Debate whether contemporary patterns of globalisation and inequality are linked to insufficient market freedom or unbridled capitalism

Helen Devine 12953059

Debate whether contemporary patterns of globalisation and inequality are linked to insufficient market freedom or unbridled capitalism.

Globalisation plays an important role in today’s world. It is considered a blessing to some people as it has helped to stop poverty in some cases around the world along with improving the rights of women but many people do not see the benefits to an optimum level. Inequality is active all over the world and is also evident in developed countries. This essay will concentrate on whether globalisation and inequality are linked to insufficent market freedom in the world market and also lead to uncontrolled, free capitalism.

During the 1800’s, there was evidence of globalisation taking place because the British wanted to attempt to widen their borders therefore colonialism occurred in places like in India, Ireland , and Australia. Net outflow of capital from these colonialised countries returned to the u.k. In this respect, globalisation is not a new phenomena but it is a long drawn out process that has originated from the beginning of capitalism (Friedman, j. 1992.)

Globalisation today is seen as a positive thing for many people however it is also seen as ‘a threat to the local diversity and local autonomy.’ (Amin, A, Thrift, N, 1994.).

Although globalisation has helped many people, the number of people living in poverty has increased by almost 100 million as total world income has increased by an average of 2.5% annually. (Stiglitz, J. 2002). Globalisation has caused many inequalities for the world both between and within countries.

Western countries have pushed poor countries to eliminate their barriers and their tariffs on goods however they have kept their own barriers therefore there has been continued polarisation between the poor countries and the richer countries. I agree with amin when he says that ‘globalisation revalidates and reconstitutes place, locality and difference.’ (Amin, A, Thrift, N. 1994.) There can also be inequality within countries. There are some cities which can attract growth due to their location or their resources. This means that areas that do not have this advantage become increasingly marginalised from the growth poles causing more inequality for the people in the peripheral areas. This can also lead to a barrier in the market within that country caused by unbridled capitalism and inequality. There can also be inequality in developed countries as highlighted by Thea Lee. This showed that in developed countries, there may be strong competition therefore the companies may lower the wages of the workers to accommodate the lower price of their goods. Landes stated that: ‘the present tendency to global industrial diffusion will entail for the richer countries, a levelling down of wages, increased inequality of incomes and/or higher levels of (transitional) unemployment.’ (Landes, D 1999.)

This is a preview of the whole essay

Globalisation causes different affects for the capitalist countries and for communist countries. There are different social, economic and political factors that come from globalisation as highlighted by Sen. He stated that: ‘economic freedom can breed social unfreedom just as social and political freedom can also foster economic unfreedom.’ (Sen, A. 1999.) When capitalist countries trade with other countries, the free trade that is generated often leads to economic prosperity. The growth in capital means that the society in general will prosper as the money can be spent on infrastructure, education, health care and also lead to more employment. On the other hand, countries which have insufficient market freedom will have little economic prosperity. When the government are failing they often have to borrow money or get loans which have to be paid back. This money can help for a short while however the economy suffers because they are in debt and the cycle will continue due to the lack of market freedom for their country.

The GATT and the NAFTA are important in free trade as they are agreements which try to ensure that economic growth and wealth is promoted. The GATT was set up by the Bretton Woods conference to help reduce the barriers associated with free trade. . Giddens highlighted that Mexico became the net loser. In 1962 Mexico was experiencing 3.6% growth but when it joined the GATT, this figure fell to 0.6%. The poverty levels also increased from 29% in 1980 to 36% by 1989.

The NAFTA on the other hand was to eliminate tariffs placed on products that were being sold between the USA, Canada and Mexico. Although on the outset, it seemed like it was beneficial for the three nations involved, closer inspection would show otherwise. Again, Mexico became the net loser on this occasion again.

This shows that free trade is not completely free as some countries can experience restrictions and failures which will lead to increased insufficient market freedom when the main aim of the agreement was to help prevent this from happening.

There has been huge capitalist development over the past 250 years and this has increased rapidly in the last 50 years. Giddens stated that: ‘capitalism tries to turn every relationship into a commercial exchange.’ (Hutton, W and Giddens, A. 2000.) I believe that this is true in today’s society and many people and countries across the world have had to keep up with this change in society. Today, there are less manual skill jobs as more people are working with technology and computers as the world is changing. In more developed countries this is more evident and this has reflected the unbridled capitalism. This is linked back to globalisation as this also leads to ‘a smaller world.’ As the capitalism and globalisation continue to grow, many people in poorer areas are marginalised from these changes and this can lead to increased inequality and polarisation between the rich and the poor. Countries that are less developed concerning technological advancement and marketing can fall behind as insufficient market freedom take over. Many of these countries may have a lot of interest from TNC’s however the technological advancements are concentrated in the countries in which they have come from.

TNC's have played an important role in globalisation but they also cause a lot of inequality for many of its workers. The TNC’s have their headquarters in capitalist countries in which the state can take care of the debts of capitalism and they flourish in the face of globalisation. The products are made in countries with an unstable market where the workers can be paid cheaply and the conditions are not of the same standard as some developed countries. This form of capitalism is affecting the peoples’ rights and the money generated is going out from the country. The TNC’s are free to choose which countries they want to locate in and many countries want to attract them because they bring employment to the people and also generate wages however, this is very unstable as the company may decide to relocate due to cheaper workers or resources therefore this creates unstable market freedom in the country and also causes unbridled capitalism.

Many of these TNC’s originate in the western worlds which can also reflect the process of ‘Americanisation.’ This is the term penned to describe how the USA has influenced the development of other cultures and how many cultures have tried to copy the American way of government and market to gain success and development. This ahs also included many American products such as McDonalds and Coca-Cola.

Kuisel states that "Perhaps no commercial product is more thoroughly identified with the United States... Coca Cola was fast becoming a universal drink". Shiva highlighted that in Mexico water is so scarce that babies and children drink coca cola. This helps to contribute to the generated revenue of 16 billion US dollars which is generated in 195 countries worldwide. This again highlights the insufficient market freedom of Mexico compared to the USA which has its companies all over the world including Mexico and the revenue received from coca cola goes back to the USA when local companies cannot receive the revenue. This highlights the spread of the American culture throughout the world which has major implications for individual cultures and it causes a dilution of cultures but also highlights the inequality between the USA and the countries which wish to aspire to the capitalist success of the USA.

The market is useful today in many countries to create jobs and help increase revenue however this highlights inequality between countries as many countries cannot establish a suitable market. Sen states that ‘restrictions of the market mechanism can lead to a reduction of freedom because of the consequential effects of the absence of markets’ (Sen, 1999.) However, the IMF state that markets do not always work well and can conclude in massive job losses instead of providing them. The main aim of the IMF was to help countries gain full employment for its population. This failed in many cases because the market freedom was unsuitable and the countries could not compete in the global market. The IMF worked hard to highlight the downfalls of the market and to help countries prevent that from happening. Hollis Chenery was praised by Joseph Stiglitz for researching how markets in developing countries had their downfall and tried to find methods of prevention for this. The main solution highlighted by Chenery and the IMF was the introduction of free markets for developing countries. This was promoted in Reaganism and Thatcherism to help prevent inequality and the continuation of unfreedom in markets.

This research has highlighted that there is a definite link between globalization and inequality and insufficient market freedom and unbridled capitalism. It is also highlighted that it is a vicious circle in which each of the categories can compliment each other causing more problems for the country. I believe that the best way forward is to create free markets for the developing countries and to prevent the TNC’s from taking advantage them also. I think that fair trade should be promoted more so that smaller developing countries can have the chance to create a decent market and also to be helped by capitalism. In the future, I think that the problems will continue as globalization continues to occur, however I believe that if more is done to help these developing countries, the problem will not be so severe and there will be sufficient market freedom for all of the markets.

Bibliography

Amin, A. (2004) regulating economic globalization. Transactions of the institute of British Geographers

Amin, A and Thrift, N. (eds) (1994) Globalization, institutions and regional development in Europe. Oxford, London.

Bhagwati, Jagdish (2002) in defense of globalization, Oxford: Oxford university press.

Friedman, J (1992) empowerment: the politics of alternative development. Oxford: Blackwell.

Hutton, W and Giddens,, A (eds) (2000) on the edge: living with global capitalism, London: Jonathon Cape

Kuisel, R (1991) coca-cola and the cold war: the French Face Americanization, French Historical studies 17 (1)

Landes, D (1999) The wealth and poverty of nations. London: Abascus Books

Monbiot, G (2004) the age of consent: a manifesto for a New World Order, London: Harper Perennial

Sen, A (1999) Development as Freedom. Oxford: Oxford University Press.

Stiglitz, J (2002) globalization and its discontents, London: penguin

Stiglitz, J, Lee, T, Hutton, W, Galbraith, JK, Faux, J, Rodgers, J, Andrews, M D’Arista, J (2006) taming global capitalism anew, the nation, April 17, 2006