Economic globalization has been accelerated from the shift f

Economic globalization has been accelerated from the shift from \"Keynesian\" policies to \"Neo-Liberal\" policies (sometimes called the \"Washington Consensus\"). Explain the differences between the two perspectives and in your response, please comment on the strengths and weaknesses of each approach. Is there a cause for concern for the global move toward neo-liberal economic policies?

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Solution

Keynesian policies or perspectives on economic globalization is that every nation must be self-sufficient. In other words, less dependency on other countries by encouraging self reliance and protectionism results in economies not being affected by policy changes in other economies it is linked with as a result of economic globalization. Keynesian economics lies more towards government influence in economic activities in order to maintain balance. In the context of international economics, a economist from the Keynesian school of thought would be of the opinion that goods are best produced at the home country than getting them through trade with other countries. Economic self sufficiency is preferable to economic interconnectedness according to the Keynesian school of thought.

Neo liberalism:- It is concerned with increased role of private sector, promotion of free trade, deregulations and cutting of tariffs and taxes. With respect to economic globalization, a neo-liberalist is a proponent of free trade and economic interconnectedness. The idea is that it encourages specialization and provides competitive advantage to nations depending on their factor endowments. Neoliberalism encourages foreign direct investment and free trade practices aimed to increase efficiency and poverty reduction through more jobs, industrialization etc through globalization.

Pros of Keynesian policies:

Cons of Keynesian policies:

Pros of Neo-liberalism:

Cons of Neo liberalism:

The global move toward neo-liberal economic policies are not a cause for concern as trade only enhances economic activity and its growth. It is almost impossible for a nation to exist on its own without any trade activities as resources are limited. Globalization by means of free trade policies and/or trade agreements with certain conditions are necessary for growth of all nations in the long run. A narrow defensive approach to economic policies with respect to globalization would only result in losses for the state in the long run.