From Keynesianist to Neoliberal Monetarist Policy

1. From Keynesianist to Neoliberal Monetarist Policy Deconstructing the Ideological Underpinnings of Globalization

2. What Policies Allowed For Neoliberalism to Take Root in the West?

3. What is Hegemony? • Term coined by Italian Antonio Gramsci, who wrote The Prison Notebooks while a political prisoner in fascist Italy. • Hegemony examines capitalist appropriation of power as underpinned by • A. the combination of moral, political and cultural values to achieve ideological consensus • B. Consensus can be achieved via two means • 1. Consent: intellectual moral inducement (i.e. the media) • 2. Coercion: direct force or threat of using violent means

4. Creation of Neoliberal Hegemonic State (1970 – 1990) • 1974 campaign finance law allowed Political Action Committees (PACS) to operate without oversight in financing political contributions • PACs increase from 89 in 1974 to 1,467 in 1982 • PACs, largely represent corporate, moneyed and professional association interests that support candidates across both parties, but Republicans largely serve their class interests. • To gain political traction, Republican Party sought alliance with Christian right and fueled fear of civil rights legislation as a vehicle to reinforce white cultural nationalism.

5. Policies Under Reagan • Due to 1979 Volcker Shock rates of interest in US increased, preventing access to capital for public sector, but private investment encouraged for profitable returns for banks through FDI abroad. • Lack of access to capital creates a recession of US economy and high unemployment rate. • To resolve crisis, Reagan devalues the dollar (1985 Plaza Accord) in relation to the Japanese Yen and German Mark. Increased inflows of foreign currency decreases interest rates, allowing for greater spending. • Japan & Germany absorb US exports, but local industries suffer and results in transporting the US recession abroad (account deficit).

6. Impacts of Reagan Policies • Opposed organized labor: fired 11,000 air traffic controllers protesting poor working conditions. • Excess military spending (i.e. “Star Wars Program”) increases Federal deficit and provides excuse to gut social programs. • Accumulated capital by corporate interests (profits in collection of foreign debts), and state opposition to unionized labor, provide “opening” for capital to transport intensive manufacturing industries to go abroad.

7. Summary: Neoliberalism’s Impacts in the US • Relocation of industrial production abroad (deindustrialization). • Erosion of state regulations on expanded movement of financial flows.

8. Ongoing Contradictions to Neoliberal State • Despite claims of “small government”, neoliberalism relies heavily on state power. • Promotes elimination of borders to trade in commodities and finance, but reinforcement of borders to labor migration. • Utilizes state power to promote “supply side economics” that privilege wealthy through adjustments in: • Tax Relief on Income • Tax Relief on Capital Gains (investments in stock market) • Use of public funds to secure risks by private investment.

9. Global Neoliberal State The General Agreement on Tariffs and Trade (GATT) & the World Trade Organization (WTO)

10. General Agreement on Trade & Tariffs (GATT) • GATT created in 1944, and created to govern global trade in industrial and manufactured goods. • GATT provided flexible dispute settlement system that recognized “special and differential status” of Third World. • Permitted industrializing countries to negotiate lower tariffs for their products entering developed country markets than those imposed on developed country imports. • Provided permanent legal basis for a general system of preferences to jump-start exports from developing countries

11. Organized Opposition by Global South in 1970s • UN Conference on Trade and Development (UNCTAD) pushed for price stabilization of commodities. • UNCTAD proposed scheme of • Preferential tariffs to allow Third World manufactures to enter First World markets at lower tariff rates. • Protectionist trade policy as mechanism for industrialization • Speed transfer of technology to the South • Special Session of UN General Assembly adopted this program in drafting New International Economic Order (NIEO) of 1974.

12. Rollback of UN Development System • US contributes 20 to 25% of UN budget. • Threat of US withdrawal of financial support pressured UN to silence NIEO rhetoric in key UN institutions. • In 1979, UNCTAD V negotiations in Belgrade, the North refused the South’s program of debt cancelation to revive Third World Economies. • Abolished UN Center on Transnational Corporations • In 1992, UNCTAD VIII, held in Cartagena, Northern countries opposed all linkages with UNCTAD discussions.

13. World Trade Organization (WTO) • Following multilateral negotiations (1986-1994) dominated by power nation-states (US, Canada, EU, and Japan) and corporations (computer tech firms, pharmaceuticals, and agribusiness) resulted in revising GATT to what is now known as the World Trade Organization (WTO). • Fundamental change includes the inclusion of Trade-Related Intellectual Property Rights (TRIPs) and Trade-Related Investment Measures(TRIMs) Agreement. • WTO is a dispute-resolution mechanism serves American interest to eliminate trade barriers.