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Introduction

Neoliberalism is bad for business because it creates situations in which the very issues it was supposed to eradicate are instituted back into the economy or the enterprise under consideration. The essay shall examine the validity of this statement with regard to some specific examples in the market today.

How neoliberal polices destroy favourable conditions for business investment

Neoliberalism is a recent form of economic liberalism. It advocates for free markets and free trade with less control by less centralisation of economic institutions. However, one must not confuse the definition of Neoliberalism with free market economies or with free trade. Neoliberalism is a philosophy in itself. It is driven by the need to expand and intensify market transactions in all possible ways. The overall target for Neoliberalism is to reach a level where every single interaction between people is a market transaction. This means that neo-liberalism aims at increasing the frequency with which market transactions occur, the extent of formalisation of those transactions and their repeatability. It should be noted at this point that neo – liberalists’ ultimate goals can never be attained. (Barr, 2000)

Numerous countries have instituted neo – liberalist policies such as Ireland, Japan and Chile. Many economists argue that the reason behind these countries’ economic booms is neoliberal policies. One cannot deny that certain aspects of Neoliberalism have caused short term benefits to those countries. However, there are certain issues that make neo-liberalism a failed concept. (Foried, 2001)

Neo liberalism impedes business because it is driven by the need to constantly expand markets. This means that neo-liberalists attempt to utilise all the resources at their disposal to further market sizes. One of the resources at their disposal is time. Neo – liberalists believe that enterprises should be open for twenty four hours a day and anything less than that would be unsatisfactory. Such a point of view can bring about problems because it does not reflect the human nature of business. This goal is over-ambitious and cannot attain optimal productivity. In twenty four hour economies, it is common to find that workers operate below their optimal levels because they are stretched beyond the limit. This goal does not consider the humanistic aspect of labour and is thus unrealistic. (Thomas, 2000)

Neoliberalists’ policies make a radical shift from classical liberalism owing to the fact that property is not an important aspect in the former as it was in the latter. Entrepreneurs in neoliberal economies can engage in transactions without any fixed assets as long as they posses a contract and other means of production. This can be detrimental to a country as it can be seen in the Unite states. While the US may not be fully neo-liberal, a large section of their industries embrace this philosophy and one such example is in the real estate sector. This sector has caused a crisis in the US economy owing to neoliberal decisions made within the mortgage sector. Many mortgage companies agreed to lend to borrowers without having their own fixed assets and this eventually led to the credit crunch plaguing the country today. If mortgage lenders had not adhered to neo-liberal principles by lending more than they had in the form of fixed assets, then the US’s economy might not be in the current situation. (Van Parijs, 2002)

Neoliberalist ideas advocate for frequency of contract. Consequently, any employer must always look for ways of maximising their existing contracts. This means that that contracts need to be shortened even in cases where the parties involved are few. For instance, when one enters into an agreement with a construction company to work for him/her for one year, this would mean that the contract initiator would not be able to maximise on his contract as he would be susceptible to complacency by the constructing company. However, if the contract was shortened to say a period of three months, then the constructor would be prompted to work harder in order to receive another contract in the next three months. Again, this approach to business is quite unrealistic because it advocates for a scenario in which a worker would have to apply for the same job over and over again. Consequently, that worker would always be aware of the fact that he/she could loose his/her job at any moment. Neoliberalism ignores some basic human resource fundamentals such as best practice strategies. In this human resource strategy, job security is a key aspect to maximising employee potential. In this regard, Neoliberalism can interrupt business professes because it ignores some of these basic rules of human resources administration. (Derber, 1999)

Neoliberalism requires that contracts be continually assessed in order to ensure that the highest yield is obtained from them. In other words, even the employees seeking to maximise these contract must also be analysed in order to ensure that they are performing to their fullest. Operating in such a manner only creates deep mistrust between employees and their employers. Certain examples reflect the extremism of this notion; in tele-care centres, employees who have to go to the toilet are noted and the amount of time spent at those toilets is also measured. Even in courier services, individuals responsible for transporting various packages are usually tracked by a GPS system in order to ascertain that the package is delivered on time. Such extreme assessment can wear out employees thus causing some of them to look for dishonest ways of surpassing the system. As the old saying goes; where there is a will, there is a way. (Lindblom, 2001)

Neo-liberalists are always looking for ways of maximising their prevailing conditions. Consequently, they favour the creation of artificial transactions so as to promote real transactions. One such example is the use of financial derivatives. It should be noted that financial derivates have been around for centuries but they have been exercised in moderation. Countries that operate under neo-liberal polices are likely to have large scale financial derivatives in place. In this regard, people have the possibility of trading financial derivative such as a ‘futures’ in the stock exchange. As if that is not enough, it is now possible to create a financial derivative on another. On such example is trading on electricity futures. The problem with such mechanisms is that they distort the true market by creating situations where investors are misled by the large amounts of alternatives available to them thus causing them to make wrong decisions. Financial derivative critics have asserted that the latter form of trade can be very detrimental to the economy because it is based on quasi opportunities. This definitely impedes business progress. (Gray, 2002)

Neo liberalism can also bring problems to resulting countries in instances where large numbers of contract have to be used to maximise any transaction. Taking the example of the British railways-the corporation was privatised some decades ago. This privatisation process resulted in the creation of thirty thousand different contracts. In order to draft those resulting drafts, there was a need to examine the legal aspects of the contracts. Consequently, lawyers had to be hired and other stakeholders involve in the process of verifying the validity and efficiency of the transaction. The problem, with such an approach is that the cost of maximising a transaction becomes so intense that it sometimes exceeds the benefits that emanate from instituting the contract. In this case the benefits of privatising the British Railway were undermined by all the expenses that went into the transactional costs. Consequently, the benefits of technology can be undermined by such expenses in any business.

Neoliberalism does not promote business within given countries because when analysed critically, the process of creating benefits through neo liberal principles causes more harm to affected individuals. Taking the example of the financial service sector; many people claim that this sector has grown because of neoliberal policies but one must ask himself/herself whether this is actually a good thing for the economy and hence for affected businesses. In centralised economies, there are no neo-liberal policies, also, there is no need for a financial services sector. In other words, one can assert that the financial services sector is a cost that neo-liberal governments themselves have to meet in order to propagate neo-liberal policies. The financial services sector demands huge amounts of investment because it is a machinery run by neo-liberalists. In the end, the financial services sector then opposes the very rule that was used to create it i.e. to decrease bureaucratic systems. It also minimises the efficiency of the market system. (Gray, 1999)

Neoliberalism causes a creation of derivative professions or professions within professions. One such example is the case of the psychologist assessment coach. (Sunstein, 2000)The work of this individual is to asses whether employees are worth hiring. Neoliberalists believe that only the best candidates must be selected. However, some candidates have found a way of manipulating this system by going for training on how to pass those tests. Consequently, the psychological assessment coach might find that they are qualified for the job yet that is not necessarily the truth. In other words, Neoliberalist policies are so extreme that they create goals which normal persons cannot attain. This means that most people feel so pressured to look for other alternatives of surpassing such systems. In the end, the very principles that were aimed at improving transactional performance end up being the ones that destroy it. (Kuttner, 2000)

Lastly, Neoliberalism advocates for maximising suppliers. Usually, neoliberal economies are such that they encourage bidding for any available contract regardless of one’s original profession. This means that a supplier who was dealing in provision of cosmetics should embrace the opportunity to offer electronics. This is the reason why a company like the Harley Davidson Motorcycle company now offers motorcycles, spare parts, jeans and t-shirts. The problem with such an approach to business is that it ignores the benefits of specialisation because no single individual or enterprise can do everything and do it well. (Perelman, 2003)

Conclusion

Neoliberalism impedes business because its transactional costs may outweigh benefits of the transaction, it overworks employees thus causing them to look for ways of manipulating systems, it creates quasi professions and also encourages contracts without the availability of financial assets. The latter two issues can cause severe market distortions and can even cripple the economy as is the case with the current US mortgage crisis.

References

Barr, N. (2000): The Economics of the Welfare State; Seven Stories Press

Derber, C. (1999): How Corporations Are Taking Over Our Lives, And What We Can Do About It”

St. Martin’s Press

Thomas, F. (2000): Extreme Capitalism, Market Populism, and the End of Economic Democracy”

Doubleday

Fried, B. (2001): The Progressive Assault On Laissez Faire: Robert Hale And The First Law And Economics Movement; Harvard University

Gray, J. (2002): Beyond the New Right: Markets, Government and the Common Environment”

Routledge

Gray, J.  (1999): False Dawn: The Delusions of Global Capitalism; New Press

Kuttner, R. (2000): Everything for Sale: The Virtues and Limits of Markets; Polity Press

Lindblom, E. (2001): The Market System: What It Is, What To Make of It and How It Works

Yale University Press

Van Parijs, P. (2002): Real Freedom for All – What Can Justify Capitalism?”

Oxford University Press

Perelman, M. (2003): The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation, Harvard University Press

Sunstein, C. (2000): Free Markets and Social Justice; Oxford Univ. Press

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