Neoliberalism in Development Essay

The development of international relations, both political and economic, in the 2nd second half of the 20th century was marked by considerable changes. In fact, a considerable change in international relations was a result of the emergence of neoliberalism, which has become the mainstream trend by the late 20th century and defines the development of the world at the present epoch. Basically, the neoliberalism marked the revival of liberalist ideas and evoked quite a controversial reaction from the part of politicians and economists since, on the one hand, it contributed to the liberalization of international relations, while, on the other hand, it was criticized for widening the gap between developed and developing countries of the world (Rapley, 2004). In such a situation it is necessary to analyze in details the conditions at which the neoliberalism actually emerged, its essence and effects on the international relations. In this respect, it is necessary to underline that, in spite of criticism, the neoliberalism is very popular in the world and basic political and economic trends of the modern world, such as globalization and growing cooperation and interaction between countries in all spheres of human life, may be viewed as direct effects of the spread of nealiberalist ideas and implementation of neoliberalist principles by political leaders of the world and economic elite in different countries of the world.

Historical background of the emergence of neoliberalism

The emergence of neoliberalism occurred in response to the historical changes that took place in international politics and economy at the epoch. To put it more precisely, the development of a new approach to politics and economy at both domestic and international levels was essential because the use of conventional approaches proved to be ineffective. In this respect, it should be said that in the middle of the 20th century, the world’s political and economic life was characterized by the growing role of the state. In fact, after the Great Depression and global economic crisis of the 1920s ”“ 1930s and the post war recovery of countries after the end of World War II, many countries suffered from a number of social and economic problems, which provoked numerous internal and external conflicts. In such a context, World War II could be viewed as a result of socioeconomic problems of countries which were extrapolated on international relations and resulted in the military conflict, which involved the entire world and aimed at the improvement of socioeconomic situation in countries which could have won the war.

However, many countries started to develop new strategies and approaches to national economies, which naturally affected international relations. In this respect, the trend to nationalization of certain companies or even entire industries grew particularly strong, but it was only a manifestation of a more profound change in politics and international relations at the epoch. In fact, after the global crisis of the 1920s -1930s and in the post-World War II era the role of state had started to increase dramatically and state became the major power which could influence the development of national economy. As a result, many countries attempted to protect their national economies and companies by raising fiscal barriers and protecting local business in such a way. Eventually, this resulted in the deterioration of international cooperation and slowed down the development of economy on the global scale.

In such a situation, many specialists insisted on the introduction of absolutely new approach to politics, economy and international relations (Friedman, 2002). In such a situation, liberalist ideas had revived and contributed to the emergence of neoliberalism, which rejected fundamental concepts and principles, which became typical for socially-oriented states, which basically stood on the left-centrist ground and incorporated some elements of socialism, especially in regard to the interference of the state into economy.

However, the interference of state prevented normal, free market development that made the international economy vulnerable to crises that undermined the stability of international relations and lead to the growing isolation of countries, especially those of the democratic and Soviet Bloc. In such a context, progressive, neoliberal ideas replaced popular concept of a welfare state and Keynesian principles of the state regulation of economy, which apparently lead to the appearance of barriers between countries in the field of economy, which naturally extrapolated on political and socio-cultural international relations.

Instead, neoliberalism suggested the revival of fundamental liberalist principles and concepts, which could improve the socioeconomic development of the world through the liberalization of the world economy and provision maximum freedom to people. In fact, the emergence of neoliberalis was, to a significant extent, determined by the crises of the mid-1970s and the early 1980s, which revealed the weakness of leading states and their inability to solve all economic problems by means of the state regulation. Alternatively, neoliberalism suggested a different way of development and by the 1990s the implementation of basic principles of neoliberalism resulted in the economic growth and closer integration of countries worldwide. Moreover, by the late 20th century, neoliberalism became the mainstream theory which defines the development of the modern world and it is due to the neoliberalism the international integration has already started not only in the sphere of economy but also in political and socio-cultural life worldwide.

In such a way, taking into consideration the historical context of the emergence of neoliberalism, this theory can be viewed as a an alternative theory to Marxists ideas, which used to dominate in the Soviet Bloc and which proved to be unable to compete with countries applying democratic and neoliberal principles. But, what was even more important, neoliberalism became an alternative to the concept of welfare state and Keynesian principles, which implied the interference of state into economy and which prevented the world and international relations from growing cooperation and close interaction.

The principles of neoliberalism

On analyzing the theoretical foundation and basic principles of neoliberalism, it is important to underline a huge significance of economic aspect of this theory since it affected not only world’s economy proper but also world’s politics and international relations at large. In this respect, it should be said that neoliberalism basically develop liberalist ideas and adapts them to the contemporary situation in the world and international relations. In general, the fundamental concept of neoliberalism is the idea of freedom, which neoliberalists extrapolate on all spheres of human life. What is meant here is the fact that neoliberalists (Rapley, 2004) emphasize the importance of freedom of an individual in his actions and rights. At this point, it is worth mentioning the fact that the concept of neoliberalism can be applied only in a democratic country, where individuals’ rights and liberties are not violated, thought they can be limited by norms and regulations which are implemented in a legal and democratic way. But neoliberlaists insist on the necessity of the elimination of any regulations that limit consistently an individual’s freedom since this freedom can be limited only when it can cause some harm to other people or society at large.

In fact, such a view on freedom as an absolute good and the main concept of the development of society is the milestone of neoliberalism and defines its basic principles and ideas, which always meet the requirement of maximum freedom.

In such a context, it is quite natural that neoliberalism, being mainly oriented on the economy, tends to transfer control over the economy from state to private sector. At this point, it is worth mentioning the fact that such a transfer became really important after the considerable socioeconomic changes in the middle of the 20th century, when the nationalization occurred en mass and regulative policies of the state increased consistently. In response, neoliberalist suggested to decrease the state regulations and pressure on economy and business (Gomory, 2002). In state, according to neoliberalism, the state should distance from the economic life and stimulate the development of open market, free economy enhancing fair competition principles. In this respect, it is important to underline that, at the level of international relations, such neolbieralist economic policies implies the elimination of barriers between countries and development of the global market, where all countries cooperate closely stimulating economic integration at the global scale.

On the other hand, economic liberalization does not imply the lack of state control by means of fiscal policy since neoliberailsts insist on strict fiscal policy discipline (Friedman, 2002). At the same time, they argue that the state expanses should be strictly regulated too. It is important to underline the distinct feature of neoliberalism which makes totally different from the concept of a welfare state, for instance, – this is the shift from subsidies from the part of the state to broad-based provision of key pro-growth, pro-poor services, such as education, basic health care services, infrastructure investments. In such a way, the state creates favorable conditions for economic development, while people and companies undertake their entrepreneurial activities independently from the state.

Another important principle of neoliberalism is liberalization of inward foreign direct investments and international trade. In such a way, this liberalization naturally stimulates direct investments and enlarges economic cooperation between countries. It is necessary to understand that economic integration of countries naturally derives from the liberalization because state is not supposed to create fiscal barriers, for instance, or regulate the economic development or international trade. At the same time, the implementation of principles of neoliberalism in economy inevitably leads to a consistent change of political and socio-cultural relations in the world. What is meant here is the fact that the economic integration of companies inevitably stimulates the necessity of adaptation of national legislation to demands of business. In such a way, national legislation tends to adopt international norms and standards in order to liberalize economy. Moreover, as companies start operating internationally they need to develop corporate culture which allows them to operate efficiently in multicultural environment.

Globalization as a manifestation of neoliberalism

Obviously, neoliberliasm implies the economic integration and the late 20th century was marked by an unparalleled international cooperation in the field of economy, while, today, the globalization defines the development of the entire world and national economies are closely integrated to the extent that the world’s economy functions as a solid, united body. Hence, it is possible to estimate that globalization is the manifestation of neoliberalism or, to put it more precisely, it is the effect of the implementation of neoliberalist principles by the leading world’s countries, which eventually forced other countries to follow their lead to maintain a competitive position in international markets. In such a way, at first glance purely economic changes led to the emergence of globalization which has already surmounted economic boundaries and expanded on all spheres of human life and defines international relations in the modern world.

In order to understand the neoliberalist nature of globalization, it is necessary to dwell upon some examples which prove that neoliberalist ideas were implemented and stimulated the development of globalization. First of all, it is necessary to remind that one of the fundamental principles of neoliberalism is the deregulation of economy by the state and the development of free trade along with liberalization of economic relations. In this respect, the development of free trade occurs extremely fast. To put it more precisely, the free trade, which was one of the major elements of the process of globalization, started from the creation of international trade agreements which facilitated trade between countries. For instance, it is possible to name the NAFTA, which stimulated free trade between the USA, Canada and Mexico. Such free trade agreements were signed worldwide and eventually resulted in the creation of the WTO, which actually enhances the development of free trade worldwide (Van der Borght, 2000). As a result, today, international relations are characterized by the growing integration of countries, to the extent that trade agreements eventually stimulated growing political and cultural integration of countries.

In this regard, it is possible to refer to the example of the EU, which started as an economic alliance, where countries agreed on free trade and economic integration, but, today, it is not only an economic union but it is also a political union, where countries integrate even at the cultural level. Thus, today, it is possible to speak about the formation of European community as a multi-cultural formation which is united economically and politically. Consequently, neoliberalism has changed international relation completely since the implementation of neoliberalist ideas led to the integration of global economy, politics and even culture.


Thus, taking into account all above mentioned, it is possible to conclude that neoliberlaism has become a very influential theory which defines the development of international relations at the present epoch. Initially, neoliberalism emerged as an alternative or response to the strengthening Keynesian ideas and concept of a welfare state, where the role of state was supposed to be dominant. Instead, neoliberalism insisted on the liberalization of economy, which inevitably affected the development of international relations not only in economic but also political and cultural spheres. The emergence of free trade, as one of the basic principles of neoliberalism, stimulated progress of the globalization. The latter changed international relations consistently re-orienting countries on international cooperation and integration.

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