Uneven Development in the Neoliberal Era
What is Neoliberalism?
Neoliberalism is an economic and social policy model that shifts control of production factors from the public sector to the private sector. Emerging in the 19th and 20th centuries, neoliberalism advocates for governments to reduce subsidies, limit protectionism, decrease deficit spending, reform tax laws to broaden the tax base, and open markets for trade. It aims to abolish fixed exchange rates, privatize state-owned property, and establish privately managed businesses.
Neoliberalism and Uneven Development
Neoliberalism has contributed to uneven development. Despite its global acceptance and evolution, it has exacerbated inequalities between nations and social classes. The continuation of primitive accumulation leads to unequal exchange, where products with disparate production costs are traded. This ongoing accumulation of wealth, coupled with varying productivity rates between developing and developed nations, fosters uneven development.
Capital Exportation and its Consequences
Neoliberalism facilitated the exportation of capital, leading to the establishment of various enterprises in peripheral areas to exploit low wage costs. This allows core and peripheral regions to export agricultural and manufactured goods produced with outdated technology and cheap labor. Consequently, high-value goods produced in the core are exchanged for lower-value goods from the periphery, widening the inequality gap.
The Role of Free Trade and Markets
Free trade and open markets are central to the current uneven development under neoliberalism. In the 19th century, free trade was globally adopted under the assumption that all nations would achieve similar development levels by focusing on their comparative advantages. However, this resulted in developed nations benefiting at the expense of developing economies, deepening uneven development. In essence, free trade perpetuates unequal exchange and undermines state sovereignty by limiting a state’s ability to stabilize its economy.
Foreign Ownership and Exploitation
Foreign ownership of firms in the neoliberal era has led to unequal development, as corporations from developed nations exploit labor in less developed countries. These corporations often repatriate profits to their home countries. Additionally, less developed countries, lacking resources, are forced to outsource exploitation to developed nations, which then take a large share of these resources, further exacerbating economic disparities. Neoliberalism has also contributed to debt crises, resulting from deregulation failing to aid economic development effectively. A notable example is the 2008 financial crisis.
Market Fundamentalism and Inequality
Neoliberalism promotes inequalities by disregarding market fundamentalism. Using free markets to provide essential services like education and healthcare cannot be done solely for profit. Therefore, adopting neoliberal policies can widen inequality and lead to under-provision of services that would benefit the economy in the long run. Neoliberalism also creates monopsony and monopoly power, promoting uneven development by widening income and wealth inequality. Skilled workers can demand higher wages, while those with fewer skills in free markets often experience stagnant salaries. Firms with monopoly power tend to increase producer surplus at the expense of consumers, while those with monopsony power can limit wage and salary growth.