Implications of Faith in Markets for International Trade and Human Security

Critically discuss the liberal market economy model and its implications for international business, and human security.

Since the period beginning 1995, when the UN set a target of poverty reduction by 50% so as to lift people from absolute poverty by 2015, the liberal market economy model has come to be applied in many parts of the world (Thomas, 2001). The outcome of poverty reduction was sought to be achieved through a reimagined redistributive mechanism, which put faith in the markets rather than the state and this was promoted by global governance institutions (Thomas, 2001). This essay critically discusses what the implications of this faith in markets has for international trade and human security.

Human security is defined in terms different from security of individual so that the concept of human security relates to a condition of existence where basic material needs are met and where human dignity is realised (Thomas, 2001). At the very least, human security would mean that members of the community are able to have a meaningful participation in community life and also have access to means of attaining their basic material needs (Thomas, 2001).

In the context of human security, one argument made in favour of free market economy model is that it engenders social and economic conditions that are conducive to prevention of war and other forms of violence that disturbs peace in the society (Tadjbakhsh & Chenoy, 2007). Examples of societies in the west, that have witnessed long periods of peace and security are given to support the argument that the combination of democracy and neo-liberal economics works to create more stable and peaceful societies. In a specific example of Sierra Leone, one research study critically explores whether the market-driven reforms in Sierra Leone after the civil conflict in 2002 were able to achieve the goal of human security (Conteh, 2014). In Sierra Leone, these reforms were imposed by the World Bank and IMF and were primarily in the nature of privatisation and decentralization particularly in the fields of education and health system and to some extent it is reported that the effects of the free market approach has been to empower local communities and increase participation of people in education and health care systems (Conteh, 2014).

In the context of economic growth itself, research suggests that there is no major difference in the economic growth of the democratic regimes and democratic regimes. Because the studies of democracies like the United States and the United Kingdom and the autocratic regimes like the Soviet Union show that in the period between 1950 and 1990 there was no major difference between these countries’ economic growth (Dellepiane-Avellaneda, 2009). This is in consonance with the Barro study that demonstrated that while economic growth has been seen to be strengthened by the maintenance of the rule of law and free markets in the initial period of real per-capita GDP and then becomes relatively weak after constancy of the GDP is achieved (Barro, 1996). In other words, the argument that growth can be achieved through free market only is not a strong argument.

However, in the context of international trade, there can be an argument that free markets improve international trade. The Washington Consensus, which was based on neoclassical theories and is based on reduction of protectionism and opening of borders to international trade (Norris, 2012). Free markets are able to generate better international trade results because through free markets, nations can attract investment capital, allow competitive exchange rates and deregulate the economy (Norris, 2012). Furthermore, the successes of the liberal market economy are also related to the development of robust banking systems and capital markets (Johnson & Turner, 2010). International trade can be fostered in an environment where integration of financial markets take place, and this has happened in the global economy after the development of liberal market economy and the global financial institutions that have encouraged this system (Johnson & Turner, 2010). Indeed, even with countries that have stronger government controls in the market, such as China, have taken advantage of the free market economy in the other parts of the world to become important manufacturing hubs (Luo, et al., 2010). In China, there has been large scale outward foreign direct investment (OFDI) and this is also made possible by the development of the liberal market economy which makes it easier for businesses to invest in foreign companies and businesses.

To conclude, the development of liberal market economy can be said to have mixed outcomes in terms of human security and international business. While human security and international business have improved, there is no evidence to suggest that national economy improves due to free market model.

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Bibliography

Barro, R. J., 1996. Democracy and growth. Journal of Economic Growth , 1 (1), p. 1–27.

Conteh, A. A., 2014. A critical evaluation of the effects of neo-liberal (market-driven) reforms in achieving the goal of human security in Sierra Leone. Brunel: Brunel University.

Dellepiane-Avellaneda, S., 2009. Review article: Good governance, institutions and economic development: Beyond the conventional wisdom. British Journal of Political Science, Volume 40 , pp. 195-224 .

Johnson, D. & Turner, C., 2010. International business: Themes and issues in the modern global economy. s.l.:Routledge.

Luo, Y., Xue, Q. & Han, B., 2010. How emerging market governments promote outward FDI: Experience from China. Journal of world business , 45(1), pp. 68-79.

Norris, P., 2012. Making democratic governance work: How regimes shape prosperity, welfare, and peace. s.l.:Cambridge University Press.

Tadjbakhsh, S. & Chenoy, A., 2007. Human security: Concepts and implications (Vol. 51). Routledge.

Thomas, C., 2001. Global governance, development and human security: exploring the links. Third World Quarterly, 22(2), pp. 159-175.