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Concept and theories in political economy

Paper Type: Free Essay Subject: General Studies
Wordcount: 4082 words Published: 1st Jan 2015

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1.0 Introduction

One of the main outcomes of neo-liberalism in IPE (International political Economy) in economic reforms is Privatisation. To develop my argument, I will look at the arguments of neo-liberalism in favour of privatisation and trans-nationalisation of capital through globalisation. The idea of globalisation has grown to be one of the generally effective in socio economic development as well as raises the global cross boarder in term of social, economic and cultural.

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‘To day the terms ‘World economy’, ‘world market’ and ‘globalisation’ are commonplace, appearing in the sound bites of politicians’ (Dunn: 188). The debate of the above three vectors relate with economic competition and privatisation try to increase world interdependent and become desirable and inevitable process. Afterwards globalisation is rising attractive a controversial subject whether it can really be important in socio economic development and improve human welfare. A number of scholars in this part come across not so convincingly to provide or even concur that relation between globalisation and privatisation in terms of free competition and free trade (worldwide capital mobility) lead to economic effectiveness, welfare and democracy. To my understanding, globalisation is an important but not adequate circumstance to hasten socio economic.


The foundation of this essay is to essentially examine how aspects of globalisation with privatisation and trans-nationalisation of capital are either important desirable in socio economic improvement. The essay will begin by introducing the concepts of globalisation and will explain Neoliberals perspective on globalisation and its effects on socio economic using different readings, lectures, Journals and my individual observation concerning to the issue.

The primary part of this essay will demonstrate the neoliberal arguments in favour of privatisation and trans-nationalisation of capital and its contribution of economic o the process of accelerated economic growth and poverty reduction. Secondly, it will examine some view and criticism and or challenges associated from other perspectives for concerning arguments. Finally, I will draw a conclusion based on review findings.


The idea of globalisation is global change relate with connections of social, cultural, economic and political between actors across the globe. (Robinson: 1999). According to Todaro, globalisation is increasing integrations of national economies into expanding international markets. The above information explains that the process of globalisation try to make a global single set. Indeed Gill accepts that ‘globalisation is part of broad process of restructuring of state and civil society and political economy culture.’ He emphasizes that ‘It is ideology largely consistent with the world view and political priorities of large- scale internationally mobile forms of capital’. Mobility of resources is very crucial in development, investment and services for increasing internationally interconnection and commonly world economy. The OECD1 handbook on Economic Globalisation Indicators explained that the term ‘globalisation’ has been widely used to describe the increasing internationalisation of financial market and of markets for goods and services. In this regards the integrations of capital labour and financial services is very important for economic inter-reliance.

The Concept of neo-liberalism is a set of economic policies that have become widespread during the last two decade. Martinez 1996. Indeed

(Cerny, 2008), explained that, during 1980s ‘neo-liberalism’ was related with International Relation while 1990s focus on economic and liberalisation in International Political Economy. Thorsen agrees that ‘is used to describe a range of policies and an economic philosophy that stress international free trade, economic liberalism or capitalism and the promotion of such through deregulation privatisation and liberalisation of nation economies’. He highlights that, ‘the term neo liberalism also used to imply that is a new form of economic liberalism more commonly known as ‘capitalism’ but on global scale’. In this logic the neoliberals relate with open of trans-nationalisation of capital and liberation of enterprises and state linking the appearance of market civilisation.

Mean while, (Gill1995) agrees that ‘neoliberal macroeconomic policies, aligned to the ideology of the competition state,’ hence the competition through the privatisation is more essential and enhance global interconnection on socio economic growth.

According to sheikh (2004) neoliberals’ dominants modern globalisation. Its practices are justified by asset of theoretical claim rooted in standard economic theory. Market is represented as optimal and self regulating social structure. It is claimed that if market must be allowed to function with out restraint. Therefore, neoliberals believe that the role of government is to provide public service and markets will adjustment naturally.

Neo-liberalism perspective with globalisation reflects on international competitiveness, the policy might engage in recreation of a role in improving international economy. Hirst (2009) at el accepts that, ‘to neo-liberalism international competitiveness as the characteristic modality of international economic governance. It involves political compromise including diplomatic bargaining between countries to establish compromises on trade policy as exemplified by the GATT mechanism’. A long with this for neo-liberalism emphasis on the political bargaining is very significant the exercise of international market entrance.

2. Privatisation and Trans-nationalisation of Capital.

Before the description and explanation of the neo-liberalism arguments in favour of privatisation. I will describe in short the meaning of privatisation

In generally. According to Todaro 2009 ‘the privatisation of state owned enterprises in the production and financial sectors, hinges on orthodox hypothesis that private ownership brings greater efficiency and more rapid growth’ In addition he emphasise that ‘privatisation improves efficiency, increase outputs and lower costs to reduce public internal and external debt, and promotes individuals initiatives while rewarding entrepreneurship. In this regards states by implementing this policy leads to improve growth and increase in the rational choice for consumer and socio economic level.

Martinez (1996) agrees that ‘privatisation sell state-owned enterprises, goods and services to private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water. Although usually done in the name of greater efficiency, which is often needed, privatization has mainly had the effect of concentrating wealth even more in a few hands and making the public pay even more for its needs’. In general privatisation is very crucial on world economy yet it is increasingly becoming a debated issue whether it can improve the economy or make it is worse situation especially in developing Countries.

Related with trans-nationalisation of capital is a kind of recent capitalism connected with hegemonic tool for analysis of transitional economy. Capital transnationalisation can be transferred through different type in terms of and goods and service capital, financial capital, and productive capital. Bina (1991) agrees that there are three ways of trans-nationalisation in world economy (i) ‘Concentration and centralisation of capital both in manufacturing (industrial capital) and financial capital. (ii) The formation of finance capital and further development of credits system for expanded reproduction and the consequent internationalisation of all circuits of capital and globalisation and production through the medium of transnational cooperation (TNC’s)’. However economic labour movement and financial flow become considerable society in the age of globalisation. Labour is directly related to the reason of advanced capitalism. This requires an inspection of requirements of the political economy of today trans-nationalisation.

Cerny 2008 argue that ‘for neo-liberalism contemporary politics entails both a process of choosing between version of neo-liberalism, and the attempt to innovate creativity within the new neoliberal playing field including open trade capital flows embedded financial orthodoxy, the regulatory state, privatisation and hybrid forms of governance are the bottom line of neo-liberalism’. In theory, it offers prediction of amendment of political institutions increase of economic globalisation.

The argument of neo-liberalism paradigm base on free market and privatisation has encouraging effects in social impartiality. Moreover they believe in freedom of movement for capital commodities, it advocates the opportunity of economies and competition in the world market in situation of complete freedom. Hirst agrees that ‘economic performance measures through ‘competitiveness’. Idea of competitiveness relate with comparative advantages that is different countries lead each country will capable to acquire other product at al lower resources cost less hours.

Moreover, Makwana (2006) agrees that neoliberal’s claims that privatized services are more capable than those run by state. They consider that market competition and collaborate effectiveness can drive prices drive prices down for consumers. Furthermore, the eventual goal of neoliberal economic globalisation to eliminate of all barriers to trade and the privatisation of all accessible resources and service.

In addition, Cerny 2008. state that, ‘neo-liberalism focus on relatively dogmatic, enforced laissez-faire doctrine, it involves first of all an acceptance that we live in multilevel, more open and market like globalisation world in which informal and negotiated policy process’ prevails for neoliberals open market and globalisation is very significant for ‘neoliberal market civilisation’ (Gill 1995) which is linking social well being on broad around the world economy system.

Another explanation from (Cerny: 2008) reiterates that, neoliberal’s public policies, whether at national, regional or international level do not merely constrains but also bring opportunities. In theory, through Structural Adjustment policies allows poor to possess and be accountable for recovering their lives changes themselves relatively than the system.

As I mentioned earlier that, transformation of capital may occur in term of manufacturing and financial aspects there is empirical evidence that some of countries benefited with privatisation policy. (Calva: 2003) accepts that, ‘in Costa Rica four company privatise and reported that increasing 9 percentages of GDP in 1998′.this means that shares of GDP reduce deficit in GDP.

Another evidence which (Calva 2003) provided that increase of production in industrial sector, he highlighted that ‘Russian and Mexico is among of countries achieved in by privatisation. The above example provided, demonstrate for neoliberals ideology of privatisation had positive aspects in economic sector.

Different with neoliberals perspectives, realist theories highlighted that competitiveness and privatisation is not a solution for social well being on broad around the world. Bayliss (2005) agreed that, ‘in developing countries, privatisation, in common with the wider neo-liberal policy agenda, has failed to meet expectations. Privatisation efforts have been undermined by various factors, including weak political commitment, poor investor supply response and institutional challenges’. He emphasis that ‘since the late 1990s, the language of privatisation has softened (as, for example, ‘private sector participation’ has replaced ‘privatisation’)’.

In additional to that, realism scholar’s argues that globalisation has not succeeded to promote market economy in world market. It gears an inequality of market between North and South. Stiglitz agrees there is ‘disproportionate share of benefits, at the expense of the developing worlds.’ Therefore a consequence of this situation consequence was some poorest countries in the world turn into worse off.

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Private investment sector is useful in socio economic especially for countries that lacks of capital, including piece of equipments and expertise. Stiglitz (2006:) accepts that, for privatisation policy of world economy to ‘meet the demand for their skill labour increase, and wages of unskilled labour become higher’ he emphasized that ‘if labour moves from a country where productivity and wages are low to one where they are high, the increase in out put can be enormous and world’s economy grows.

The Marxist perspectives, argues that privatisation is related with capital accumulation. Dunn 2006 agrees that ‘private capitalist accumulate capital by making investment decisions within logic of profit maximization’. He emphasizes that privatisation in capitalist counties don’t directly interfere in investments decisions or in the market, but rather provide legitimation and order, using its power primary to guarantee external defense and internal peace consistence with the institutions of private property,’ therefore they emphasizes that globalisation serves an interest maximisation of profit inter of capital trans-nationalisation and intercontinental trade other than ideology.

For Marxist discipline, globalisation relates with expansion of capital accumulation and should be profitable the working class Hossein (2005) agrees that ‘for many Marxist in recent decades, capitalism is key its nature a globally expanding system geared to accumulation on a world scale’. To some extent Marxist believe that ideology of competition between capitalist countries facilitate currently instability for the world capitalist economy.

3.0: Critics of Globalisation, Privatisation and trans-nationalisation.

This paper has assessed the privatisation and trans-nationalisation idea of neoliberals facilitate socio economic world. Policy of privatisation to large extent the development helps to increase job creation, trade competition and rational choice for consumer. Yet it features some challenges.

As I illustrated in the beginning, trans-nationalisation of capital is kind of hegemonic capitalist system, this is more appropriate part of global political economy in capitalist production and finance. This reflects the rising domination of transnational cooperation (TNC) of having hegemonic actors (North part) in world economy. Roboson 2004 agrees that, there is ‘evidence that a transnational class is gaining hegemony over local- and national-based capitalists including the spread of TNCs, increase in foreign direct investment (FDI), cross border mergers and acquisitions, transnational interlocked directorships, and strategic alliances’. This situation changes stability of classes forces that has completed likely that attack on unions.

For neoliberals structural Adjustments policies is appropriate and its implementation but in reality the application of Shock therapy implementation of SAP in Africa and other areas resulted in increase in economic shock and other abjection results Protozos 2004 agreed that ‘over 15 years of IMF / World Bank management of Tanzania‘s economy saw its per capital GDP drop from $ 309 to $ 210 and rate of abject poverty jumped to 51 percent of the population.’ Moreover the

Implementation of SAP are forced as condition for loans, hence the repayments of loans affects budget of the developing countries.

In addition Protozons argue that ‘SAP structural Adjustment Programme are imposed renegotiating debts, and on condition that the receipts country accepts privatisation, capital market liberalisation, market based pricing and reduction in subsidies for public services such as water, food and utilities’. This has therefore resulted was disintegration of their economies and hence catastrophic for developing countries.

Competiveness of trade is myth to increase sustainable of true competitiveness. Unfortunately, this major reason that leads to divergences and differences between North and South. Hirst 2009 agrees that, ‘the emerging market economies might threaten the competitive position of the traditional developed countries of the North, which in countries is threatened by cheap goods and labour, the growth of South cheap goods and labour’ which one of aspects hinder trade competition. Indeed Curtis 2005 argues that ‘in Pakistan increasing foreign competition in fisheries a sector is edging 300,000 local fisher folk out of market’. This evaluate that private company distorted local market since local companies does not compete due to different obstacles.

Private investment sector was usual to consequence in job formation. In reality restructuring has been accompanied with retrenchments. Stiglitz (2006) accepts that, privatisation policy failed to meet commitments to world economy to ‘many development countries around the world when they liberalized so fast that the private sector did not have time to respond and create new jobs, or when interest rates were so high that the private sector could not affords to make the investments necessary to create new jobs.’ There fore unemployment rate increases in economic system.

4. Conclusion.

In conclusion this paper argues on that globalisation and privatisation and trans-nationalisation in world economy. To a great degree, privatisation helps to facilitate and improves in different sectors management job opportunities socio and economic development growth in North side rather then South side. Above of the mentioned challenges / critics and other factors may cause that implementation of globalisation and tarns-nationalisation and privatisation be uneven. Moreover, the concept of globalisation exhibits affirmative forms of thought, including economic effectiveness, wellbeing and democracy. For neo-liberalism ideology of privatisation is away cut off hegemonic power between North and South which exist, yet the process seem failed to meet its commitments. Furthermore, the elementary strategy of neoliberal is focusing on rising freedom both political and economic aspects.

The practice and performance of neoliberal ideology has been reliable every where in the world. Privatisation in developing countries is universal with the wide neoliberals strategy programme has failed to meet expectation. (Curtis 2005) accepts that, ‘In South Africa, water privatisation has meant that half of million people were cut off non payment of their water bills during of their water bills during a three month period in 2001 out break of cholera has been also been reported as families resort to drawing water pollution rivers’. In this regards, the policy move emerged in response to apparent failures in the public sector particular in Sub Sahara Africa.

Finally, I have drawn the conclusion, why neoliberal thought of globalisation through free trade policy not working? And what can be done in order to make globalisation run for more people. In my view damaged by different factors, together with weak political obligation, underprivileged investor supply response and institutional challenges. However there is tendency of TNCs exercise several strategies to reduce their declared income in developing country including transfer pricing and be liable to move most of declared profits elsewhere of the host country. On top on that, developing countries should provide sufficient data for foreign investors; hence it helps more promoted achievement.

In developing countries, privatisation can place substantial demands on an already stretched and destabilized public sector, both in terms of functioning and rule of the privatised enterprises. Therefore manufacturing sector productivity is smaller and low-income economies due, in part, to an amalgamation of hi-tech dependence

What do poor countries require to perform to reap the utmost benefit from globalisation? For my view that, developed countries should to reduce boundaries against import of African products.

Public Sectors including provision of water, education and health might be clearly excluded from privatisation.

Poor countries have to have right of entry to substantial special action to look after their frail economies from foreign competition.

Developed countries should implements the Article 66 of TRIPS2 agreement, which requires developed countries to make available incentives encouraging transfer of technology. In addition to that, industrial countries should implement well article 22, 23, and 24 Howard 2009 agrees that, article 22,23,24 allow government to protect good name of product from certain regions in their countries’, this helps developing countries to have a property of use of trade mark and geographical protection for produce a specific commodities.

Last but not least a major aspect for implementation of privatisation is political stability. Ajay 2001 argue that,’ Good governance and accountability and trustworthy and independency of national institutions’ is very crucial condition for growth.

To summarise, state should play its role well, where market failure and international developments agencies try to equalized and avoided to implements globalisation and other policies by dominants of unilaterally or us hegemony.

5. References.

  • Ajay S Ibi 2001. What African needs to do to be benefit from Globalisation?
  • Bayliss Kate 2005 Privatisation Theory and Practice: A Critical Analysis of Policy Evolution in the Development Context.
  • Bina Cyrus and Yaghmaian Behazad 1991 Post war Global Accumulation and trans-nationalisation of capital.
  • Curtis mark 2005 The WTO and developing countries right to protect
  • Dunn Chase Christopher (1999), Globalisation: World- Systems Perspectives.
  • Garcia Arnoldo and Elisabeth Martinez 1996 http://www.corp watch.org/article.php?id=376.
  • Gill Stephen Millennium Journal of International Studies http://mil.segepub.com
  • Hirst Paul and Thompson Grahame and Simon Bromly 2009 Globalisation in equation. 3rdedition.
  • OECD hand book on Economic Globalisation Indicators (2005)
  • http://unjobs.org/tags/neoliberalism.
  • Makwana Rajesh 2006. Share the world resources sustainable economics to end global poverty. http://www.stwr.org/globalisation/neoliberalism and economic globalisation.html.
  • Nicholas Howard 2009 ‘lecture Notes 1’the international trading system December 2009(The Hague ISS.)
  • OECD hand book on Economic Globalisation Indicators (2005)
  • Philip G Cerny The journal of international Trade and Diplomacy spring 2008. Embedding Neolibalism: The evolution of Hegemonic Paradigm.
  • Robison Fiona (1999), Globalizing Care, ethics, feminist theory, and International Relation.
  • Todaro. P Michael and Smith Stephen C (2009.) Economic Development 10th Edition
  • Vander Myrian Stichele, Kim Bizzarri lonard Plank. 2006 Cooperate power over EU Trade Policy. Good for business bas for the world
  • Prontzos, Peter G 2004 Collateral Damage. Human Cost of Structural Violence, in Jones (Ed) Genocide, War Crimes and the West: History and Complicity, London-New York: Zed Books, pp 315-324
  • Robison William Baltimore 2004 a theory of global capitalism Production, class state in transnational world
  1. OECD: Organisation for Economic Cooperation and development.
  2. Trips: Trade intellectual property rights


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