Neo-liberalism: The Framework for a Global Economy

Globalization means that now, more than ever, we live in a global village. Multinational corporations, international banks, and international trade organizations have created one global economy. Neoliberalists propose the benefits of such an economy; there are also many dangers.
Neo-liberalism intends to create economic development for all nations through increasing global trade, thereby maximizing profits and efficiency. The theory grows out of classical economic liberalism as put forth by Adam Smith. Smith proposed that the market is most efficient when left untouched. According to his theory, market demand alone determines the most efficient allocation of capital. Therefore, Smith contended, any hindrance on a free market diminishes the efficiency and productivity of the economy.
Neo-liberalism takes Smith’s suggestion to an extreme by calling for a free market on a global scale. To increase international trade, neoliberalist policy calls for:
Freedom of trade (ex. Removal of tariffs)
Free flow of capital
Free ability to invest
Fiscal rectitude (limited government spending on health care and education)
Privatization of public-owned enterprises
Limited government regulation

The most contested assumption of economic liberalism is that the profit created from market productivity will “trickle down” and benefit all members of society. Other assumptions include:
sustained economic growth is the way to human progress; free markets without government interference is the most efficient allocation of resources; privatization removes inefficiencies of the public sector (Richard Robbins, Global Problems and the Culture of Capitalism, Allyn and Bacon, 1999).
Despite the many assumptions and practical problems within free market capitalism, the theory itself is not the problem. The problem is that many atrocities occur under the shadow of neo-liberalism. Free-market rhetoric provides an excuse to put profit before people. The reality of human nature is: when profit is the goal and no regulation is in place, people will be exploited. As the global economy continues to grow, we have seen the lives of millions exploited. Governments and armies are used to make way for multinational corporations, all in the name of progress. Ironically, today’s so-called “development” resembles the unjust mercantilist policies that Adam Smith sought to overcome.

see: www.globalissues.org/TradeRelated/FreeTrade/Neoliberalism.asp