What is 'Neoliberalism'
Neoliberalism is a policy model of social studies and economics that transfers control of economic factors to the private sector from the public sector. It takes from the basic principles of neoclassical economics, suggesting that governments must limit subsidies, make reforms to tax law in order to expand the tax base, reduce deficit spending, limit protectionism, and open markets up to trade. It also seeks to abolish fixed exchange rates, back deregulation, permit private property, and privatize businesses run by the state.
Liberalism, in economics, refers to a freeing of the economy by eliminating regulations and barriers that restrict what actors can do. Neoliberal policies aim for a laissez-faire approach to economic development.
BREAKING DOWN 'Neoliberalism'
Neoliberalism has been used by various scholars, critics and analysts, mainly referring to an upspring of 19th century ideas connected to economic liberalism that began in the 1970s and 1980s. These ideals advocate for extensive economic liberalization and policies that extend the rights and abilities of the private sector over the public sector, specifically the shutting down of state and government power over the economy. Neoliberalism supports fiscal austerity, deregulation, free trade, privatization and greatly reduced government spending.
The popularity and support of neoliberalism is divided. This approach has most famously been connected to various economic policies introduced in the United Kingdom by Margaret Thatcher and in the United States by Ronald Reagan. Some academics and analysts, however, attribute the resurgence of neoliberal economic theories in the 1970s and 1980s to financialization and indicate that the financial crisis of 2008 and 2009 is ultimately a result of such an approach to the economy.
The exact meaning and usage of the term has changed throughout time. In its earliest sense, neoliberalism referred to an economic philosophy popular among 1930s European liberal scholars, a sort of middle road between classic liberalism and socialist planning. The use and popularity of the term "neoliberal" declined steadily, specifically in the 1960s. Neoliberalism gained popularity again in the 1980s, connected to Chilean economic reforms issued by Augusto Pinochet. During this time, the term gained a negatively slanted connotation and was used primarily by critics of market reform. The meaning of the term also shifted to indicate a more radical laissez-faire capitalist pool of ideas. Most scholars began to associate the term with Friedrich Hayek and Milton Friedman. This new meaning of neoliberalism, popular among Spanish-speaking scholars, diffused into the English-language study of the economy. However, the term is rarely heard in the United States.