By the end of World War II, all parts of Europe were in agreement with a mixed economy. However, there were divergent views on whether or not basic industries should be nationalized, the best level of redistribution of resources, as well as the best economic plan. This gave rise to two ways of thought. The forces that condemned the role of government terming them as socialism took over the day. This marked the rise of neoliberalism. The second thought was strongly opposed to free market policies of neoliberalism. Latin America is on record for strongly opposing US proposition of Free Trade. Neoliberalism emerged due to the evident undermining or abolition of societal democratic reforms by the ideological dominance of the market. The backbone of neo-liberalism ideology was a belief that an unregulated, open, and competitive market, free of state involvement or interferences is the key to economic development. Neoliberalists perceived their move as a strong response to the global recession following WWII.
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Factors for the Rise of Neoliberalism
Economics was the backbone for neoliberalism. It gave rise to other issues such as the need to reduce corporate taxes, deregulation of state authority over large industries, enhancing international capital mobility, assaults on workers unions, and intensifying regional competition. The major role of neoliberalism was to eliminate all barriers to commerce. The debt crisis of the earlier 1980s forced the USA and other G-7 states to extend the neoliberal programs to the entire world with an aim of imposing discipline of capital markets in all states. Bretton Woods’s institutions such as WTO, IMF and World Bank were all changed into transnational neoliberalism. These institutions were also assembled to extend their operations to third world countries through fiscal austerity programs and structural adjustments.
The Neoliberal Program and Foreign Investment
Neoliberalism was aimed to achieving free trade internationally. That is, there was the need to gain access to emerging markets for large corporations and their host countries. One of the fundamental economic programs associated with neoliberalism is the North American Free Trade Agreement (NAFTA). This was an agreement between Canada, Mexico, and US which grants large corporation potential legal opportunities at the expense of sovereignty of countries. Latin America is on record for strongly opposing US proposition of Free Trade. However, due to immense pressure from US, they had to embrace progressive liberalism. Contrary to the free-Trade Agreements sponsored by US, the Latin American emphasizes on integration through cooperation. Their investments are geared towards addressing the people’s needs, ensuring environmental sustainability,
How the Neoliberalism Policies Impact Latin America
Latin America has felt the greatest impact of neoliberal policies than any other region. The neoliberal policies, being strongly entrenched in international financial institutions like IMF and World Bank, were geared towards structurally adjusting the economies in the world to meet the needs of larger corporations at the expense of the sovereignty of nations. The implementation of NAFTA brought very devastating effects in Latin America. There was great job loss especially among the locals. The labour rights of many citizens from Latin American countries were greatly undermined especially by US. There was increased environmental degradation and economic equality. The ultimate goal of neoliberalism is to privatize all available resources and create freedom in all commerce. Neoliberal ideology perceives the market as a product of nature and not created and structured by states. According to Chasteen (2001), neoliberalism is a philosophical view which takes individualism and liberalism to the extreme thus making it dangerous for the well being of developing nations in Latin America. Since neoliberal ideologies were entrenched in World Bank and IMF, the Latin america economies were forced to succumb to the structural adjustments of these policies due to economic recession and growing debt. Latin American experienced a transition to free markets and neoliberal economic structure. The import substitution model (ISI) and the debt crisis pushed the economies of Latin America to be at the mercy of Neoliberalism movement with a slogan that ‘there is no alternative (TINA). Latin American countries cut tThe ISI model of development sprang during the era of Keynesianism and Fordism in which social and class struggles were the order of the day. According to this model, high tariffs rates would enable a nation to own products more competitive as well as establish domestic industries.