Neoliberal Economic Model in Western Countries | Free Essay Example

Neoliberal Economic Model in Western Countries

Words: 1956
Topic: Business & Economics
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Introduction

Probably the most notable characteristic of today’s living in the West is that there is presently a strongly defined neoliberal quality to the socioeconomic realities in Western countries, reflective of the assumption that one’s entrepreneurial freedoms cannot be restricted – even if it comes at the expense of undermining the society’s structural/functional integrity from within. In its turn, this assumption derives from the neoliberal belief in the self-regulative essence of the market economy’s functioning, people’s ability to act as rational actors, and the “invisible hand of the market”, as the main agent of social progress (Quairel-Lanoizelee, 2016).

Nevertheless, there are a number of reasons to consider the mentioned belief conceptually fallacious, which means that the long-term effects of the currently enacted “liberalisation” and “privatisation” economic policies will prove detrimental to the society’s overall well-being.

After all, the neoliberal paradigm of “unrestricted market” does not acknowledge both the systemic aspects of how the society actually functions and the biologically predetermined essence of how people go about trying to attain self-actualisation – the main indications of the neoliberal theory’s unsustainability (Brenner & Fraser, 2017). In my paper, I will explore the validity of this suggestion at length while backing the would-be presented argumentative claims with references to the Chapter 13 (in The General Theory of Employment, Interest and Money by John Keynes) and the article The Modern Corporation: The Site of a Mechanism (of Global Social Change) that is Out-Of-Control?) by Tony Lawson.

Analysis

As it was implied in the Introduction, for the duration of the last few decades the neoliberal economic model, concerned with “the introduction of markets and market values into formal institutions, normative assumptions and cognitive principles” (Birch, 2016, p. 112), has been enjoying much popularity in most Western countries. Its promoters have gone a great length striving to convince people that the less the government meddles in economic affairs, the better.

Moreover, the model’s proponents have always insisted that the government should also refrain from exercising control over the public domain while allowing it to become “privatised” to a considerable extent – something that predetermined the emergence and sub-sequential popularisation of the “corporate governance” and Corporate Social Responsibility/CSR concepts.

Nevertheless, as time goes on, more and more people realise that the enactment of neoliberal policies across the world did not only fail to change the situation for better with the global economy’s functioning, but that is, in fact, created the objective preconditions for this economy to become particularly vulnerable to the outbreaks of financial crises (such as the one of 2008). They are to continue taking place on a progressive scale.

What is even more, as practice shows, the practical implementation of the “free market” policies resulted in destabilizing the domain of international politics. This can be explained by the dramatically increased power of the Western-based transnational corporations (TNCs), which have been effectively transformed into the independent entities of their own, capable of acting as the de facto international actors. What has brought forward such an eventual development? After all, it stands opposed to the neoliberal claim that the earlier mentioned “privatization” and “liberalization” are the keys to progress and prosperity.

The answers to this question can be found in the assigned materials, as such that explain the actual mechanics of the process of the capitalist economy growing ever more ineffective and exploitative (immoral). For example, according to Lawson, the reason why in the West corruption is commonly listed among the greatest “social evils” is that it has caused the government to experience the never-ending lack of funds, within the context of how it goes trying to finance social programs.

However, contrary to how the Media strive to portray it, there is nothing incidental about the problem of corruption. It is not only that the current law (concerning the legal status of incorporated commercial entities) naturally prompts companies to indulge in tax evasion, but it also empowers them rather significantly, in this respect. According to the author, one of the reasons for this is that, contrary to the considerations of one’s common sense logic, a modern company is treated as a sovereign subject in possession of a number of social rights that were meant to apply exclusively to people.

As Lawson (2014) pointed out, “A firm qua company acquires numerous rights originally intended only for human beings. These include those of owning assets (houses, boats, shares, etc.), contracting, suing, and being sued, and so on” (p. 11). Simultaneously, the law recognizes the principle of “limited liability, according to which the affiliated shareholders cannot be held responsible for the adoption of one or another strategy, on the part of their company’s top-executives – even if the move’s effects involve the deaths of many innocent people.

This effectively prevents shareholders from being considered legally liable, “It is the basic feature of limited liability, the fact that any debts run up, or misdemeanours committed, by the firm qua company are rationalised as the property or doings of the company per se, not of the shareholders” (Lawson, 2014, p. 12).

The described situation, however, does not appear to be even superficially justified because conceptually speaking the corporate agenda of a particular company is highly subliminal of its affiliates’ biologically predetermined power-seeking anxieties. In this regard, Lawson came up with yet another insightful observation, “Unlike physical objects, the positioned components of communities include intentional human beings, and the latter are able actively to seek occupancy of more powerful positions or to transform the powers associated with those positions that are already occupied” (2014, p. 7). As it can be inferred from the Lawson’s article, the implications of the above-stated are quite apparent:

  • For as long as there is a continual shortage of natural/human resources onthis earth, the fluctuating dynamics within the corporate sector will continue to be defined by the “law of the jungle”. What this means is that all of the CSR-related) rhetoric has a strong utilitarian undertone to it, in the sense of providing a perfectly legal tax-avoidance “cover” for its corporate practitioners. What is even worse about the current state of affairs, in this respect, is that as a result of having been subjected to the corporately sponsored propaganda of CSR for decades, many people in the West grow increasingly incapable of grasping the actual significance of contemporary trends in the global economy.
  • Because the law draws a clear line between the legal principles of “corporate.” and “private” liability, this will inevitably result in creating a “breeding ground” for corruption. The suggestion’s rationale is quite apparent – the concerned practice enables a commercial organisation to avoid paying most (or all) taxes by mean of establishing subsidiaries in the Third World countries and indulging in the so-called “transfer pricing”, when financial transactions that take place between this organisation’s sub-divisions are presented fully contractual.
  • The main motivating incentive for investors to consider becoming involved in a particular commercial project is their conviction (either rational or irrational) that they will be able to get rid of the acquired “assets” (shares, that is) quickly, in case some unexpected economic downturn comes into play. It is understood, of course, that this consequentially suggests the appropriateness of investing specifically in the short-term projects – something that contributes rather heavily to the rapid growth of the so-called “financial bubbles”, the eventual bursting of which is bound to have a strong negative effect of the would-be affected economy’s functioning.

It is quite notable that despite the fact that Lawson’s article was published as recently as three years ago, many of its argumentative claims correlate well with those contained in Chapter 12 of the Keynes’ 1936 book – something that serves as the best proof that this book (and Keynesian economics, in general) is far from being considered “outdated”. The last of the above-outlined implications is perfectly illustrative. After all, it refers to the old Keynesian idea that as time goes on, the capitalist economy’s real (industrial) sector becomes increasingly stagnant because it is much easier and safer (as well as more time-efficient) making money out of thin air by mean of buying/selling shares on the stock exchange market.

The line of the author’s logic behind this particular suggestion is easy to follow. According to him, people are naturally drawn to invest in the least risky commercial enterprises. However, the society’s growing complexity presupposes non-applicability of linear (casuistic) logic, within the context of how one strives to predict the qualitative dynamics in a particular market on an annual basis. Partially, this explains why the factor of confidence is presented as an independent variable in economic equations that aim to project the spatial characteristics of the supply/demand ratio in such market into the future.

In its turn, the described situation presupposes that the perceived security of a particular investment negatively relates to the amount of time that it would take for the investor to reclaim his/her money back. In its turn, this provides a powerful boost to the expansion of the economy’s speculative segment, made sustainable of the concerned actors’ irrational belief (or “confidence”) in the full objectiveness of their ownership-transferring options.

As Keynes (1936) noted, “Stock Exchange revalues many investments every day,y and the revaluations give a frequent opportunity to the individual (though not to the community as a whole) to revise his commitments” (p. 151). However, the heightened liquidity of the publicly traded shares causes their value to be the subject of a continual transformation, utterly sensitive to how the investment climate responses to the externally induced stimuli.

Because of it, investors are naturally drawn to the idea of making money from becoming experts on “mass psychology”, rather than to the idea of generating long-term profits from investing in the production of any tangible products or services, “Investment becomes reasonably ‘safe’ for the individual investor over short periods, and hence over a succession of short periods however many, if he can fairly rely on there is no breakdown in the convention” (Keynes, 1936, p. 153).

As a result, speculation becomes the most lucrative commercial pursuit – the development that Keynes considered detrimental to the society’s interests while insisting that there is a clear distinction between the activities of manipulating with publicly traded shares, on the one handd, and financing infrastructural projects, on the other. The author leaves only a few doubts, in this regard, “(I appropriated) the term speculation for the activity of forecasting the psychology of the market, and the term enterprise for the activity of forecasting the prospective yield of (tangible) assets over their whole life” (p. 158).

It goes without saying, of course, that this once again suggests that the neoliberal concept of CSR is utterly misleading, especially when the economy is being plunged ever deeper into the state of recession, “Investments (in CSR) are particularly unlikely to pay off in the two to four-year time horizon that public companies, through demands of the stock market, often seem to require… investments in things like the environment or social causes become a luxury” (Fooks, Gilmore, Collin, Holden and Lee, 2013, p. 288). Apparently, the Capitalist paradigm in economics is innately inconsistent with the Media-promoted myth about theprivately-ownedd companies’ “genuine” commitment to serving the public interest.

Conclusion

I believe that the earlier deployed line of argumentation (in defence of the idea that the assigned materials expose the deep-seated contradictions of neoliberalism) is consistent with the paper’s initial thesis. It appears that it is indeed appropriate to think of the idiom “invisible market-hand” as being synonymous with the notion of “irrational greed”, and one’s endowment with the latter can hardly prove beneficial to the concerned individual. Therefore, it will be logical to conclude this paper by stressing once again that most neoliberal ideas about the economy’s workings are no longer viable.

References

Birch, K. (2016). Market vs. contract? the implications of contractual theories of corporate governance to the analysis of neoliberalism. Ephemera, 16(1), 107-133.

Brenner, J., & Fraser, N. (2017). What is progressive Neoliberalism? A debate. Dissent, 64(2), 130-140.

Fooks, G., Gilmore, A., Collin, J., Holden, C., & Lee, K. (2013). The limits of corporate social responsibility: Techniques of neutralization, stakeholder management and political CSR. Journal of Business Ethics, 112(2), 283-299.

Keynes, J. (1936). The General Theory of Employment, Interest and Money. London, Macmillan.

Lawson T. (2015). The Modern Corporation: The Site of a Mechanism (of Global Social Change) that is Out-of-Control?. In Generative Mechanisms Transforming the Social Order. M. Archer. Cham, Springer.

Quairel-Lanoizelee, F. (2016). Are competition and corporate social responsibility compatible? Society and Business Review, 11(2), 130-154.