End of the Cold War, neoliberalism, and globalization

The post WWII period witnessed the emergence of a Socialist Bloc, the so called Second World, and free former colonies that together constituted the Third World along with the former colonial powers or the “Free World” known as the First World. The end of WWII gave birth to a new struggle for supremacy between the “Free World” and the Socialist Bloc led by the USA and the USSR, respectively. This conflict was named the “Cold War” and both the USA and USSR tried to win their allies in the Third World, engaging in low-intensity local conflicts, coup d’etats, and localized wars through their proxies. This conflict ended with the collapse of Soviet Union in 1992 following the fall of Berlin Wall in 1989. The end of the Cold War did not result in the peace dividend that was expected by the global community. During the post WWII years, an explosion of knowledge took place as the global economy rapidly moved from the first industrial revolution to the fourth industrial revolution. Beginning in the 1980s, the gains made under the New Deal were reversed under neoliberalism (Mann 2020; Bockman 2013). The effectiveness of state for promoting common welfare compared to the “free market” was questioned (Brosio 2008). There was continuation of perpetual tension between the state and the market whereby the business class desired the engagement of the state to protect its interests and uphold freedom of the market from the state when its own interests were challenged (Frieden 2012).

Neoliberalism closely resembles Gore Vidal’s eloquent statement on the American system that it is more like “socialism” for the rich and “free enterprise” for the poor (Vidal 2005). The system which was governed by the Bretton Woods institutions got fractured when the value of the dollar was delinked from gold in 1971 due to increased international financial flows and speculative pressure on dollar and other currencies. This led to introduction of flexible exchange rates instead of fixed exchange rates. Increased flows of international finance and a burst of borrowing by the least developed countries (LDCs) led to a debt crisis of unprecedented proportions. The economic shock caused due to the oil price increase by the Organization of Petroleum Exporting Countries (OPEC) led to a simultaneous high rate of inflation and unemployment known as stagflation. During these crises, advanced capitalist economies returned to greater market rule, deregulation, privatization of public enterprises, and tax reforms although the United States followed the “anomaly” of deficit financing to deal with the crisis during this period (Christianto 2018).

The debt and oil crises and the shortcomings of import substitution strategies in less developed economies led to the greater openness of the world economy. The collapse of centrally planned economies removed the remaining barriers standing in the way of the globalization of the world economy. This was followed by the emergence of regional economic blocks. Capitalism now became global and the globe became capitalist. However, neoliberalism has eroded states’ authority and ability to regulate their own atfairs, while globalization has not ended capitalism’s existential problem of recurrent periodic crises hence the need for recurrent state intervention. Neoliberalism, according to some thinkers, is less about stateless markets and more about a market world protected from demands of mass justice and redistributive equality (Iber 2018). Recurring financial and currency crises are the price of open financial markets.

Capitalism has been in perpetual motion from its beginning. While free markets and democracy have held centre stage, the structure, practices, policies, and ideological representation of capitalism have kept changing. Contrary to market orthodoxy, the capitalist system has to be managed both by the invisible hand of the market and the visible hand of the state (Scott 2006; Chavance 2003; Коска 2010). The questions now staring in the face of global capitalism are about making a choice between a predatory or a pluralist economy, and dealing with the issues of deindustrialization, degrowth, and re-appropriation of the commons as an alternative to glaring inequalities and climate change (Frieden 2012). The neoliberal order has been a political success and an economic failure (Kuttner 2019, Rodrigues & Kuttner, 2019). Contrary to the promises made by the political class that lower tax rates and financialization guaranteed under the neoliberal order would lead to high rates of growth and high standard of living, advanced capitalist economies suffered from deindustrialization, polarization, and a shrinking middle class (Stiglitz 2019).

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