Most of the things that surround you were manufactured elsewhere. Part of the food you eat is produced elsewhere. And perhaps, part of the products the region where you live produces is destined for somewhere relatively far.
Products, goods, and services continuously travel in the world, making us all more and more interconnected day by day. But could this have ever been possible without free markets? Read the following explanation to learn about the relationships between liberalism and globalisation.
Liberalism and globalisation definition
Globalisation is a process through which people, goods, ideas, cultures, etc., that are far from each other, come in close contact. This is a process that arguably has always been happening. However, today globalisation seems to have changed the way we live our everyday lives, such as what we eat, how we travel, the languages we speak, the products we can buy, and the music we listen to.
Globalisation is the process through which different parts of the world become increasingly connected, intertwined, and interdependent. We speak of different types of globalisation: political, cultural, economic, and technological. This causes interaction and integration between countries— the higher the level of connection, the higher the level of globalisation.
Therefore, we can say that in order for globalisation to happen, people must be able to become connected, exchange goods, and share ideas. The way in which this was achieved in the past century was through free markets. Free markets are one of the main concepts of liberalism.
Liberalism is a political theory developed from the tradition of the political philosophy of the Enlightenment, which argues for the natural and individual rights of humans, such as the right to life, liberty and property.
The concept of free markets and free market capitalism can be traced back to the economic theories of Adam Smith. Smith argued that the economy has internal and natural adjustment mechanisms and, therefore, should not be subjected to state control. This stands in opposition to socialism.
Adam Smith is behind the theory of the 'invisible hand'', which argues that in the economy, there is something similar to an "invisible hand" which drives internal adjustment even when the individual investments are not profitable. It argues against state intervention.
This economic theory is the backbone of today's manifestation of liberalism in the economy, i.e. neoliberalism.
Neoliberalism is an economic and political ideology characterised by policies of liberalisation of the market (i.e. less state control), privatisation, free trade, and in general, the favouring of the private sector over a state-sponsored economy.
Many theorists see globalisation and neoliberalism as two sides of the same coin and often refer to the two simultaneously as "neoliberal globalisation" as a definition of the relationship between Liberalism and Globalisation.
Liberalism and globalisation theories
The links between Liberalism and Globalisation theories can be traced to two central theoretical notions: the Washington Consensus and Modernisation Theory. These theories are crucial to liberalism and globalisation because they were aimed at political and economic globalisation in most of the world and, therefore, at the diffusion of "Western values" such as individual liberty and free markets in countries with different economic structures.
Fig. 1 New York City's Skyline. New York is one of the main financial districts in the world, and theories of development are modelled on principles of free trade discussed and applied in its financial district.
The Washington Consensus
The Washington Consensus was formed by different economic policies applied in developing countries facing debt crises in the 1980s. In particular, it was used in Latin America.
The critical actors in developing this theory were the IMF, the World Bank and the U.S. Department of Treasury.
The main key points are:
- Free markets through a weakening of state control in the economy.
- Fiscal control
- New plans for public spending focused on education and health
- New tax system
- Market-set interest rates (i.e., the amount charged for borrowing money)
- Low exchange rates (which is the prerogative for free, unregulated markets)
- Easier foreign investments
Modernisation Theory
If the Washington Consensus tackled the economic globalisation of the world, Modernisation Theory theorised both political and economic globalisation.
Modernisation Theory was advanced at the end of WW2 to explain what was referred to as the "underdevelopment" of Global South countries.
According to the theory, so-called "traditional values" in the Global South prevent modernisation. These are, for example, particularism, collectivism, patriarchy, and ascribed status (e.g. caste systems). Modernisation theory believes in exporting Western liberal values such as individual freedom to these values.
If these new values are introduced, alongside economic policies such as the ones of the Washington consensus, Global South states should reach "maturity", as it is referred to in the theory.
Racism and Western-centrism in the theory
The above-explained theories, which are the tenants of the globalisation of Western liberalism, have received criticism from Critical Political Economy such as Neo-Marxism or Postcolonial Literature. First and foremost, many have argued that they have not achieved the promised results, or that sometimes they were not applied as promised.
Secondly, the above ideologies argue that these theories are based on a pre-conception of Western (liberal) values and systems such as individual freedom and capitalism as superior to non-Western values. The language used, such as "reaching maturity", is reminiscing of imperial and colonial language, particularly the system of protectorates, according to these thinkers.
Finally, the policies advanced aim to exploit resources in the Global South by opening the free market conditions to foreign investment, according to critical economic analysts.2
Main concepts of liberalism and globalisation
Now that you are familiar with these theories, let's look at the main concepts that uphold Liberalism and Globalisation simultaneously.
Fig. 2 A cargo ship in Jakarta, Indonesia, one of the leading trade hubs in the world.
CONCEPT | DEFINITION | EXAMPLE |
Free Trade | A model of trade between countries not controlled or regulated by tariffs or other types of protectionist policies. This was crucial for transforming the world into a globalised space where goods, services, and consequently, ideas and culture travel continuously. | An example of free trade can be seen in the way in which the EU has 41 agreements with 72 different countries. The EU uses Free Trade Agreements to reciprocally open markets and Economic Partnership Agreements, which involve development aid to the country with which the EU is trading. Not to mention that there are no trade barriers within the EU. |
Liberal Democracy | Liberal democracies are democracies founded on a strong rule of law, and civil liberties, and where people's consent legitimates the power, which additionally renders them electorate democracies. Neo-liberals believe that a globalised world system dominated by liberal democracies is less likely to have conflicts within states. | Most Western countries are liberal democracies. At the end of the Cold War, there was a general enthusiasm regarding the democratisation of the Global South. From the 2000s, the hopes of sustainers of liberal democracies started to crumble with more wars, particularly after the failure of the Arab Spring. |
Cosmopolitanism | Cosmopolitanism is crucially a philosophical underpinning of both globalisation and liberalism. Mainly developed by English philosopher Kant during the Enlightenment, it tells us that all humans are members of the same community. | Climate Change Agreements are an example of joint efforts to prevent extinction in the name of a global community of citizens. The way in which policies are developed aims at globalising responsibilities and actions. |
Relationship between Globalisation and Liberalism
From the above concepts and theories, you should now understand that many of the tenants of liberalism, particularly neoliberalism, are shared with the fundamentals of globalisation. As such, the relationship between globalisation and liberalism is mutually reinforcing.
In particular, we can say that without neoliberal markets, we would not have reached the stage of economic globalisation that we have today.
This is mainly due to the increasing international economic competition and trade openness in the 20th century. Governments started deregulating their economies so as to have more investments from foreign countries and so that transnational corporations would not transfer their businesses to other more competitive countries.
Transnational corporations are a perfect example of the convergence between neoliberal free markets, lack of state intervention, and globalisation. Transnational corporations go beyond state borders by being based, per definition, in two or more countries and are usually facilitated through economic policies such as tax cuts. Apple and McDonalds are examples of Transnational corporations.
Difference between globalisation and liberalism
Even though the two concepts have a strong relationship, there is a significant difference between globalisation and liberalism. Globalisation, particularly current economic globalisation, is the reproduction of capitalist production networks and finance beyond nation-states into the international system. Liberalism, in particular, neoliberalism, is a form of an economic policy approach based on the same ideas that developed during the Enlightenment and that regained consensus after World War II.
As we have seen, liberalism facilitates globalisation. However, it can also be applied solely on a more regional level or in forms that do not necessarily lead to globalisation as we know it today. Furthermore, states can participate in global economic politics without necessarily complying with just neoliberal policies, showing that globalisation as a process can exist outside of exclusively neoliberal dynamics.
China's economy is somehow hybrid since it develops neoliberal policies in terms of the way in which its free-market economy works, but at the same time the state holds control through laws such as the New National Intelligence Law which affirms that any organisation or citizen must cooperate with the Chinese intelligence.
Nonetheless, the state did not prevent the country from becoming the second biggest economy in the world, thanks to sponsoring a socialist market economy. Indeed, economic policies in the Asian country facilitate investment, and open trade, while the state controls welfare. Therefore, there are examples of systems that are not liberal yet fully integrated into the processes of economic globalisation of the world.
It is essential to remember that certain aspects of globalisation, such as cultural globalisation, historically started long before the rise of neoliberal market economies.
Liberalism and Globalisation - Key takeaways
- Globalisation is the process through which different parts of the world become increasingly connected, intertwined, and interdependent.
- Liberalism and neoliberalism are political doctrines that favour free trade, the privatisation of the world economy, and individual rights, hence can favour globalisation.
- The Washington Consensus and Modernisation theory address the economic policies needed for the development of liberalism globally. was formed by different economic policies applied in developing countries facing debt crises. Both theories have been critiqued for having failed in some instances and for how they uphold racist Neo-imperial discourse.
- Globalisation is driven by three liberal concepts: free trade, liberal democracy and cosmopolitanism.
- Economic globalisation is heavily influenced by neoliberalism. However, more generally, globalisation is a process that started before neoliberal policies, and the latter can be balanced with more interventionist state systems.
References
- Revise Sociology (2017), 'Modernisation Theory'.
- Fig. 1 New York City's Skyline https://commons.wikimedia.org/wiki/File:New_York_Skyline_(129300657).jpeg by Andy Moreton https://500px.com/p/andymoreton? licensed by CC-BY-3.0 https://commons.wikimedia.org/wiki/Category:CC-BY-3.0
- Fig. 2 Aerial view of cargo ship https://www.pexels.com/photo/aerial-view-of-cargo-ship-1554646/ by Tom Fiskhttps://www.pexels.com/@tomfisk https://www.pexels.com/@tomfisk no attribution required
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