CUNY Academic Commons

In Path Persistence, Isabella Weber explains how the neoclassical “convergence theory” has not born out empirically in the development of global capitalism; rather, a pattern of “path-dependence” is more likely to explain the development, or lack thereof, of a country. The former would have us believe that unimpeded movement of capital across national borders will enable the specialization of national markets and subsequent development of national industries. Instead, the author’s research has shown that a country’s ability to develop industry beyond the cultivation of agricultural commodities is correlated with whether or not that country was industrializing at the beginning of the modern expansion of capitalism at the beginning of the 20th century. 

This is honestly not surprising, given the history of the IMF and World Bank in forcing “developing” countries to bend to advance of liberal democracy. Any notion of development of national industry that would enable diversification of exports, through the use of tariffs, or nationalization of industries, including what we think of as “utilities” in the United States, has been challenged by international financial institutions. Essentially, underdeveloped countries need foreign currency, or historically Dollars, Pounds, Francs, to purchase industrial production goods from “developed” countries. To get foreign currency, they have to sell raw materials, at a bargain price, to industrialized countries, i.e the global north, imperial core, whatever you want to call it. Following WW1, the United States was in a prime seat to lend dollars to Europe, just for them to spend it back into the US economy by purchasing capital goods. Following WW2, the newly industrialized USSR was also in a position to sell capital goods to the underdeveloped world, hence the Cold War.

The Economic Mythology of Neoliberalism appears to be a critique of neoliberalism, which advocates unrestricted global trade as a solution to global poverty and economic development. It presents the Neoliberal theory that free markets are optimal and self-regulating, and they can efficiently fulfill economic needs and create full employment if allowed to function without restraint. It also points out that Neoliberalism attributes poverty, unemployment, and economic crises to constraints placed on markets by factors like labor unions, government intervention, and cultural and historical practices. The text also mentions that proponents of neoliberalism argue that expanding global markets is the key to alleviating poverty worldwide. This argument has been shown as flawed, yet neoliberalism continues to hold significant influence in social sciences, popular understanding, and policy circles. Neoliberalism keeps suggesting that, with the help of international institutions, competition can be extended globally, and free trade will eventually deliver its promised benefits. Shaikh’s challenge to the economic mythology of neoliberalism is fascinating, the emphasis of the flawed assumptions that international trade leads to global development and poverty alleviation, and that instead a more comprehensive social agenda is needed to address the complex issues of global inequality and economic development.

Stephanie Luce, “What’s the Deal with Tariffs?” is a critical perspective on Trump’s approach to tariffs and trade, suggesting that while some of his policies may resonate with workers and address certain concerns, they may not comprehensively address the broader issues affecting the American workforce and the global economy. It raises doubts about the effectiveness of tariffs alone in saving jobs and calls for a more comprehensive and internationalist approach to economic development and worker well-being. The passage questions whether Trump is genuinely focused on worker rights or whether his push for tariffs and improved labor terms in trade deals is primarily driven by political considerations. The passage highlights that the promised large infrastructure programs to create jobs have not materialized and highlights the idea that tariffs need to be accompanied by domestic investment. Tariffs also do not address unregulated cross-border financial flows and the erosion of environmental and labor protections.

Neoliberal theory is built on unconfronted assumptions, many of which Anwar Shaikh is able to draw out. There is the assumption that countries will always have competitive industries, the assumption that there will be job-creation to offset job-loss, and most fundamentally, the assumption that weaker countries will benefit from international markets even though weaker businesses do not win within domestic markets.

Although the theory of neoliberalism emerged in the 1980’s, what Isabella Weber calls the start of the second era of globalization, the better-position of rich countries began a century earlier in the first era of globalization.

In this era, better positioning was created through the export of manufactured goods from industrial nations, and the cheap export of raw materials from developing nations controlled by colonial powers.

It appears then that neoliberalism is not a way to level off the imbalance of jobs, technology, and raw materials throughout the international market among different nations, bur rather it is a way to maintain a better economic positioning by earlier industrial nations, and to strengthen their stance against and control over weaker nations.

Shaikh demonstrates that market-surplus leads to more available credit and lower interest rates, and market-deficit leads to tighter credit and higher interest rates—this sets the stage for poor countries to become persistent debtors and for rich countries to become their lenders, a powerful and controlling position to be in.

Stephanie Luce adds to the idea that neoliberalism maintains the power of rich countries by showing how tariffs have been used by the early industrial nations to protect and grow their infant industries, but how the same protection was withheld from developing nations during the second era of globalization. Further, tariffs become used politically rather than economically.

It appears, then, that the colonial-imperialism of Weber’s first era of globalization becomes a neoliberal-imperialism within the second era of globalization. Both are forms of power to subjugate and control one group to another. Whereas colonialism was bound by national borders, neoliberalism binds itself to class structure.

In Anwar Shaikh’s, “The Economic Mythology of Neoliberalism,”  the author criticizes the economic principles and policies associated with neoliberalism. Shaikh’s essay critiques the economic myths associated with the theory of neoliberalism, emphasizing that these myths often do not align with the realities of economic and social outcomes, which we can see depicted in the real world economy in the US today. Shaikh argues for a more balanced approach to economic policy that considers the complexities of the real world.

In Stephanie Luce’s, “What’s the Deal with Tariffs?”, the author discusses the concept of tariffs and their implications. Luce begins by explaining what tariffs are and how tariffs are used in international trade which was very informative. Luce expresses concern about the potential for tariffs to escalate into trade wars. When countries impose tariffs on each other’s goods, it can lead to retaliatory measures and disrupt global trade.

In Isabella Weber’s, “Path Persistence”, the author discusses the two periods of globalization and presents a comparison of important factors in both, including countries productivity. The author makes a comparison between the type of slavery that existed in both periods of globalization and its impact/relationship with capitalism.

• This reply was modified 6 days, 18 hours ago by Rebecca Ramnarine.
• This reply was modified 6 days, 18 hours ago by Rebecca Ramnarine.

This week’s readings present three different but complementary angles of the development of the global economy. Weber compares what she defines as the two periods of globalization to show the correlation between highly developed economies in the colonial era with the continued dominance of these nations in the post-industrial age. Luce explains how tariffs, now anathema to neoliberal free trade, were policies once used by European and North American countries as a tool for economic development. And Shaikh argues against neoclassical and neoliberal theories of free trade – that market competition does not regulate itself and instead is the cause of global poverty.

These arguments all complement one another. Luce points out that the export and sale of raw materials has a lower profit margin than the export and sale of manufactured goods. A country with diverse productive capabilities is able to diversify its exports, growing its economy, and its productive capabilities increase exponentially. Economic complexity today is a result of historical productive capabilities and how countries have been situated in the global economy, and other commonly referenced drivers like economic liberalization, human capital, and the quality of institutions (i.e. strong property rights and liberal representative democracy) are less important. Neoclassical and neoliberal economists alike embrace competition, which definitionally requires the elimination of weaker firms (often those with higher costs,) but refuse to acknowledge the ill effects of this market function.

Shaikh also illustrates how the theory of real competition explains the cumulative effect of colonizer/developed nations’ continued domination over the global economy. A trade surplus in a nation creates a greater availability of credit, which pushes down interest rates. Profit-seeking capital is attracted by the low interest rates, which creates further investment in a nation with a trade surplus, while capital avoids nations with a trade deficit and high interest rates. The surplus country becomes a lender in the global economy, while the deficit country becomes a debtor.

This weeks readings highlighted the fact that any economic development whether for an individual or a country is a complicated subject and comes at a cost. It is a fact that we live in a world which is characterised by enormous wealth and widespread poverty for both individuals and countries.

Hence, in order to achieve the so-call win, we need to create a platform where the individual or the country is expending less than they take in. For example, Dr. Stephanie Luce in her article, “What’s the deal with Tariffs?”, pointed out what is known as the concept of socially-necessary labor time, or the average amount of labor time needed for a worker to produce a good for exchange. Should the worker spend more time manufacturing a product where their return is less? Common sense would say no.

Should countries striving to achieve more productive capabilities in the world market pay attention to their export and import as it relates to their prosperity? Isabella Weber in the article, Path Persistence pointed out that “the more productive capabilities a country has, the more things it can produce competitively and hence the more diverse its exports.”

All three articles points to the fact that in order to address the widespread disparities between the ‘have’ and the ‘have nots’, whether it be an individual or a country, we must exercise what Shaikh in Neoliberalism stated we needed to collectively do, ‘the object should not be to level the playing field, but to bring up the levels of the disadvantaged players.’

How else can we achieve the improvement of these players up the economic ladder? Competition via a free market or no free market?

I really liked the article written by Stephanie Luce on tariffs and free trade. I have had this idea that policies like the North American Free Trade Agreement (NAFTA) were bad because they were often talked about in articles I have read before that discuss the period of neoliberalism in the US and ways in which working-class power has been undermined. However, I never understood much about how free trade policy worked. It seems like free trade is another policy that uses deceiving and virtuous-sounding language to appear fair when in reality it creates barriers and specifications to trade, to benefit the business class, rather than reducing them.

The large variation in tariffs on products that are super similar to each other is telling. However, beyond this, free trade can be used to stop countries from developing their own industries, thus making them more reliant on American products. This undercuts foreign workers, and in the case of Mexico, American free trade policies limited the options of Mexican agricultural workers to the point that they were incentivized to immigrate to America. This is an interesting dynamic to me because the article talks about how tariffs and free trade agreements are often policies that politicians use to drum up support from domestic workers who were severely affected by job insecurity due to the rise of globalization, immigration, and the offshoring of jobs, especially autoworkers. But seeing as these agreements do not seem to be bringing many domestic jobs, it is interesting to see how some domestic workers are being misled into supporting very similar policies to the ones that put them in a desperate financial position in the first place.