CHAPTER 1

INTERPRETATIONS OF GLOBALISATION

Globalisation, either as a concept or a phenomenon, has not yet been precisely defined. It appears differently in neoliberalism, neo-Marxism and Giddens’ ‘Third Way’. The differences arise from the different foci of the theories and evolve with these theories development. For the purpose of analysis, a definition of globalisation is given in this chapter. This analysis requires an understanding of the different interpretations on globalisation by the three theories. In order to better understand the basic principles embedded in neoliberalism, this chapter also investigates the role of world institutions and the state.

A SURVEY OF NEOLIBERALISM, NEO-MARXISM AND GIDDENS’ THIRD WAY

Neoliberalism Neoliberalism has prevailed around the globe for over two decades. Historically speaking, neoliberalism was at its peak during the period of trans-Atlantic cooperation between then American President Ronald Reagan and then British Prime Minister Margaret Thatcher in the 1980s (and pre-eminent in New Zealand under Finance Ministers Roger Douglas in the mid- to late-1980s and Ruth Richardson in the early 1990s). It is still influential, indeed prevalent, even though it has lost some of its dominance since the 1990s because of growing awareness of, and resistance to, its negative consequences, such as widening the divide between rich and poor nations and rich and poor within nations, and curtaining ecological consciousness. The WB, the IMF, the WTO, the Asia Development Bank (ADB), the OECD, the General Agreement on Tariffs and Trade (GATT) and the GATS have promoted neoliberal policies like privatisation, free trade, lowering labour costs and shrinking public expenditure (Peters, 2001b; Bourdieu, 1998; MRTA, 2000). Neoliberalism refers to a new form of liberalism, which could be regarded as both an ideology and a strategy. It is often associated with ‘Reaganomics’, ‘Thatcherism’, ‘Rogernomics’, so-called ‘Ruthanasia’, ‘supply-side economics’, ‘monetarism’, ‘new classical economics’, and ‘structural adjustment’. In the ideology of neoliberalism, the market is of vital importance and should be respected. All economic actors, including government and individuals, should follow the invisible hand or magic wand of the market. Besides those other aspects of neoliberal policies stated above, the strategy of neoliberal economics covers higher profits, free capital mobility and the speedy commodification of nature (Zapatista, 1999; Olssen, 2000). However, Paul Treanor (2003) points out that

1 CHAPTER 1 neoliberalism, contrary to liberalism, does not restrict itself to economics but has an underpinning social, moral, political and cultural philosophy. Neoliberals do not deny ‘market failure’ but are optimistic about what markets can achieve and are swift to claim that ‘government failure’ undermines policies that try to correct ‘market failure’. As neoliberalism also represents the prevalent way of thinking about government and individuals in the Western world at present, its profound influence and importance cannot be overlooked. Moreover, its principal tenets have been translated to other parts of the world. Hence, it should be a major focus of discussion in research on globalisation, including research on HE, since it has had a deep impact on HE policies and HEIs’ management (Olssen, 2000). The foundation of neoliberalism was first laid by Friedrich von Hayek (1899-1992). He presented the three principal arguments. The first argument is that the market is “the result of human actions over many generations” instead of “the result of human design”, indicating that the markets develop naturally (Peters, 2001a, p. 14). The second is that knowledge is restricted in nature, resulting, for example, in the impossibility of coordination in the spreading of information about supply and demand among large numbers of consumers and producers. The last represents the major element of Hayek’s liberalism: “methodological individualism; homo economicus, based on assumptions of individuality, rationality, and self-interest; and the doctrine of spontaneous order” (ibid). These three principles were disseminated by the Chicago School, where Hayek moved to from Austria in the 1950s. Hayek’s theory shares many of the main ideas of neoliberalism as embodied in Human Capital Theory (HCT), Public Choice Theory (PCT), Transaction Cost Economy (TCE), Agency Theory (AT) and the different forms of Managerialism which evolved between the 1940s and 1960s (Olssen, 2000; Olssen & Morris Matthews, 1995). Neoliberalism started to peak in the 1980s, when Reagan and Thatcher applied Hayek’s political and economic philosophy to justify policies aimed at removing bulky and cumbersome government structures, and reshape the rigid welfare state. They formulated and implemented a policy mixture based on free trade and an open economy. The policies and strategies indicated an emerging economic liberalisation and rationalisation, which had a strong bearing on the ‘Washington Consensus’ formulated to adapt national economies to the global economy that emerged in the last two decades. From the 1980s, there has clearly been a weakening of the post-war Keynesian (fiscally interventionist) welfare state in Western countries and collapse of European and Russian communism as typified by the breakdown of the Soviet Union and the fall of the Berlin Wall. At the same time there has been speedy worldwide application and progress of advanced information and communications technologies (Peters, 2001a). This situation has led to a further protection and increase of capitalist profits by taking advantage of the weak status of workers and developing countries. The principal theoretical elements of neoliberalism that replaced Keynesian economics are:

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