The document discusses neoliberalism and its rise globally following World War 2. It establishes that the Bretton Woods institutions like the IMF and World Bank, as well as the GATT and later WTO, were created to spread and enforce neoliberal policies that promoted deregulation, privatization, and free trade. While claiming to support freedom and growth, these institutions in practice amplified the power of wealthy states and corporations and undermined developing nations. The document also analyzes how neoliberal policies negatively impacted agriculture, industry, and social services in the Philippine context.
8. WHAT IS NEOLIBERALISM?
NEOLIBERAL THEORY
A largely unregulated capitalist system not only embodies the
ideal of free individual choice but also achieves optimum
economic
performance with respect to efficiency, economic growth,
technical
progress, and distributional justice.
“The state is assigned a very limited economic role:
9. WHAT IS NEOLIBERALISM?
Cardinal feature of neoliberal thinking: the
assumption that individual freedoms are
guaranteed by freedom of the market and of
trade. The freedoms it embodies reflect the
interests of private property.
Thus requires the removal of various controls
deemed as barriers to free trade, such as:
tariffs, regulations, certain standards, laws,
legislation and regulatory measures, and
restriction on capital flows and investment.
15. WHY THE NEOLIBERAL
TURN?
Case 1: 1939-1945 – World War II: Many countries were left
devastated.
This led to the restructuring of state forms and international
relations designed to prevent a return to the catastrophic
conditions that threatened the capitalist order
The thinking at the time: Both Capitalism and Communism
had failed in their raw forms
The conclusion at the time: To construct the right blend of
state, market, and democratic institutions to guarantee
peace, inclusion, well-being, and stability.
Theory: This paved the way for the introduction of Neoliberal
Policies: Supposedly a tool in preventing the re-emergence of
inter-state geopolitical rivalries that led to the war.
16.
17. WHY THE NEOLIBERAL
TURN?
Case 2: After the two world wars, the US emerged
dominant
in the global economy.
1950s: One third of world exports came from the U.S.
Theory: To ensure its dominance, the US restructured
the world economy through neo-liberal policies such
as deregulation and liberalization.
Deregulation: put simply, deregulation means limiting
government control over market forces.
Liberalization: The trade liberalization program invariably
consists of the elimination of import quotas and the
reduction and unification of tariffs.
Aim: To create new markets for its surplus products
and excess capital.
20. INSTITUTIONS ESTABLISHED
THE INTERNATIONAL
MONETARY FUND (IMF)
The IMF was to be a supra-
national body that would regulate
exchange rates of currencies
among member-countries and
ensure global financial “stability”
by extending loans to members
to help them address balance of
payments crises.
21. INSTITUTIONS ESTABLISHED
The World Bank
(WB)
It consists of the International
Bank for Reconstruction and
Development (IBRD) and the
International Development
Association (IDA). Both
institutions make loans to
governments for projects and
programs related to
"development," that is, loans
designed to promote economic
and social progress in member
countries.
22. INSTITUTIONS ESTABLISHED
HOW WERE THEY FORMED?
1944: Bretton Woods Conference:
The International Monetary Fund (IMF) and the International Bank
for Reconstruction and Development (IBRD), also known as the
Bretton Woods Institutions (BWIs), were formed in Bretton Woods,
New Hampshire in 1944 on the eve of the end of World War II. The
conference intended to "formulate definite proposals for an
International Monetary Fund, and possibly a Bank for
Reconstruction and Development." They were precursors to the
United Nations and other multilateral institutions formed after World
War II and reflected the new spirit of cooperation between nations,
especially in economic matters.
24. WHAT FUNCTIONS DO THEY
SERVE?
Oversees the international monetary
system.
Provides short- to medium-term
credits to member countries who find
themselves in temporary balance of
payments difficulties.
Supplements the currency reserves
of its members through the allocation
of SDRs (special drawing rights)
Provides training and technical
assistance in the areas of finance
management system, tax system,
banking system development to its
member countries
Helps to draw a systematic process
for foreign transactions to take place.
Assists developing countries through
long-term financing of development
projects and programs
INTERNATIONAL MONETARY
FUND
WORLD BANK
(WB)
26. ESTABLISHED INSTITUTIONS
WHAT IS IT?
It is a multilateral agreement among countries that
provides a framework for the conduct of international
trade. It contains disciplines on matters related to
import
and export of goods. Through this, countries
committed to
27. ESTABLISHED INSTITUTIONS
HOW WAS IT
FORMED?
The US drafted a charter for a proposed International Organization
(ITO), but it was heavily amended in the UN—evoking opposition from
the US. Eventually, because of such heavy opposition from the US, the
ITO was “dead”. Negotiations on trade liberalization, however,
continued.
Trade rules and tariff concessions were negotiated during the 1947
Geneva
conference and signed in November that year.
28. ESTABLISHED INSTITUTIONS
WHAT IS ITS
FUNCTION?
The General Agreement on Tariff and Trade (GATT) aimed
at the
abolition of quotas and the reduction of tariff duties among
the
Contracting nations.
30. ESTABLISHED INSTITUTIONS
WHAT IS IT?
The WTO is a freestanding organization with legal
personality and with self-executing enforcement,
meaning that it contains binding dispute mechanisms
to
enforce trade rules. It was established to supervise
and liberalize world trade. It is the successor to the
GATT.
31. ESTABLISHED INSTITUTIONS
HOW WAS IT
FORMED?
1980s: There were calls for a stronger multilateral
organization to monitor trade and resolve trade
disputes.
The WTO began operations on January 1, 1995.
Following the completion of the Uruguay round (1986-
1984) of multilateral trade organizations.
32. ESTABLISHED INSTITUTIONS
WHAT IS ITS
FUNCTION?
To set and enforce rules for international trade.
To provide a forum for negotiating and
monitoring further trade liberalization.
To resolve trade disputes.
To help developing countries benefit fully from
the global trading system.
34. CRITICAL ANALYSIS
CREATION OF THE IMF AND GATT
These financial institutions supposedly aimed to assist
in global economic post-war recovery.
Upon closer inspection, however, it is clear they are
actually avenues for spreading and enforcing
neoliberal policies.
For the IMF, loans were given under the condition that
the borrower country must adopt a package of
economic policies that were neoliberal in nature and
promoted US dominance.
For the GATT, it was easily manipulated by powerful
countries because of its provisional and overall
tenuous nature.
35. CRITICAL ANALYSIS
GATT: AN AGREEMENT TO REDUCE TARIFFS
Meant to promote “free trade” principles like liberalization,
equal market access, reciprocity, non-discrimination and
transparency on a global scale.
The commitment to reduce tariffs is inherently imbalanced.
Generally, tariffs serve 3 functions: they protect local
industries from foreign products, provide an additional source
of revenue for the government and allocate foreign exchange
among different competing imports..
Moreover, powerful countries like the US would simply
circumvent the GATT and intervene directly whenever its
economic interests were being threatened.
36. CRITICAL ANALYSIS
WORLD TRADE ORGANIZATION
Created to continue the fundamental principle of the GATT that exported
goods should generally be free to enter into the importing country.
The objectives of free trade—objectives the WTO forwards, such as
opening agriculture, industry and services as well as liberalizing
investments—serve the interest of developed countries thus are inherently
unbalanced.
It is an organization that prides itself on its democratic processes and
decisions made by consensus.
But even Former director-general Michael Moore acknowledges the
inequalities present in the organization, saying, “Some members are more
equal to others when it comes to influence.”
There is much behind-the-scenes maneuvering to the detriment of the
interests of developing countries.
Ex: the WTO’s infamous “Green Room” meetings
Ex: The WTO’s dispute settlements processes
37. CRITICAL ANALYSIS
WORLD TRADE ORGANIZATION
Transnational corporations (TNCs) play a huge role in the
WTO—which solidifies the bias of the organization towards
larger rather than smaller companies.
Right from the start, TNCs stood to gain from the liberalization measures
of the WTO.
TNCs have access to the highest decision-makers and staff of the WTO.
Powerful countries, again, find various ways to circumvent the
rules while developing countries follow them and suffer the
consequences.
For instance, many developing countries have made huge reductions in
their tariffs and bound them. India’s trade-weighted average tariff has
been reduced from 71.4% to 32.4% while the tariff in developed countries
has only been reduced from 6.3% to 3.8%.
38. CRITICAL ANALYSIS
WORLD TRADE ORGANIZATION
“The WTO is inherently unjust since it pits powerful
countries against poor and weak ones in the arena of
“free trade”, perpetuates the subjugation of nations
through the intensification of neocolonial trade, and
promotes the interests of corporations to the detriment
of peoples across the globe. It is thus anti-development
and anti-people as it undermines the capacity for
genuine national progress, destroys economic sectors
and people’s livelihood and intensifies poverty.”
39.
40. CRITICAL ANALYSIS
DISPARITY BETWEEN THE THEORY OF
NEOLIBERALISM AND THE PRAGMATICS OF
NEOLIBERALISM
Principles of neoclassical economics vs political
commitment to individual freedom
Distrust of state power vs the need for an authority to
defend rights of private property, individual liberties and
entrepreneurial freedom.
41. CRITICAL ANALYSIS
RESTORATION OF POWER
Gerard Dumenil and Dominique Levy have concluded
that neoliberalization was, from the very beginning, a
project to achieve the restoration of class power.
1970’s capital accumulation crisis: There were clear political
and economic threats to elites and ruling classes everywhere.
They had to move decisively to protect themselves from
political and economic annihilation.
After the implementation of neoliberal policies in the late
1970’s, extraordinary surges in income inequalities and wealth
occurred in the US, Britain, Russia, China and Mexico.
42.
43. CRITICAL ANALYSIS
RESTORATION OF POWER
The rich and powerful of the world have formed somewhat of an
informal alliance with one another in order to protect their mutual
interests and maintain their dominance. They “posses a certain
accordance of interests that generally recognizes the advantages to
be derived from neoliberalization.”
We can even go as far as to say that a political consensus has been
reached; that governments throughout the world have fully
embraced the neoliberal policy agenda.
46. PHILIPPINE CONTEXT
Payne-Aldrich Act of 1909
Allowed unlimited quantities of all kinds of U.S.
Goods to enter the Philippines freely
Importing U.S. goods became an obligation for the
Philippines
Philippine exports to the U.S. were given particular
quota restrictions
47. PHILIPPINE CONTEXT
1946 Bell Trade Act
1954 Laurel-Langley Agreement
Provisions of this act tied the Philippine
economy to the economy of the United States.
Despite the nominal independence of the
Philippines at that time, these established free
trade with the U.S., so neocolonial patterns
were sustained.
48. PHILIPPINE CONTEXT
THE MARCOS
DICTATORSHIP
Authorized a series of
investment incentives
laws which maintained
the neocolonial
preferential treatment for
foreign investors and
allowed the neocolonial
trade patterns to continue
In general, foreign
investors benefitted.
49. PHILIPPINE CONEXT
AGRICULTURE
Background Information
1/3 of the land area of
the Philippines is fertile
and can be used for
agriculture
The Philippine economy
is predominantly agrarian
Agriculture, fishery, and
forestry contributed to
almost 20% to the
GDP[Gross Domestic
Product]
50.
51. PHILIPPINE CONTEXT
HOW TRADE LIBERALIZATION UNDER THE WTO HAS AFFECTED IT
Although the government attributes the weak growth of agriculture to
factors such as seasonal weather conditions, the fact that there is no
sustained growth points to the conclusion that the crisis besetting the
agricultural sector is structural in nature: low level of technology, small
economies of scale, rampant landlessness, and concentration of land
ownership among a relatively small elite.
Thus, the local agriculture industry is extremely weak and uncompetitive
and puts small producers at a disadvantage in the trade liberalization
implemented by the government as dictated by the WTO.
The Ramos, Estrada and Arroyo administrations all embraced WTO
policies (trade liberalization), implementing privatization and deregulation in
the local agriculture industry. This devastated the farmers’ livelihood and
the rural economy, because the domestic market was flooded with imports
while local farmers’ produce were still unable to penetrate the markets of
developed countries.
52. PHILIPPINE CONTEXT
INDUSTRY
Background Information:
In 2004, 33% of the Philippines’ GDP came from the industry sector
How Trade Liberalization under the WTO has affected it
The government’s policy of attracting foreign investments increased foreign
dominance in Philippine industries.
Footwear, apparel, rubber, textile, glass, tires, paper, wood, cement, and steel
manufacturers in the country all suffered from imports and low tariffs.
Many local companies were forced to downsize/close because of the foreign
competition.
Many workers were laid off or force to go on rotation
45.1% of workers in January to March 2004 were displaced because of
reorganization, downsizing, and change in management (merger). 8 establishments
reduced their number of workers or closed down every day, and 196 workers were
displaced daily.
In July 2004, approximately 2,688 Filipinos left the country everyday.
53. PHILIPPINE CONTEXT
SERVICES
Background Information:
Roughly 44% of the Philippines’ GDP is from the Service Sector
How Trade Liberalization under the WTO has affected it
The Philippines has committed under the GATS to bind all restrictions on market
access and has applied national treatment on foreign investors and suppliers in
financial services
The Privatization and Commercialization of social services is a burden to average
Filipinos.
Rates for vital utilities increase, making them less accessible.
Many families could not pay for healthcare in Public Hospitals.
Education became so costly because of the privatization of state colleges and
universities.
Local service providers are marginalized because of the liberalization under GATS.
Capital has become concentrated on foreigners, through TNC’s.
54. REFERENCES
SOTTO SORIANO TENSUAN TABORA
Sources:
IBON Data Bank and Research Center. 2005. WTO: The Supreme Instrument of
Neoliberal Globalization. Manila: IBON Foundation.
David Harvey. 2005. A Brief History of Neoliberalism, Oxford: Oxford University
Press
Michel Chussodovsky. 2003. The Globalization of Poverty. Ibon Books, pp. 1-64.
Shah, A. (2010). A Primer on Neoliberalism. Retrieved February 13, 2011 from:
http://www.globalissues.org/article/39/a-primer-on-neoliberalism
Kotz, D.M. (2000). Globalization and Liberalization. Retrieved February 13, 2011
from: http://people.umass.edu/dmkotz/Glob_and_NL_02.pdf
Globalization101.com (nd). What is Globalization? Retrieved February 13, 2011
from: http://www.globalization101.org/What_is_Globalization.html
Shah, A. (2010). Poverty Facts and Stats. Retrived February 13, 2011 from:
http://www.globalissues.org/article/26/poverty-facts-and-stats