“Neoliberalism”
Neoliberalism is the economic theory that defines the transfer of economic regulatory powers from the public to private economic sectors. The theory describes withdrawal of economic issues from public regulated systems to systems of unregulated markets. The transformation is arguably driven by the desires to success the accomplishment of both international markets and private interests. For instance, Neoliberals suppose that unregulated markets have essential benefits for both rising and developed nations since they potentially alleviate economic performance. Neoliberalism is commonly represented as the translation process that imposed termination of prior economic policies leading to economic instability and also causing a decline in market profitability. For instance, Dumenil (2011) indicates that its trends unsettled secure chances of the United states “to grow, maintain the leadership of its financial institutions worldwide and ensure the dominance of its currency” (1). Orhangazi (2008) describes neoliberalism as the implementation of new policies for the sake of privatizing economic activities so as to terminate government intervention (50).
Capital – Labor Relations
During the neoliberal period, governance between workers and employers experienced significant changes. The era brought in new perspectives of bargaining economic relations between large corporations and subsequent trade unions. Labor unions and corporations took the role of discussing wage levels, working hours and working hours which unconnected from notions of regulated markets. Collective bargaining was associated with affluent pressures which significantly brought about uneasiness in the capital- labor relations. For instance, legitimacy disagreements persisted between large corporations and trade unions as a result of collective bargaining. Neoliberal era characterized a decline in relationships between labor unions and potential employers since corporations started terminating union’s role of negotiating earnings and working conditions and also federal governments withdrew its support for labor unions. As a result, market forces determined wage rates and negotiated the working conditions unlike in the regulated markets where labor management negotiated for labor wages.
Capital - Government Relations
Government spending was reduced in neoliberalism due to the privatization of firms. This means that the liberal system terminated direct intervention of the market which reduced government role of regulating capital. The government lacked its portion to regulate the market as a result of free-trade systems enabled by neoliberalism. Nevertheless, the government played little role of making tax reductions for both the firms in the market and also for large institutions (Kotz 15). As a result, the level of production decreased significantly in comparison to the era prior neoliberalism when the government owned capital and controlled production in the market. Lack of government intervention alleviated the problem of investments since it lost control of capital in the market.
Labor – Government Relations
The labor relation with the government was partially active in the neoliberalism. For instance, low government spending indicated the irrelevancy of fiscal policies in the labor markets. Due to this, demand management lost control since government intervention plays a very important role of controlling economic pressures as far as factors such as demand and supply of labor are concerned (Kotz 15). Therefore, neoliberalism represented a system whereby the demand for labor decreased significantly. Wages declined since unionization and welfare policies were terminated by unregulated markets which negotiated wages and working conditions for employees. Companies and large corporations started hiring labors of their choices and even hired cheaper labors. Additionally, corporations hired labors from other nations which provided cheaper labor. This indicates that the levels of unemployment are high since all forms of labor are exposed to affluent threats in neoliberalism. Nevertheless, neoliberalism symbolizes effective competition in the labor markets due to the irrelevancy of unionization and market individualism. Most jobs in the labor markets shifted from permanent jobs to temporal jobs. This signified a decline in stable jobs with high pay since neoliberal era insisted on flexible labor sectors. This was fueled by the fact that employers took control of determining working conditions and the level of wages hence workers had little power to negotiate such economic pressures.
Capital – Capital Relations
There are significant inefficiencies in the Capital to capital relations in neoliberalism. Inefficiency of capital to capital relations signifies a drop in the economic performance due to lack of capital support. For instance, during the period prior neoliberalism, institutions such as International Monetary Fund (IMF) and World Bank had comprehensive relations which equitably fueled economic performance in the American markets and extensively in the international markets. IMFs for example were to provide loans to countries and institutions with shortfalls and massive debt problems. On the other hand, World Bank had the role of financing developmental projects in both developing and other underdeveloped nations across the world. On the contrary, neoliberalism proposes measures that change the roles of the institutions indicating a huge transition in the economic sectors. Nevertheless, neoliberalism reduces roles of governmental policies to control and ensure success of financial institutions in the economy (Orhangazi 29)For instance, IMF and the World Bank must work in accordance to the principles provided in neoliberalism which in particularly emphasizes on weakening of overdeveloped countries. For instance, IMF implements a micro policy in order to redeem the most affluent economies as indicated by the neoliberalism. On the other hand, the World Bank is forced to fund development to few nations unlike the prior period whereby it funded potential economics to many countries. On the other hand, neoliberalism indicates the privatization of funding economic markets including financial institutions. Neoliberalism represents the transformation of economic systems from the Golden age to a neoliberal system. For instance, it seems to eliminate the support from financial sectors and management of capital accumulation in the market. Neoliberal therefore places a system where finance in actuality controls economic pressures to slow down economic growth and at the same time enforce regressive distribution of market systems (2002, 11).
Economical theories
Neoliberals classify two economical theories which include; Neoclassical Equilibrium Theory and Schumpeterian ideas to communicate the appropriateness of the new economic system (Crotty 2000 2). Crotty indicates that equilibrium theory is the most viable theory used by economists to defend neoliberalism (2). International Monetary Fund (IMF) and also the World Bank for instance, depend on neoclassical equilibrium models to manage Neoliberal policies (Crotty 2000 2). The theory in particular emphasize such as trade stocks to regulate international trade and also control labor economists in order to accomplish benefits of globalization. On the other hand, Schumpeterian ideas classify a set of perspectives in the economy including; innovation, positivity of monopoly power inefficiency caused by “marginal cost pricing’ aimed at approving neoliberalism (Crotty 2000 2).
Neoliberals believe that economy efficiency of both national and global economies would only be attained with elimination of government intervention. Neoliberals suppose that management of economic resources is made easy in an unregulated economy. They claim that an environment defining high competition, high profits and relative prices can be availed unregulated economy which in turn boosts micro economy. Economists as well suggest that the level of competition enhances placement of market factors close to market clearing which boosts market processes. Nevertheless, neoliberals are of the opinion that unregulated markets ensure fully utilization of economic resources thus eliminating resource wastage. They therefore indicate that the only role of micro policy is to accomplish the objectives of controlling inflation in an free economy thus enhancing economic performance (Crotty 2). Neoliberals believe that monetary policy and freedom of central banks can effectively manage inflation in the economy unlike prior economy which depended on fiscal policy democracy to control inflation. Additionally, neoliberalism backs competition as one of the economic reason behind its processes. Neoliberals suppose that free market is an important strategy of eliminating excess demand in the market in order to ease pressures in the competitive markets. This theory suggests that unregulated markets will significantly enhance control of demand by supposing that supply will be able to create its demand in the market. The primary reason of this theory is to reduce levels of competition by controlling production costs. The theory as a result suggests the withdrawal of demand management in order to limit competition in the markets (Crotty 2002, 5).
Liberalization of economy is supposed to effectively allocate world savings in the financial markets (Crotty 2000 2). Neoliberalism proposes a rise in investments, effective flow of savings from the most developed nations to less privileged hence promising productive investments in different markets across the world (Crotty 2000 3). As a result, neoclassical economic theories of market efficiency insist on free trade in order to boost economic performance by increasing process efficiency and market productivity. The main reason behind free trade is to eliminate barriers in order to facilitate cross border trade. Elimination of cross-border barriers is in actuality aimed at integrating global financial market. This is economically meant to minimize productivity costs such as labor costs in the market. Nevertheless, neoliberalism is economically meant to eliminate chances of over accumulation in the global market by enhancing process efficiency.
Work Cited
Crotty, James. Slow Growth, Destructive Competition,and Low Road Labor Relations: A Keynes-Marx-Schumpeter Analysis of Neoliberal Globalization. University of Massachusetts, Amherst Second Draft: November 2000
Crotty, James. The Effects of Increased Product Market Competition and Changes in
Dumenil, Gerard. & Levy, Dominique. The Crisis of Neoliberalism. Cambridge, Massachusetts London, England. 2011
Financial Markets on the Performance of Nonfinancial Corporations in the
Kotz David M. The Rise and Fall of Neoliberal Capitalism. Cambridge, Massachusetts & London, England 2015
Neoliberal Era. University of Massachusetts, Amherst October 11, 2002
Orhangazi, Özgür. Financialization and the US Economy. Edward Elgar Publishing Limited
