The Fall of Neoliberal Order and Globalization

Written by Eda Salik

Eda Salik (born in 2000) has been working as a freelance journalist and editor on Türkiye Atlas. She graduated from the Department of International Relations at Middle East Technical University (METU) in June 2024. She is continuing her education as an MSc in Asian Studies at METU. Turkish politics, International Political Economy, and East Asian Politics are among her study areas.

The Second World War’s impacts on all aspects of people’s lives were tremendous and devastating. Thanks to the implementation of the Keynesian economic model as a key element in reviving the economic capabilities of states and living standards, there was an attempt to establish a balance between the private sector’s interests and states’ control (Heywood, 2019, pp. 131-157).

From time to time, the Keynesian AS/AD model’s policies had been insufficient to answer the lack of economic order; furthermore, it had not adapted itself to the changing conditions of the new world order due to its policies. For instance, the existence of a slow legislative process based on the implementation of fiscal policy to modify taxes and government spending, questioning the state’s reliability in the economic field, and the government’s capacity to react to a crisis are some of the reasons why it became redundant and inappropriate, and replaced with neoliberal economics (Colander, 2017, pp. 587-589).

The Establishment of Neoliberal Economic Order Under the Umbrella of Globalization

Although the rise of the neoliberal economic order occurred in the 1970s, the emergence of international institutions and initial attempts to conduct global trade backed the end of World War II. At Bretton Woods, in the USA, decision-makers came together to design the post-world economic system. The International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), later called the World Bank, were established by prioritizing the process of reconstruction in Europe, the facilitation of private investments, and the spread of development to other countries. In 1947, with the General Agreement on Trade and Tariffs (GATT, replaced by the World Trade Organization), the liberalization of trade came to the stage with the assistance of this institutionalization and an economic rivalry between the West and the East (Woods, 2020, p. 444-459).

Looking at the 1970s to Analyze the Global Economic Order’s Roots

The economic crisis in the 1970s and 1980s pushed states to revise their economic model to overcome the increasing unemployment rate and high inflation. In that regard, decision-makers applied to the implementation of neoliberal economic policies. Restricting the states’ expenditures and their control and supporting the globalization of economics through the assistance of international institutions questioned the new position of states in a global world with the Non-State Actors and Transnational Advocacy Networks gaining power (Scholte, 2020, p. 450-464).

In the 2008 economic recession, the outcomes from the heavy limitation of the state’s capacity to examine economic relations proved individuals’ unreliability and the necessity of a checking mechanism.

Is Neoliberalism the Absolute Method to Develop?

(Case Study: Asian Financial Crisis)

The studies of International Political Economy based on American thought have discussed neoliberal economic policies as the only way to achieve development. On the other hand, the adaptation of the neoliberal economic order through the assistance of neoliberal institutions under the USA’s intense press led to the eruption of the Asian Financial Crisis in 1997. That crisis began in Thailand and spread in Asia quickly. The IMF defined this economic breakdown as a currency meltdown (Woods, 2020, p. 444-459).

At the center of criticisms regarding that financial clash, the pressures from the IMF and US Treasury Department and the desire of Asian technocrats to benefit from increased foreign investments have been blamed for their devastating influence on the emergence of overinvestment. As a result, Japanese stagnation in the 1990s challenged Japanese colonization and the concept of the developmental state in the region (Bello, 2009, pp. 194-199).

Understanding The Fall of Neoliberal Order

Discussions on the future of globalization have emerged with international terrorism since the 9/11 terrorist attacks questioned border security and migration. Another key stage in redesigning neoliberalism was the 2008 economic recession. The American government prevented American banks’ bankruptcy; as a result, the insufficient control mechanism in the neoliberal economic system challenged the interests of the private sector.

Furthermore, the Arap Uprisings and the Syrian civil war pushed the European Union to adopt the securitization of migration. With the impact of ISIS’s terrorism in the continent, prioritizing anti-migration and cross-border security over the EU’s values has questioned the movement of people in a globalized environment (Cox, 2005, 131-157).

After the pandemic years’ outcomes in economic and social life, the eruption of the Russia- Ukraine war shifted the security concerns’ position as a survival issue. Since Donald Trump reelected as the President of the U.S.A., the rule-based system has been in danger. The rise of nation-states and far-right populism has been challenging globalization through complex power politics.

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Henry, J. F. (2010). The Historic Roots of the Neoliberal Program. Journal of Economic
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Heywood, A. (2019). Political ideologies. In Politics (5th ed., pp. 131–157). Red Globe Press.
Scholte, J. A. (2020). Global trade and finance. In J. Baylis, P. Owens, & S. Smith (Eds.), The globalization of world politics: An introduction to international relations (8th ed., pp. 450–464). Oxford University Press.
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