Neoliberalism

ORIGIN

Industrial Revolution /Mercantilism

IDEAS - 1     Central banks · Corporations /Democracy/Denationalization/

Deregulation/Economic freedom/Economic integration/Economic interdependence/ Economic liberalization /Exchange rate /Fair trade/Fiat currency /Foreign exchange reserves /Foreign direct investment/
Free markets /Free trade (area) /Globalization /Harmonisation of law /Inflation adjustment/

 Inflation targeting /Intellectual property /Intergovernmentalism/ Liberalization /Marketization ·

Mixed economy /Negative income tax /Open market operations /Private finance initiative /

Private property ·/ Privatization /Public highway /School vouchers /Single market /Supranationalism

Tax cuts / Tax reform

IDEAS - 2

Political liberalism/Political freedom/Cultural liberalism/Democratic capitalism/Democratic education
Economic liberalism/Free trade · Individualism/Laissez faire/Liberal democracy/Liberal neutrality
Negative / positive liberty/Market economy · Open society/Popular sovereignty/Rights (individual)
Separation of church and state

Comparative advantage/Consumer price index/Economic growth/Economic rationalism/Friedman rule / k-percent rule/Gross domestic product/International economics/International finance/International trade
Laffer curve · Monetary theory/Quantity theory of money/Symmetrical inflation target

Neoliberalism describes a market-driven^[1] approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the political and economic priorities of the state.

The term "neoliberalism" has also come into wide use in cultural studies to describe an internationally prevailing ideological paradigm that leads to social, cultural, and political practices and policies that use the language of markets, efficiency, consumer choice, transactional thinking and individual autonomy to shift risk from governments and corporations onto individuals and to extend this kind of market logic into the realm of social and affective relationships.

Policy implications

 

Neoliberalism seeks to transfer control of the economy from public to the private sector, under the belief that it will produce a more efficient government and improve the economic health of the nation.

the Washington-based international economic organizations (like the International Monetary Fund (IMF) and World Bank). Williamson's list included ten points:

1.      Fiscal policy Governments should not run large deficits that have to be paid back by future citizens, and such deficits can only have a short term effect on the level of employment in the economy.

2.      Constant deficits will lead to higher inflation and lower productivity, and should be avoided.

3.      Deficits should only be used for occasional stabilization purposes.

4.      Spending neoliberals deem wasteful toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment

5.      Tax reform– broadening the tax base and adopting moderate marginal tax rates to encourage innovation and efficiency;

6.      Interest rates that are market determined and positive in real terms;

7.      Floating exchange rates;

8.      Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions

9.      Trade protection to be provided by law and relatively uniform tariffs; thus encouraging competition and long term growth

10.  Liberalization of the "capital account" of the balance of payments, that is, allowing people the opportunity to invest funds overseas and allowing foreign funds to be invested in the home country

11.  Privatization of state enterprises; Promoting market provision of goods and services which the government cannot provide as effectively or efficiently, such as telecommunications, where having many service providers promotes choice and competition.

12.  Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;

13.  Legal security for property rights; and,

14.  Financialisation of capital.

History

Within the developing world, several developments – among them decolonization, a desire for national independence and the destruction of the pre-war global economy,^[8] and the view that countries could not effectively industrialize under free market systems (e.g., the Singer–Prebisch thesis) – encouraged economic policies that were influenced by communist, socialist and import substitution precepts.

A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated "social democracy and central planning on the one hand" and those "concerned with liberating corporate and business power and re-establishing market freedoms on the other.

Post-1970s economic liberalism

Global spread

Chronic economic crisis throughout the 1980s, and the collapse of the Communist bloc at the end of the 1980s, helped foster political opposition to state interventionism in favor of free market reform policies. From the 1980s onward, a number of communist countries initiated various neoliberal market reforms, such as the Socialist Federal Republic of Yugoslavia under the direction of Ante Markovic (until the country's collapse in the early 1990s), and the People's Republic of China under the direction of Deng Xiaoping.

Thatcher's political and economic philosophy emphasised reduced state intervention as well as free markets and "entrepreneurialism".^[68]

She vowed to end excessive government interference in the economy and attempted to do this through privatizing nationally-owned enterprises.

She began her economic reforms by increasing interest rates to slow the growth of the money supply and thus lower inflation.^[70] In accordance with her "less government intervention" views she introduced public spending cuts^[71] particularly on housing and industry subsidies. She also placed limits on the printing of money and legal restrictions on trade unions.

Reach and effects

Neoliberal movements ultimately changed the world's economies in many ways, but some analysts argue that the extent to which the world has liberalized may often be overstated. Some of the past thirty years' changes are clear and unambiguous, like:^[93]

1.      Growth in international trade and cross-border capital flows

2.      Elimination of trade barriers

3.      Cutbacks in public sector employment

4.      The privatization of previously public-owned enterprises

5.      The transfer of the share of countries' economic wealth to the top economic percentiles of the population.^[94]

Other changes are not so apparent, and are debated in the literature^[93]:

·Reduction in the size of governments. Governments do not appear to have shrunk wholesale. With the exception of exceptionally high-spending governments, government expenditures (as a percentage of GDP) appears to have stayed the same since 1980. Most of the cuts to government spending appear to have been a temporary phenomenon that took place during the 1990s.

Opposition

Opponents of neoliberalism argue the following points:

·      Globalization and liberalization subvert nations' ability for self-determination.

·      Exploitation: critics consider capitalist economics to be exploitative.

·      Negative economic consequences: Critics argue that neo-liberal policies produce inequality.

·      Increase in corporate power: some anti-corporate organizations believe neoliberalism, unlike liberalism, changes economic and government policies to increase the power of corporations and large business, and a shift to benefit the upper classes over the lower classes.^[99]

·      There are terrains of struggles for neoliberalism locally and socially. Urban citizens are increasingly deprived of the power to shape the basic conditions of daily life.^[30]

·      Trade-led, unregulated economic growth and state regulation of pollution and other environmental impacts economic growth.^[100]

·      It is claimed that deregulation of the labor market produces flexibilization and casualization of labor, greater informal employment, and a considerable increase in industrial accidents and occupational diseases.^[101]