THE ROLE OF NEOLIBERAL GLOBALIZATION WITH DEMOCRACY: ICELANDIC ALTERNATIVES

Kimberlee Massing and Nicki Mosley September 24, 2012 SOWK 673 SO1

ERA OF NEOLIBERAL GLOBALIZATION

1983 to 2007

Three phases
1. 2. 3.

1983 to 1989 1990 to 2002 2003 to 2007

COMPLEXITY OF GLOBALIZATION
Washington Consensus vs. Post-Washington Consensus

Creates global free market

What are the benefits? Whats the best path to general prosperity and for what countries?

AIMS OF NEOLIBERAL GLOBALIZATION

To create a global free market which would bring democracy and development to the global South Free countries from the burden of a Welfare State Modernize the global South
Critique Economic globalization threatens democracy:
(1) (2)

increasing interconnectedness between nations restricts national sovereignty and democratic control over political agenda; economic globalization tends to eliminate the social correctives to the market economy.

the relationship between globalization and erosion of the basic structures of representative democracy is of different nature. Complicated policy tasks require representative institutions to find new approaches and instruments, while the linkage between the institutions and the represented social groups have been eroding due to the changing structures of society and political communication.
Beliaev , M. (2003). Democracy and Globalization: Sources of Discontent. Globalization. http://globalization.icaap.org/content/v3.1/04_beliaev.html

THE TRADEOFFS CAN BE REPRESENTED IN THE FORM OF A TRILEMMA: THE NATION-STATE SYSTEM, DEMOCRATIC POLITICS, AND FULL ECONOMIC INTEGRATION ARE MUTUALLY INCOMPATIBLE. OF THE THREE, AT MOST TWO CAN BE HAD TOGETHER

GLOBALIZATION IS COMPLEX IN NATURE!

Introduction to case study: Icelands Economic Crisis

never before in modern history has an entire financial system of a developed country collapsed so dramatically.
Nielsson, U., & Torfason, B. (2012). Icelands economic eruption and meltdown. Scandinavian Economic History Review. (60)1, 3-30.

CBC Sunday Edition: July 8, 2012

http://www.cbc.ca/thesundayedition/popupaudio.html?clipIds=2253845664 (27-29.09)

NEOLIBERALISM
Reduced government interference in the market Decentralize government Privatization of the means of production Deregulation of capital Ideology behind development and capitalism in the 1980s, 1990s, and 2000s

FOREIGN AID

Foreign aid can be a catalyst for development Aid breeds relations of dependence Providing more benefits to the donors than to the receiving country Therefore consider this

1. Is foreign aid a way for donor country to hold power over recipient country? 2. Does it continue to contribute to debt? 3. How does foreign aid impact a nations democratic responsibility?

INTERNATIONAL MONETARY FUND

Formed at Bretton Woods in 1944 Currently has 188 member countries Financed through quotas paid by member countries, based on countries size in world economy IMF a framework for international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression.

Retrieved from International Monetary Fund on 2012/09/20, https://www.imf.org/external/np/exr/facts/finfac.htm

INTERNATIONAL MONETARY FUND

When a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid from the international community. These loan conditions also serve to ensure that the country will be able to repay the Fund so that the resources can be made available to other members in need.

Retrieved from http://www.imf.org/external/np/exr/facts/conditio.htm on 2012/09/20

SO WHAT ROLE DID THE IMF PLAY IN ICELANDS RECOVERY FROM ECONOMIC COLLAPSE?

CBC Sunday Edition: July 8, 2012

http://www.cbc.ca/thesundayedition/popupaudio.html?clipIds=2253845664

(29:40-34)

THREE DIMENSIONS TO ICELANDIC RECOVERY

Defined as a political crisis 2. Went against private orthodox and did not follow traditional recommendations a) Did not bail out banks b) Took budget measures to ensure the poor were supported! 3.Followed path of true democracy and held referendum with the people
1.

Could Icelands recovery be a template for other countries?

Taxpayers

in Europe (and the United States) who have been terrorized since 2008 by government officials warning about economic armageddon, catastrophe, and pestilence should look to tiny Iceland for a taste of how little there is to fear when the experts cant save the people. Christine Lagarde, managing director of the International Monetary Fund, recently branded Icelands economic performance impressive." In the last few years the small island in the north Atlantic has managed to shrink its deficit, reduce unemployment, and allow its economy to grow. Meanwhile, on mainland Europe, there is hardly any economic growth to be seen, and countries that pledged to make necessary austerity reforms have almost certainly failed to do soWere they to examine Icelands example they might find that temporary financial collapse and monetary sovereignty provide a better roadmap to economic recovery than bailouts backed up by unpopular and unenforceable "austerity" conditions.
Feeney, M. September 7, 2012. Iceland Shows Other Europeans How to Survive Bankruptcy. Reason: Freeminds and Freemarket. http://reason.com/archives/2012/09/07/iceland-provides-a-blueprint-for-survivi

DIVERSIFICATION OF DEMOCRACY AND GLOBALIZATION

Alternative perspectivesdifferent stories!

TED Talk: Halla Tomasdottir: A feminine response to Iceland's

financial crash
http://www.ted.com/talks/lang/en/halla_tomasdottir.html (3:15-7:10)

VALUES
1.

Risk awareness Straight talking

1.

1.

Emotional capital
Profit with principals

1.

ICELANDIC OUTCOME

Iceland hasn't avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. "Things could have been a lot worse" may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph. And there's a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary. If this is a time of incredible pain and a much harsher society, that was a choice. It didn't and doesn't have to be this way.

Krugman, P. (October 28, 2011). Krugman: The road not taken. New York Times. http://www.sltrib.com/sltrib/opinion/52804741-82/iceland-austerity-doctrinespending.html.csp retrieved Sept 18, 2012.

IN SUMMARY
3 dimensions to recovery which included budgeting to support the poor Maintained democracy over the power of economic free markets We learnt of Values driven Icelandic business

Outcome: Managed to protect the poor and maintain good living standards!

REFERENCES
Beliaev , M. (2003). Democracy and Globalization: Sources of Discontent. Globalization.http://globalization.icaap.org/content/v3.1/04_beliaev.html retrieved September 18, 2012. Enright, M. (2012, July 8). Sunday Edition. Canadian Broadcasting Association. http://www.cbc.ca/thesundayedition/popupaudio.html?clipIds=2253845664 Feeney, M. (2012, September 7). Iceland Shows Other Europeans How to Survive Bankruptcy. Reason: Freeminds and Freemarket. http://reason.com/archives/2012/09/07/iceland-provides-a-blueprint-for-survivi retrieved September 21, 2012. International Monetary Fund. (2012). Factsheet. https://www.imf.org/external/np/exr/facts/finfac.htm retrieved on September 20, 2012 Krugman, P. (2011, October 28). Krugman: The road not taken. New York Times. http://www.sltrib.com/sltrib/opinion/52804741-82/iceland-austerity-doctrine-spending.html.csp retrieved September 18, 2012.

Tomasdottir, H. (lecture). (2010). A feminine response to Iceland's financial crash. TED Talks. http://www.ted.com/talks/lang/en/halla_tomasdottir.html retrieved September 18, 2012.
Veltmeyer, H. (2011). Critical development studies handbook: tools for change. Nova Scotia: Fernwood Publishing.