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 laws 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.
BREAKING DOWN Neoliberalism
Neoliberalism supports fiscal austerity, deregulation, free trade, privatization and greatly reduced government spending. Neoliberlism is often associated with laissez-faire economics, a policy that prescribes a minimal amount of government interference in the economic issues of individuals and society. It is usually characterized by its belief that continued economic growth will lead to human progress, its confidence in free markets and emphases on limited state interference.
Neoliberalism: A Brief History
The term 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.
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.
Neoliberalism in the Modern World
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.
Liberalism vs. Neoliberalism
Although the terms share some similarities, the two are distinct. Both are rooted in 19th-century classical liberalism, which supported laissez-faire economics and the freedom of people against an overpowering government. Liberalism is more of a political philosophy that holds liberty to a high standard. It defines all social, economic and political aspects of society, such as the role of government, toleration, freedom to act, etc. Conversely, neoliberalism focuses more on the markets, meaning it supports deregulation, ending protectionism and freeing up the markets. Therefore, it is based on economics.
Criticism of Neoliberalism
The concept of neoliberalism has received a lot of criticism from both sides of the political spectrum. The focus on economic efficiency can, critics say, hinder other factors. For example, by assessing the performance of a public transit system as being purely economically efficient, it may lead to workers’ rights being considered a hindrance to the performance. Some critics also say that the rise of neoliberalism has allowed the rise of an anti-corporatist movement, which states that the influence of corporations go against the betterment of society and democracy.
There is also political opposition and criticism of neoliberalism. First, the concept of globalization is seen as a negative because it can destroy sovereign nations of their own right to self-determination. Secondly, these critics say that replacing government-owned corporations with private ones can reduce efficiency. Critics also say while neoliberalism can increase productivity, it 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.