With China entering the global economic market as an international lender and competitor to the IMF, the longevity, morality, and inevitability of modern global capitalism are being debated. Those in support of the current system praise its ability to generate income, broaden opportunities, and increase competition. The opposition recognizes that global capitalism is incapable of guaranteeing the above outcomes and is responsible for a wide range of issues: a widening wealth gap, extreme exploitation, poverty, and a failure to provide basic social services such as education and healthcare. The conflict is particularly pressing in the third world which is the most affected by international negotiations, relations, and policy but lacks the political agency to influence these international arrangements and compete on an equal footing in the economic market. In this essay, I will argue that modern global capitalism is a parasitic relationship between the developed and developing world. I will support my claim with the perspectives of Robinson, Budhoo, Cole, and Keynes and show opposition through the work of Hayek, Micklethwait, and Woolridge. In the debate as to whether modern global capitalism improves a country’s public wellbeing and who the system benefits, the narrative that modern global capitalism is beneficial forces all countries to participate in a corrupt system rife with exploitation, massive wealth disparity, and a disregard for social programs.
Hayek: Laissez-Faire Capitalism as a Just System
Hayek, a prominent economist in the 1930s, advocated for laissez-faire economics and held the perspective that government intervention obstructs liberty and that the market is capable of self-regulation and ensuring a just society. A laissez-faire economic system was not implemented within Hayek’s lifetime but is the dominant system in modern global capitalism and is responsible for much of today’s inequality. Much of this inequality is due to multinational corporations dominating the market and ensuring that wealth is concentrated in the hands of a small percentage of the population. While Hayek recognizes the free market is inherently biased towards larger corporations that already have a footing in the market and are advantaged by previous systems, he did not view this as a deterrent (Cassidy, 2009). Cassidy remarked on Hayek’s belief that liberties should be at the center of the economic system and any governmental intervention inhibits the opportunities and benefits of the individual (2009). It is now apparent that poor people are impacted disproportionately by the lack of governmental intervention to raise the insufficient minimum wage and offer social programs that could not develop in a laissez-faire economic system (Fahnbullah, 2020). A free market will always benefit those who have access to resources, connections, and funds, and those individuals will have the power to determine how those benefits are distributed. For this reason, it is important to have governmental regulations to redistribute wealth, regulate large corporations, and ensure that working people have access to basic amenities (Cassidy, 2009).
Keynes: In Support of Governmental Social Programs
Foundational economists believed that unfettered capitalism could guarantee citizens improved living standards but many recognized its inability to provide necessary social programs such as education, healthcare, and other public services. Keynes, another prominent economist in the 1930s, espoused policies aligned with what we would now call social democracy which involved governmental contributions in the sphere of social programs and during crises. Following Keynesianism, Western developed governments constructed welfare projects, FDR’s New Deal, and the war on poverty which were instrumental in decreasing poverty and increasing employment, living standards, and positive awareness for the implications of poverty (Cassidy, 2009).
Keynes’ perspective is particularly important in considering the implications of global policy leaders transitioning from Keynesianism to a laissez-faire economic system and his predictions regarding future economic conditions. He was correct in predicting that countries would continue to amass economic wealth but was unsure of how the wealth would be distributed. Keynes recognized two possible paths for the development of capitalism: he believed that the abundance of capitalism would either result in increased consumption or, as he hoped, once global wealth achieved a certain level, this would be distributed to meet the economic necessities of all (Klein, 2013). Keynes would be appalled by the destruction of social programs, which is notable in his home country, the United Kingdom, where the government strongly implemented Keynesianism in the post-war period (Cassidy, 2009). The United Kingdom, similar to other countries, has not recovered from the 2008 banking crisis and continues to struggle due to privatization and deregulation implemented over the past decades. Since the 2008 banking crisis, people in the UK are on average poorer, household debt is higher, and 14.3 million people live in poverty. Governmental decisions to abandon Keynesianism have left the majority restless as people recognize the structural faults of current capitalism. A recent poll found that 75% of people in the UK support restoring railways, electric services, and water companies to public ownership (Fahnbullah, 2020). Rising popular support of social programs allows governments to mobilize against global issues. For example, the Green New Deal –governmental investments in green infrastructure, new technology, job training, and subsidizing local green energy in place of oil and gas corporations– combats the pressing threat of climate change while more equitably redistributing resources to its citizens (Fahnbullah, 2020).
Micklethwait and Woolridge: Globalization as an Equalizer
Micklethwait and Woolridge view global citizens under the current capitalistic system as capable of pursuing their interests with access to “perfect information, relatively free from government and geographical obstacles [where] power lies increasingly in the hands of individuals rather than governments and in which people are free, within reasonable bounds, to pursue the good life wherever they find it” (Micklethwait & Woolridge, 2000, p. 17). The economic journalists present an idealized form of capitalism that the developed world can access but ignore how it ostracized the developing world. In line with this mindset, authors writing on globalization ignore or minimize the role that international relations play in exacerbating inequality and discrimination, particularly within previously colonized regions. John Micklethwait and Adrian Wooldridge write in the Global Reader, “Yes [globalism] leaves some people behind, but it helps millions more to leap ahead” (Micklethwait & Woolridge, 2000, p. 13). Their perspective disregards those who are left behind and devalues their lives in the larger picture of economic growth. John Micklethwait and Adrian Wooldridge build upon their support of globalism and state, “Globalization clearly benefits producers by giving them greater choice over their raw materials, production techniques, and human talent, not to mention over the markets where they sell their goods” (Micklethwait & Woolridge, 2000, p. 13). In the abstract, this statement is true but does not apply to the populations of third world and indigenous people who cannot access their own natural resources and don’t have the resources to compete in a global market or against global influence in their local market. For example, the Zapatistas, mentioned by Steger, live in an area of abundant natural resources but cannot access the wealth due to western imperialism and foreign exploitation of their land and resources. In response, the Zapatista created “one of the first popular movements to recognize neoliberalism as a dangerous new stage of global capitalism and called NAFTA a death sentence for the Indigenous peasants of Mexico” (Klein, 2019). After 10 years of preparation, the Zapatista’s began a guerrilla campaign against neocolonialism, and for the rights of women, and indigenous and poor people.
Robinson: The Widening Wealth Gap
“[Global Capitalism] is a war of a global rich and powerful minority against the global poor, dispossessed, and outcast majority. Casualties already number hundreds of millions and threaten to mount into the billions” (Robinson 1996, p. 22-23). Robinson likens the current global climate to a war of the hyper-rich against the poor. While extreme poverty has steadily declined over the last decades, inequality has substantially increased with the top 1% of the global population controlling more wealth than the bottom 99% (Ayele, Nieva-Fuentes, et al., 2017). The interests of global capitalism ensure citizens remain in cycles of inequality and poverty. This is accomplished by presenting as fact the ideology that workers should strive to become rich within a current system that upholds a widening wealth gap. Some 400 transnational corporations own two-thirds of the planet’s fixed assets and control 70 percent of world trade (Robinson, 1996). The global rich’s domination over the global market determines the safety standards, wages, worker unions, and governmental regulation and does not allow for the necessary competition to hold these powers in line. Robinson expresses that, in the context of this global domination, “any discussion of democracy […] is meaningless” (1996, p. 25). When controlling wealth is equivalent to power, those in control do not allow a conversation regarding the redistribution of resources and improvement of current inequalities which are predicted to increase in the following decades.
Budhoo: Exploitation in the Developing World
As key instruments of global capitalism, the IMF and World Bank are praised for their success following World War Two in uniting the Global North and producing immense economic growth. The IMF offered substantial low-interest loans to countries to invest in infrastructure, the economy, and towards providing citizens access to basic amenities. Despite the great success of the IMF’s initial design, when offered to the developing world, the IMF included higher interest rates and strict conditionalities that limit the government’s independence by determining both where the loans are invested and how the government manages public spending (Vreeland, 2019). After restabilizing the global north, the developing world adjusted the IMF to sustain the parasitic relationship established in the colonial era. Budhoo, a former member of the IMF, criticizes these changes and notes their substantial burden on the developing world. While it would benefit the third world to dispose of the IMF, Budhoo acknowledges that “[t]he governments of the North will never agree to abolition, simply because these institutions are too important to them as instruments to achieve their economic and political objectives” (1994). He indicates that the global north has continually made changes to the IMF that benefit themselves as opposed to the recipients of the aid: the third world. The IMF may offer loans to struggling countries but high interest rates allow developed countries to control the developing countries without the limits and resource-intensive nature of colonialism. The high interest rates indebt domestically owned small businesses to large banks which eventually results in bankruptcy. This is detrimental to communities and small businesses chains within developing countries striving to incorporate into global markets.
One method used to control developing countries is IMF conditionalities. One such conditionality requires countries to dismantle current foreign exchange restrictions that protect their local markets and producers. This causes an increase in imports that outcompete local produce and harms already struggling citizens. The country is now required to export large quantities of primary goods –aimed to produce a sufficient revenue to pay off the loans– which leads to scarcity, hunger, unemployment, and stagnation. Because they are unable to equalize their debt, the developing world is trapped in a cycle of debt and cannot escape conditionalities to regain control of their own governance (Budhoo, 1994).
Cole: Ethics of the White Savior Complex
Those in power in modern global capitalism work to pacify the most impacted regions and persuade the majority that improvements are achievable within the system. Those privileged by the system –white people– will offer aid to non-white people in a self-serving manner under the fictive belief that their contributions will advance global justice. This phenomenon, the White Savior Complex, protects the public image of white people while sustaining damaging systems that harm the very people they are “saving” (Cole, 2012). Cole writes, “The white savior supports brutal policies in the morning, founds charities in the afternoon, and receives awards in the evening” (2012). When the solutions to systemic problems are implemented in the form of relief, they have little to no impact on future generations or towards restabilizing the nation (Cole, 2021). This is evident in the fair trade movement which is posed as the messiah for the small farmers in the developing world who are ruined by subsidies in the Global North. Fair trade guarantees small farmers fixed prices for their produce and encourages fairer working conditions. “Researchers behind the OECD’s”Agricultural Policy Monitoring and Evaluation 2020" report found that the 54 countries studied (all OECD and EU countries, plus 12 key emerging economies) provide over US$700 billion a year in total support to the agricultural sector" (Calder, 2020). This disproportionately impacts the developing world which is unable to subsidize local farmers –in many circumstances due to IMF conditionalities– and therefore unable to compete in the global market with substantially subsidized international produce. This leads to extreme exploitation such as low pay, long hours, little to no benefits, and an inability to amass wealth (Calder 2020). Fair trade is not expansive or comprehensive enough to properly “save” developing countries from the domination and exploitation of the developed world.
Conclusion
Keynes, Robinson, Budhoo, and Cole all critique the modern capitalistic system for exacerbating poverty, the wealth gap, and for destroying social programs. These authors view those in power as scheming forces towards self-centered gain. Budhoo recognized the impact of the IMF as a colonialistic tool that exploited the most vulnerable members of society. Keynes supported governmental intervention in the form of social programs that enhance living standards by providing basic amenities as a necessity while Hayek championed free trade under modern capitalism as able to regulate the market and argued that governmental intervention is detrimental. Micklethwait and Woolridge’ are in line with Hayek’s principles and argue that modern capitalism produces a competitive and fair system that uplifts the poorest global citizens. In this essay, I have presented the argument that modern global capitalism has adverse effects on the well-being of global citizens because it exacerbates the wealth gap, destroys existing social programs and precludes their further development, and perpetuates systemic exploitation. `4
References
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