<Advantages of neoliberalism and how it should be improved >
May, 16,2011(1st Term Paper)
By Hyunseok Lee (International 10b4) For: Mr. Carlton Johnson
It has been almost 30 years that neoliberalism had been the mainstream of world economy. Despite neoliberalism ruled our one of the most sensitive aspects of life, most of the people do not know about the effects or the problems incurred by neoliberalism and some of the people even don’t know what neoliberalism is. In this article, I will introduce about the concept of neoliberalism and analyze about it so that controversy over neoliberalism can be completely organized to the readers.
1. Emergence of Neoliberalism.
After Adam smith claimed that government should not take care of economic market and flow of economy must be circulated through movement of ‘invisible hand’, capitalism was the mainstream of world economy. However, numerous nations faced great economic depression in 1930s and recognized extreme monopolies in the market and gap between rich and poor. Therefore Keynesian economics, modified form of original capitalism had risen. But Keynesian economics were also destroyed when one more big economic depression devastated many countries in the world and incurred inefficiency in the flow of market economy. As a solution for problems of Keynesian economics, neoliberalism was introduced in 1980 (Kwon).
2. What is Neoliberalism?
To be simple, the main idea of neoliberalism is “the economic policy related to the claim that the flow of the market economy should be maintained through the desire to intensify and expand the market, by minimizing the intervention of government and reinforcing the efficiency in the market” (David 174~183). According to neoliberalism, government should take care of very limited range of nation economy such as security, restrictions for extreme monopolies. In addition, free world trade without harsh restrictions, liberal movement and atmosphere in labor-force market, unlimited freedom given to enterprises are being supported from advocates of neoliberalism.
3. Advantages of Neoliberalism
Supporters of neoliberalism contend that neoliberalism amplifies the efficiency of market economy. On the ground that policies with neoliberalism reduce the influences from governmental managements, companies, the group of producers, can gain tremendous power in the market. Enterprises will produce goods more actively to increase their profits. As a result, interactions between consumers and producers will be revitalized and size, efficiency of market will be maximized. During above process of development, the competitive power and creativity of companies will be dramatically developed too. One of the greatest examples that neoliberalism facilitated the liberal flow of economy can be FTA. FTA, which stands for Free Trade Agreement, is the form of transaction that induces abolition of tariffs or international limitations related to trading goods between two countries. For instance, after FTA was signed up between Republic of Korea and United States of America, both of countries are expecting better products in the market with higher competitive power because their products will fascinate consumers with lower tariffs (Kim). Furthermore, neoliberalism is considered to be the main power of globalization. Since neoliberalism encourages free trade between nations and integrity of markets, globalization has been accelerated by the name of ‘realization of neoliberalism’. That is to say neoliberalism boosted the exchange of information and cultures around the country.
4. Problems of Neoliberalism
Unlike the advantages shown above, Neoliberalism seems to be the main cause of several treacherous problems these days. Opponents of neoliberalism strongly urge that neoliberalism is the main cause of increasing gap between rich and poor in modern society. In these days, only top 1% of world population is taking 40% of finances in the world. Since neoliberalism expands efficiency in the market through limitless competitions between individuals, it raised gap between rich and poor. Riches are becoming much richer based on their original properties while poor people are ‘sinking down’ and suffering great economic hardships in their lives. This phenomenon occurs not only between individuals but also between companies. According to statistics provided in newspaper, BMW sold 9249 cars in Republic of Korea this year while Subaru sold 236 cars (Kim). As shown in this statistics, competitions without governmental controls are causing increases of economic gap between individuals and enterprises. Moreover, unemployment rate can be augmented because of neoliberalism. In the world of neoliberalism, a person with less ability is the target of unemployment or fire since a person with diverse and intense ability will get the job. There is no care from government related to unemployment, therefore, neoliberalism incurred depression on many families’ budgets. Lastly, antagonists of neoliberalism tell that globalization, which is the phenomenon deeply associated with realization of neoliberalism, cannot be considered as positive status quo. They claim that over-globalization provoked destruction of some folk cultures in each nation and forced developing countries or poor countries to follow developed countries’ economic pressures or mechanisms(Jang,203~244).
5. Solutions for the problems (How neoliberalism can be ideal)
There are three main problems which are occurred because of neoliberalism; Increases in gap between rich and poor, incremented unemployment rate and side effects from globalization. However, those three hot issues can be solved with one big solution; Government should take somewhat care of the market. First of all, government should concern about welfare system so that poor people can get enough financial support to lead safe life. If the world is only sustained by laws of neoliberalism, poor people cannot earn any chance to success or improve their economic conditions, however, they will get opportunity to enlarge their family budgets and go forward for their dreams when government provides financial back-up to them. I strongly believe that it’s nation’s duty to assist members of society and stimulate them to reveal their potentials for nation and themselves. Next, the legislative council should think about how government can aid jobless people. Recently, some of the nations are helping unemployed people by offering living expenses and find the jobs for them. As a result, the unemployment rate in those countries had evidently decreased and livelihoods of the public were stabilized (Kim). Finally, nation must manage how much the country should be globalized. Under powerful phenomenon called ‘Globalization’, people might lose their own cultures, which are developed through ancestors and themselves. Therefore, government has to supervise the balance between folk cultures and new cultures that came into because of globalization.
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- 2. Kim Jongmun, “수입차 판매는 양극화”(Suibcha panmaeneun yangukhwa, Sales of transported cars are being polarized between companies) Seoul: Joongang-economy newspaper published in 2011.05.11/11th page
- 3. Jang Ha-joon, <Bad Samaritans>, Seoul :Booki, 2007
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