What Is Neoliberalism?

Neoliberalism is a policy model—bridging politics, social studies, and economics—that seeks to transfer control of economic factors to the private sector from the public sector. It tends towards free-market capitalism and away from government spending, regulation, and public ownership.

Often identified in the 1980s with the conservative governments of Margaret Thatcher and Ronald Reagan, neoliberalism has more recently been associated with so-called Third Way politics, which seeks a middle ground between the ideologies of the left and right.

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Neoliberalism

Understanding Neoliberalism

One way to better grasp neoliberalism is through its associations, and sometimes-subtle contrasts, with other political and economic movements and concepts.

It's often associated with laissez-faire economics, the policy that prescribes a minimal amount of government interference in the economic issues of individuals and society. This theory is characterized by the belief that continued economic growth will lead to human progress, a confidence in free markets, and an emphasis on limited state interference.

Neoliberalism is typically seen as advocating more intervention in the economy and society than libertarianism, the hands-off ideology with which it's sometimes confused. Neoliberals usually favor progressive taxation, for example, where libertarians often eschew it in favor of such schemes as a flat tax rate for all. And neoliberals aren't necessarily averse to picking winners and losers in the economy, and often do not oppose measures such as bailouts of major industries, which are anathema to libertarians.

[Important: Although both neoliberalism and liberalism are rooted in 19th-century classical liberalism, neoliberalism focuses on markets, while liberalism defines all aspects of a society.]

Liberalism vs. Neoliberalism

Discussion abounds over how neoliberalism relates to the term that inspired it. To many, liberalism at its essence is a broad political philosophy, one that holds liberty to a high standard and defines all social, economic, and political aspects of society, such as the role of government, toleration, and freedom to act. Neoliberalism, on the other hand, is seen as more limited and focused, concerned with markets and the policies and measures that help them function fully and efficiently.

Key Takeaways:

  • Neoliberalism supports fiscal austerity, deregulation, free trade, privatization, and greatly reduced government spending.
  • Most recently, neoliberalism has been famously—or perhaps infamously—associated with the economic policies of Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States.
  • There are many criticisms of neoliberalism, including its potential to endanger democracy, workers’ rights, and sovereign nations’ right to self-determination.

A Model That Pleases Few

It may be telling that the term neoliberal is often used accusatorily, and seldom if ever as a self-description. In a politically polarized world, neoliberalism receives criticism from both left and right, often for similar reasons.

The focus on economic efficiency can, critics say, hinder other factors. For example, assessing the performance of a public transit system purely by how economically efficient it is may lead to workers’ rights being considered just a hindrance to performance. Another criticism is that the rise of neoliberalism has led to the rise of an anti-corporatist movement stating that the influence of corporations goes against the betterment of society and democracy. 

On a similar note is the critique that neoliberalism's emphasis on economic efficiency has encouraged globalization, which opponents see as depriving sovereign nations of the right to self-determination. Neoliberalism's naysayers also say that its call to replace government-owned corporations with private ones can reduce efficiency: While privatization may increase productivity, they assert, the improvement may not be sustainable because of the world’s limited geographical space. In addition, those opposed to neoliberalism add that it is anti-democratic, can lead to exploitation and social injustice, and may criminalize poverty.