Question 1. Neo-liberalization vs. Financialization
Neoliberalism refers to a political movement that emerged in the 1960s, which combines old-style liberal worries for social justice with a highlighting on the growth of the economy (Fouskas and Bülent, 39). On the other hand, financialization is described as a process or system that advocates for a growing role of financial markets, financial motives, financial institutions, and financial actors in the setup of local and global economies.
The rise and fall of the golden age of capitalism is attributed two major policies. First, the full employment policies, production in large quantities due to increasing demands, as well as evasion of casino/Ponzi capitalism through regulation of the exchange rate apparatus and banking capitals. Second is the internationalization of the United States, through Bretton Woods institutions. The Bretton Woods system created rules that controlled commercial and financial relations among the global industrial countries. The system advocated for fixed exchange rate as a monetary tool of controlling the economy (Fouskas and Bülent, 19). These led to the creation of the pegged rate regime, which required member states to put in place national currency parity in relation to reserve currency, and to stick to exchange rates within a range of positive or negative 1. The Bretton Woods system came to an end between 1968 and 1973. Following the collapse of the system, the members of the IMF got the freedom of choosing their own forms of exchange rate systems (Fouskas and Bülent, 23).
The US possessed about 75% of the global gold reserves as well as about 60% of the total global manufacturing output (Fouskas and Bülent, 29). The Bretton Woods arrangement was perceived as a way of expanding the US power through dollarizing the Asian and European markets. These created the framework for the implementation of the Keynesian policies, which involved rationalized management of cumulative demand so as to plank off market disequilibria. Besides, it led to the growth of welfarism and regulation of interest rates and inflation via budgetary/fiscal instruments. Through Keynesianism, the state assumed the entrepreneurial and financial responsibilities through controlling production and social capital reproduction. In 1971 financial crisis is seen as being responsible for the extinction of Bretton woods, creating way for financialization policies (Fouskas and Bülent, 33).
The relationship between neo-liberalism and financialization is a controversial issue. However, it is largely argued that financialization, which is associated with the growth of the role of finance in the economy, has its basis on neoliberal restructuring, rather than enlightening the emergence of neoliberalism (Fouskas and Bülent, 45).
Neo-liberalization and Financialization affect the internal and external socio-economic environment of a state in various ways. For instance, the role of the government in the market has declined, whereas that of the financial markets has increased with time. Besides, more countries are now increased economic transactions with other countries (Fouskas and Bülent, 51). Moreover, local and global financial transactions have increased tremendously. The other positive effect of neoliberalism and financialization is associated with resource allocation. Particularly, most economists are of the opinion that financialization of commodities enhace efficient resource allocation. Other impacts of neoliberalism and financialization include market imbalances, which is likely to lead to market failure. In addition, they may also lead to distortion of price signals (Fouskas and Bülent, 63).
Question 2: Can Globalization solve the problem of global inequalities?
Global inequalities since the 1960s have portrayed a significant interest in globalization in terms of realizing the potential benefits that lie in the developing countries. It also brings about challenges in the aspect of the immense offsetting costs (Dicken, 33). However, there are various inequalities that bring about healthy results due to the results of the differences that emerge in the vast the ambitions, will and motives of working. Over the years, inequalities have posed a huge challenge, especially in the countries that are developing. These challenges emerge through aspects of the way technology is off-shored and outsourced.
The inequalities experienced through globalization bring about effects in terms of development of fighting poverty as well as insurance put in place for any losses incurred against income. The case of inequality that emanates from globalization brings about crisis in a systematic manner that occurs through capitalism and neo-capitalism. This is where the end results were exhausted of false responses applied by the Anglo-American leaders dealt with excessive accumulation in the 1970s. Globalization in this case created some form of erosion in the manufacturing sector where the Chinese market was sunk via the economies of scale in order to create significant problems for the United States. It also made it impossible for the US to manage their aggregate demand during a time when the crisis in the 1970s hindered partial recovery in the economy (Dicken, 65).
Therefore, globalization cannot solve the problem of global inequalities as it depicts instances of trade liberalization that attributes to growth of gaps in wages among those who have some form of education and those who are not educated. Additionally, it leads to privatization, which offers huge risks in term of the accumulation of wealth as in the case during the crises. Developing countries have limited competition but intense economic and political power thus exposing them to more competition (Bovill and Leppard, 399). Inequalities are normally built upon the importance of sociological relevance. Therefore, globalization cannot solve the challenge of global inequalities.
Bovill, Catherine and Leppard, Margaret. "Population Policies and Education: Exploring the Contradictions of Neo-Liberal Globalisation." Globalisation, Societies and Education,4.3 (2012): 393-414. Web
Fouskas, Vassilis, and Bülent Gökay. The Fall of the Us Empire: Global Fault-Lines and the Shifting Imperial Order. London: Pluto Press, 2012. Print
Dicken Peter. Global Shift: Mapping the changing contours of the world economy. London: SAGE, 2010. Print