essentially, governments were spending less on domestic programs and more on paying their debt. This has resulted in widespread harm to citizens. For example:

• Between 1990 and 1993, Zambia spent 34 times as much on debt service as it did on education. This curtailment of spending on domestic programs has resulted in limited educational opportunities and widespread illness and death (particularly children).

• Currency devaluation and pressure to increase exports had lead to intense environmental degradation. Clear-cutting of forests (a means to increase exports of timber) has led to erosion and global warming (through lack of carbon uptake). And because so many countries were trying to increase their exports, markets became flooded with goods, driving down prices. Cheap timber was great for foreign consumers, but netted very little money for countries in dire financial straits.

Watch this clip on the impacts of SAPs in Jamaica. You may want to watch it twice - it goes fast! https://www.youtube.com/watch?v=YoIJPwfsbqg&t=43s

Q5. What is one take-away from the clip?

Type your answer here in RED

Here is another case/example "The South-East Asia crisis" (Steger 2009, 48)

In the 1990s, the governments of Thailand, Indonesia, Malaysia, South Korea, and the Philippines gradually abandoned control over the domestic movement of capital in

order to attract foreign direct investment. Intent on creating a stable money environment, they raised domestic interest rates and linked their national currencies to the value of the

US dollar. The ensuing irrational euphoria of international investors translated into soaring stock and real estate markets all over South-East Asia. However, by 1997, those investors realized that prices had become inflated much beyond their actual value. They panicked and withdrew a total of $105 billion from these countries, forcing governments in the region to abandon the dollar peg. Unable to halt the ensuing free fall of their currencies, those

governments used up their entire foreign exchange reserves. As a result, economic output fell, unemployment increased, and wages plummeted. Foreign banks and creditors reacted by declining new credit applications and refusing to extend existing loans.

By late 1997, the entire region found itself in the throes of a financial crisis that threatened to push the global economy into recession. This disastrous result was only narrowly averted by a combination of international bail-out packages and the immediate sale of South-East Asian commercial assets to foreign corporate investors at rock-bottom prices. Today, ordinary citizens in South-East Asia are still suffering from the devastating social and political consequences of that economic meltdown. In late 2007 and early 2008, the slowing down of the US economy had serious ramifications for its trading partners in Europe and Asia. It is yet to be seen what the extent of the impact of this will be on the global economy.

Q6. In YOUR experience, what was the impact of the 2007-2008 US economic crisis?

Type your answer here in RED

Look at the chart "The global South: a fate worse than debt" (Steger 2009, 44-45)

Q7. What is the most startling comparison this chart makes? Why?

Type your answer here in RED

Part 4: The SAP to rule them all... Trade Liberalization

The final "adjustment" to fiscal policies is related to the from a shift from Keynesian economic policies (strong government regulation and social programs, high taxes) to a neoliberaleconomic approach in the West. This final adjustment is called "trade liberalization" (aka free trade) and developing countries were no longer able to impose barriers to the free flow of goods and money across their borders.

Proponents of trade liberalization argue for the benefits of free trade, which include: enhancing consumer choice, increasing global wealth, securing peaceful international relations, and spreading new technologies around the world.

Free trade has allowed economically dominant countries to source goods, services, labor and markets in a global economy without resistance from governments. Because these countries and large multinational corporations are powerful, it can be difficult to ensure these are "fair" trade agreements. These relationships have been characterized as a kind of "neocolonialism."

Look at the chart "Transnational corporations versus countries: a comparison" (Steger 2009, 51)

Q8. What are some potential issues surrounding the fact that transnational corporations have such economic strength?

Type your answer here in RED

A neoliberal approach benefits transnational corporations by providing opportunities to secure cheap(er) labor, cheap(er) resources, favorable production conditions. It enables corporations to expand their manufacturing into areas of the world where it is the cheapest to make one part, while also enabling access to markets to sell goods.

Look at the image "Volkswagen's transnational production network" (Steger 2009, 52)

Q9. What kind of local impacts do you think this system has?

Type your answer here in RED

Watch the clip on Free Trade. https://www.youtube.com/watch?v=UzYGaFv1ryo

Q10. In this clip, the consumers seem to benefit. But what about the local producers? What are some alternatives you could imagine for local farmers who are being out competed by foreign imported food?

Type your answer here in RED

Labor, in particular, has been a major issue with regard to trade liberalization. "Race to the bottom" is a term that refers to the drive to scour the globe for cheap labor. Where can a product be made for the least labor cost? When labor costs increase, corporations again look for cheaper labor markets in new places.

Here's a scenario: A large textile manufacturer that produces clothing at a large textile plant in rural Georgia can lower its labor costs by moving its production facilities to Vietnam. Vietnam's government sees this as an opportunity to provide manufacturing jobs to small-scale agricultural workers in the rural countryside, particularly women. Identify some benefits and harms to the people (workers, consumers), governments (US, Vietnam), and organizations (textile manufacturer) involved in this scenario. Think through and explain the impacts on each.

Q11. Benefits:

Type your answer here in RED

Q12. Harms:

Type your answer here in RED

Neoliberalism

By the 1980s the elections of Reagan (US) & Thatcher (UK) governments, combined with the fall of Soviet Union in 1989 allowed neoliberalism to take root globally with the spread of free trade throughout the former Communist bloc, leading to global economic integration.

What is neoliberalism? In A Brief History ofNeoliberalism, David Harvey writes:

"Neoliberalism is in the first instance a theory of political economic practices that proposes that human well being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defense, policy, and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets. Furthermore, if markets do not exist (in areas such as land, water, education, healthcare, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture. State interventions in markets (once created) must be kept to a bare minimum because, according to the theory, the state cannot possibly possess enough information to second-guess market signals (prices) and because powerful interest groups will inevitably distort and bias state interventions (particularly in democracies) for their own benefit."

Keep in mind that neoliberalism was based on Adam Smith's idea of a self-controlling market and David Riccardo's theory of competitive advantage. However, Smith's ALSO wrote about the need for moral behavior and an "ease of entry" into the marketplace - neither of which characterize this "new" economic liberalism. Perhaps the most unpopular result of neoliberal economic policies has been economic inequality, both within countries (The 1% vs the 99%) and between countries (Global North vs Global South).

What does neoliberalism look like in terms of economic policy? See: "Concrete Neoliberal Measures" (Steger 2009, 42)

1. Privatization of public enterprises

2. Deregulation of the economy

3. Liberalization of trade and industry

4. Massive tax cuts

5. 'Monetarist' measures to keep inflation in check, even at the risk of increasing unemployment

6. Strict control on organized labour

7. The reduction of public expenditures, particularly social spending

8. The down-sizing of government

9. The expansion of international markets

10. The removal of controls on global financial flows

Q13. Since the 1980s, the US has been characterized (generally) by a neoliberal economic approach. Based on YOUR knowledge and lived experience, what do you think are some examples of neoliberalism? What are benefits and harms?

Type your answer here in RED Unit 1: A Guided Introduction to Economic Globalization

10 points

This introduction has been compiled and edited in order to provide you with a concise introduction to the major events and ideas associated with development and neoliberalism. It draws considerably from "Chapter 3: The Economic Dimension of Globalization" from Manfred Steger's Globalization: A Very Short Introduction, my own notes and summaries, and includes some clips from documentaries.

Why learn this? Economic globalization is an incredibly complex topic, and this introduction barely scrapes the surface. However, in order to have some sense of how economic globalization impacts local communities (this is what anthropologists are largely interested in), you have to have some sense of the historical and "macro" view.

Instructions: Read the information, watch the clips, and answer the questions. Each response should be written in your own words, demonstrate engagement with details from concepts from the lectures/textbook readings, and be in between 3-5 sentences in length. Please type your answer in RED text, or another color which is not black and is easy for me to distinguish. You will lose 1 point if you do not type your answers in a color other than black.

Background: Setting the Stage

Following World War II, European nations were devastated and found it difficult to govern their colonies because of civil war or disobedience. Here we see the retreat of the colonial system in which foreign powers/invaders exercised direct political and economic control over territories.

As former colonies asserted new independent political sovereignty, they had to contend with the lasting effects of colonialism, including: poverty, war, and ethnic conflict. Multinational corporations (most headquartered in the West) still exercised influence and had vested economic interests. A push toward urbanization exacerbated these effects.

These new postcolonial nations were trying to get out of this mess. While establishing political and social institutions they were also trying to establish and grow their economies through: control of trade, and limits on foreign investment and ownership. This posed a problem for multi-national corporations and other powerful countries who had long profited from the unequal terms of exchange (colonies had been "suppliers" of cheap goods, labor, and markets).

Post-Colonial Development: The Emergence of the Global Economic Order

Part 1: Keynesian Economics & Strong States

There was an important conference held at Bretton Woods, New Hampshire (July 1944) that established a new international economic order. The United States and Great Britian lead the conference, and invited the major economic players from the Global North. They decided to get rid of the "old system" which was based on economics policies of the interwar period like protectionism (e.g. high tariffs on imports).

This Bretton Woods system or "new system" was different, especially with regard to trade. All the countries agreed to expand international trade. Watch this. They also established a stable money exchange system (aka "The Gold Standard"). Watch this. You can also read the Wikipedia entry.

Q1. After watching the video, what did the Gold Standard try to do?

Type your answer here in RED

Three international economic organizations were also established. Matchwhich option best describes the function of each organization.

Q2. International Monetary Fund (IMF): Type your answer here in RED

Q3. International Bank for Reconstruction & Development (World Bank): Type your answer here in RED

Q4. General Agreement on Tariffs and Trade (GATT), now World Trade Organization (WTO):

Type your answer here in RED

1. This organization is involved in fashioning multilateral trade agreements and settling disputes about trade policy. It eventually came to regulate and promote free trade among nations. It has the power to enact sanctions on countries who violate trade policies.

1. Originally established to provide loans for Europe's post-war reconstruction, this organization shifted to providing loans mostly to "developing" (post-colonial) countries to provide capital for development projects (e.g. infrastructure, modernization, etc).

1. Administer an international monetary system including overseeing currency exchange and monitoring changes to countries' monetary policies. Issuing short-term loans to cover trade deficits (a trade deficit is where imports exceed exports).

This "new system" contributed to "the golden age of controlled capitalism" in which national governments controlled money flows into and out of their territories. High taxation rates on wealthy individuals and profitable corporations led to the expansion of the welfare state. Rising wages and increased social services in the wealthy countries of the global north appeared to offer workers entry to the middle class.

Part 2: The Debt Crisis

The "new system" began to falter in the 1970s, leading to what is known as the Debt Crisis. The debt crisis refers to accumulation of debt in peripheral countries and the resulting problems, such as: poverty, hunger, environmental devastation, disease and political unrest.

There are three contributing factors to the debt crisis:

A change in the meaning of money. In 1971, Richard Nixon gets rid of the Gold Standard, because of the cost of the Vietnam War and social programs. No longer bound to have the gold to pay for government spending, the US moves to a system of "unsecured credit." Unsecured credit is like a credit card and secured credit is like a debit card. Unsecured credit allows money to be "printed on demand." Now there is a lot more money available.

The oil boom. Oil producing countries (OPEC) make huge profits called "petrodollars" in the 1970s. This is due to price and demand. By keeping supplies controlled in a high-demand market (oil is needed for development and modernization), the price of oil skyrockets. OPEC takes those petrodollars to the banks, who need to loan them out to make interest payments. There is both pressure for developing countries to accept loans of money from banks AND to use those loans to pay for commodities like oil. This is called "oil dollar recycling."

The amount of money being lent. Because there is now a system of unsecured credit, loans are more available. In the beginning, many developing countries take loans and use that money to invest in their economies. They can afford the payments. However, most interest rates are adjustable (as opposed to fixed). Eventually, more and more money is lent to "developing" countries and the debt begins to accumulate beyond what can be repaid. Money owed by peripheral countries: $100 billion in 1971 to $600 billion in 1981 to $2 trillion in 1998.

Countries enter an economic "crisis" due to an accumulation of various factors. Some amass staggering debt loads. When interest rates are low, they may be able to afford the payments. However, inflation (related to unsecured credit and money that is "print on demand") can trigger recession concerns and the raising of interest rates. When this happens (and it always does), these countries suffer a "double-whammy." First, payments go up. Second, demand for exports usually goes down. So, many of these countries end up in a bind: their bills are higher and their income (via exports) is lower.

A couple more concerns

• Development loans for major infrastructure projects benefitted "developing" countries, but they also benefitted "developed" countries like the United States. Here's an example:
  • A small country wants to build a hydroelectric dam. It takes a loan from the World Bank. It doesn't have the know-how internally to actually design, engineer, and build the dam. It contracts with a large US company to design and engineer the dam. This company hires some local laborers but it oversees the project. The majority of the cost of the dam goes to the contractor. Only a small portion (wages for laborers) stays in the local/domestic economy. Even though the small country gets the dam, most of the money "flows through" it and back to the economic core, leaving it with a very large debt and not much money immediately in the local economy. This makes it more difficult for the country to pay back the loan.

• In some cases, corruption and government inefficiencies lead to the "siphoning off" of vast quantities of development loans. Corrupt leaders would literally steal some of this money and use it to purchase real estate and other valuable commodities in the Global North.

Part 3: Structural Adjustment Programs

What is the response to the Debt Crisis? When postcolonial nations found themselves mired in debt and on the brink of economic collapse, the Global North and (their) international economic organizations offered a solution called Structural Adjustment Programs (SAP).

When countries could not pay their debt service obligations on time, they could go to the World Bank or IMF and ask that their loans be rescheduled, restructured, or extended through additional short term loans.

For example, the IMF would then consider what loans were on the brink of default and then agree to reschedule the payments (e.g. restructure the debt). In return, the IMF imposes a set of conditions to address balance-to-payment problems (meaning that there's not enough money to cover the bills). Governments would need to alter their fiscal policies through "structural adjustments."

In the short-term, governments were asked to cut spending and raise capital. Here are some means of doing so:

1. Raise taxes on citizens
2. Sell state property (e.g. land, mineral resources, water, etc)
3. Increase exports
4. Cut social programs (e.g. education and medical care for citizens)
5. Devalue currency (i.e. make goods cheaper for consumers in other countries but more expensive for citizens)
6. Don't print money

As you can imagine, SAPs were not popular with the citizenry! These "austerity" programs had severely negative impacts on citizens. Essentially, governments were spending less on domestic programs and more on paying their debt. This has resulted in widespread harm to citizens. For example:

• Between 1990 and 1993, Zambia spent 34 times as much on debt service as it did on education. This curtailment of spending on domestic programs has resulted in limited educational opportunities and widespread illness and death (particularly children).

• Currency devaluation and pressure to increase exports had lead to intense environmental degradation. Clear-cutting of forests (a means to increase exports of timber) has led to erosion and global warming (through lack of carbon uptake). And because so many countries were trying to increase their exports, markets became flooded with goods, driving down prices. Cheap timber was great for foreign consumers, but netted very little money for countries in dire financial straits.

Watch this clip on the impacts of SAPs in Jamaica. You may want to watch it twice - it goes fast! https://www.youtube.com/watch?v=YoIJPwfsbqg&t=43s

Q5. What is one take-away from the clip?

Type your answer here in RED

Here is another case/example "The South-East Asia crisis" (Steger 2009, 48)

In the 1990s, the governments of Thailand, Indonesia, Malaysia, South Korea, and the Philippines gradually abandoned control over the domestic movement of capital in

order to attract foreign direct investment. Intent on creating a stable money environment, they raised domestic interest rates and linked their national currencies to the value of the

US dollar. The ensuing irrational euphoria of international investors translated into soaring stock and real estate markets all over South-East Asia. However, by 1997, those investors realized that prices had become inflated much beyond their actual value. They panicked and withdrew a total of $105 billion from these countries, forcing governments in the region to abandon the dollar peg. Unable to halt the ensuing free fall of their currencies, those

governments used up their entire foreign exchange reserves. As a result, economic output fell, unemployment increased, and wages plummeted. Foreign banks and creditors reacted by declining new credit applications and refusing to extend existing loans.

By late 1997, the entire region found itself in the throes of a financial crisis that threatened to push the global economy into recession. This disastrous result was only narrowly averted by a combination of international bail-out packages and the immediate sale of South-East Asian commercial assets to foreign corporate investors at rock-bottom prices. Today, ordinary citizens in South-East Asia are still suffering from the devastating social and political consequences of that economic meltdown. In late 2007 and early 2008, the slowing down of the US economy had serious ramifications for its trading partners in Europe and Asia. It is yet to be seen what the extent of the impact of this will be on the global economy.

Q6. In YOUR experience, what was the impact of the 2007-2008 US economic crisis?

Type your answer here in RED

Look at the chart "The global South: a fate worse than debt" (Steger 2009, 44-45)

Q7. What is the most startling comparison this chart makes? Why?

Type your answer here in RED

Part 4: The SAP to rule them all... Trade Liberalization

The final "adjustment" to fiscal policies is related to the from a shift from Keynesian economic policies (strong government regulation and social programs, high taxes) to a neoliberaleconomic approach in the West. This final adjustment is called "trade liberalization" (aka free trade) and developing countries were no longer able to impose barriers to the free flow of goods and money across their borders.

Proponents of trade liberalization argue for the benefits of free trade, which include: enhancing consumer choice, increasing global wealth, securing peaceful international relations, and spreading new technologies around the world.

Free trade has allowed economically dominant countries to source goods, services, labor and markets in a global economy without resistance from governments. Because these countries and large multinational corporations are powerful, it can be difficult to ensure these are "fair" trade agreements. These relationships have been characterized as a kind of "neocolonialism."

Look at the chart "Transnational corporations versus countries: a comparison" (Steger 2009, 51)

Q8. What are some potential issues surrounding the fact that transnational corporations have such economic strength?

Type your answer here in RED

A neoliberal approach benefits transnational corporations by providing opportunities to secure cheap(er) labor, cheap(er) resources, favorable production conditions. It enables corporations to expand their manufacturing into areas of the world where it is the cheapest to make one part, while also enabling access to markets to sell goods.

Look at the image "Volkswagen's transnational production network" (Steger 2009, 52)

Q9. What kind of local impacts do you think this system has?

Type your answer here in RED

Watch the clip on Free Trade. https://www.youtube.com/watch?v=UzYGaFv1ryo

Q10. In this clip, the consumers seem to benefit. But what about the local producers? What are some alternatives you could imagine for local farmers who are being out competed by foreign imported food?

Type your answer here in RED

Labor, in particular, has been a major issue with regard to trade liberalization. "Race to the bottom" is a term that refers to the drive to scour the globe for cheap labor. Where can a product be made for the least labor cost? When labor costs increase, corporations again look for cheaper labor markets in new places.

Here's a scenario: A large textile manufacturer that produces clothing at a large textile plant in rural Georgia can lower its labor costs by moving its production facilities to Vietnam. Vietnam's government sees this as an opportunity to provide manufacturing jobs to small-scale agricultural workers in the rural countryside, particularly women. Identify some benefits and harms to the people (workers, consumers), governments (US, Vietnam), and organizations (textile manufacturer) involved in this scenario. Think through and explain the impacts on each.

Q11. Benefits:

Type your answer here in RED

Q12. Harms:

Type your answer here in RED

Neoliberalism

By the 1980s the elections of Reagan (US) & Thatcher (UK) governments, combined with the fall of Soviet Union in 1989 allowed neoliberalism to take root globally with the spread of free trade throughout the former Communist bloc, leading to global economic integration.

What is neoliberalism? In A Brief History ofNeoliberalism, David Harvey writes:

"Neoliberalism is in the first instance a theory of political economic practices that proposes that human well being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defense, policy, and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets. Furthermore, if markets do not exist (in areas such as land, water, education, healthcare, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture. State interventions in markets (once created) must be kept to a bare minimum because, according to the theory, the state cannot possibly possess enough information to second-guess market signals (prices) and because powerful interest groups will inevitably distort and bias state interventions (particularly in democracies) for their own benefit."

Keep in mind that neoliberalism was based on Adam Smith's idea of a self-controlling market and David Riccardo's theory of competitive advantage. However, Smith's ALSO wrote about the need for moral behavior and an "ease of entry" into the marketplace - neither of which characterize this "new" economic liberalism. Perhaps the most unpopular result of neoliberal economic policies has been economic inequality, both within countries (The 1% vs the 99%) and between countries (Global North vs Global South).

What does neoliberalism look like in terms of economic policy? See: "Concrete Neoliberal Measures" (Steger 2009, 42)

1. Privatization of public enterprises

2. Deregulation of the economy

3. Liberalization of trade and industry

4. Massive tax cuts

5. 'Monetarist' measures to keep inflation in check, even at the risk of increasing unemployment

6. Strict control on organized labour

7. The reduction of public expenditures, particularly social spending

8. The down-sizing of government

9. The expansion of international markets

10. The removal of controls on global financial flows

Q13. Since the 1980s, the US has been characterized (generally) by a neoliberal economic approach. Based on YOUR knowledge and lived experience, what do you think are some examples of neoliberalism? What are benefits and harms?

Type your answer here in RED