Neoliberal Globalization:Transformation And Development Essay

1081 words - 5 pages

In the era of neoliberal globalization, states have more interconnectedness and interdependence with each other for the global economy to prosper. Meanwhile, Significant changes have occurred in the nature of international trade and commodity production for the past decades. These changes also lead to new geographic, social, and political divisions of labor worldwide. Moreover, social and political consequences of these transformations have begun to take effects on a global scale. In this essay I am going to explain such transformations and illustrate the ideas above.
Neoliberalism, though considered by some people as equivalent to globalization, is more like a terminology of economics. ...view middle of the document...

As a consequence, the nature of international trade also has changed: it is no longer only raw material or finished products that are traded, but also vast amount of intermediate products, because entrepreneurs realize that due to low costs of transportation, they can actually choose the places where certain components of a final product shall be produced. Therefore, the change in nature of international trade has also led to the change in commodity production.
Once in the Fordism era, products were manufactured on the assembly line in the same factory. Nowadays, however, the “assembly line” has extended to the entire globe. Through vertical or horizontal integration, companies have made transnational production possible. Previously simple commodity chains (raw material – components – assembly line – sales – consumption -- disposal) have become much more complicated now. Commodity chains nowadays vary from “in-house” production (one company producing all) to marketized production (outsourcing different components to different companies with different advantages so as to reach maximized efficiency). It is clear that whichever form is applied, the process of production, distribution, consumption has become much quicker, more efficient, more globally integrated, since global manufacturing has intensified the competitions.
With growth in transnational production, Transnational Corporations (TNCs) evolve rapidly. It was Multinational Corporation previously, which mostly refers to vertically integrated companies. However, purely vertically integrated companies become increasingly rare now, and even companies like Boeing and IBM that used to be vertically integrated companies have started outsourcing. For the purpose of market access and sourcing efficiency, Transnational Corporations affect the world economy by foreign direct investment, or outsourcing, providing lots of job opportunities and capital flows in the global market. In particular, foreign direct investment (FDI) has increased greatly during the past century. It should be noted that Asian countries also begin to participate in the process of FDI, so nowadays FDI is no longer a game between developed countries.
Developments of world economy and specifically TNCs have also resulted in changes in geographical, social, and political divisions of labor. Because the commodity chains usually involve multiple countries, division of labor tends to go beyond borders. Hence there has been international geographical division of labor, rather than geographical division of labor within the state. Class division of labor transfers from the difference between poor and rich...

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