Neoliberalism is a complex concept that many people use – and abuse – in different and often contradictory ways.
So what is it, really?
Discussing neoliberalism with my students at the University of Southern California, I explain the phenomenon’s origins in political thought, its ambitious claims to promote freedom, and its problematic global toll.
“Markets work; governments don’t
Neoliberalism supports that markets allocate scarce resources, promote efficient growth and guarantee individual freedom better than governments.
According to the progressive journalist Robert Kuttner“the basic argument of neoliberalism can fit on a sticker. Markets work, governments don’t”.
From such a perspective, government represents a bureaucratic burden and a political imposition. The government wastes. The verve of capitalism, combined with a limited democratic politics, is the balm of neoliberalism for all the ills of humanity.
To complete his sticker mantra, Kuttner continues: “There are two corollaries: markets embody human freedom. And with markets, people basically get what they deserve; changing market outcomes spoils the poor and punishes the productive.
Evolution of neoliberalism
The nickname “neoliberalism” was coined by the Austrian economists Friedrich von Hayek and Ludwig Von Mises in 1938. Each elaborated their own version of the notion in books from 1944: “The road to serfdom” and “Bureaucracy,” respectively.
Neoliberalism went against the dominant economic strategies promoted by John Maynard Keynes, that encourage governments to stimulate economic demand. It was the opposite of big government socialism, whether in its Soviet manifestation or its European social-democratic version. Proponents of neoliberalism have adopted classical liberal principles such as laissez-faire – the policy of non-intervention in the markets.
By the 1970s, Keynesian policies were wavering. Hayek’s organization, the Mont Pèlerin Societyattracted wealthy European and American benefactors into its ranks and funded powerful think tanks such as the American Enterprise Institute and the Cato Institute. These groups refined the message of neoliberalism, making it a viable and appealing ideology.
In the 1980s, neoliberalism gained ascendancy with Republicans like President Ronald Reagan. Senior Officials in Democratic Presidential Administrations of Jimmy Carter and then, bill clinton also embraced neoliberalism.
Neoliberalism has also been championed by conservatives like British Prime Minister Margaret Thatcher and by international institutions such as the World Bank and the International Monetary Fund.
But the deregulation of free markets had unfortunate political consequences. He promoted financial and labor crises in the US and UK and exacerbated poverty and political instability. The crisis has been felt from the Global South to the Northwest of the United States, manifesting itself in the anti-World Trade Organization protests often referred to as “The Battle of Seattle.” To critics like Frantz Fanon and David Harvey, neoliberalism is more akin to neo-imperialism or neo-colonialism. Basically, they argue, it is achieving its old ends – to exploit the global working class – by new means.
This criticism feeds another argument: what does neoliberalism conceal? anti-democratic sentiments. What if citizens prefer government regulation and oversight? History demonstrates that the neoliberal pillars would still be pushing market orthodoxy on popular opinion.
Hayek’s support for the repressive Pinochet regime in Chile is an extreme example. Augusto Pinochet overthrew the popular socialist government of Salvador Allende in 1973. Pinochet was cautiously greeted by the Nixon administration and look favorably by Reagan and thatcher. According to them, Pinochet’s commitment to neoliberalism outweighs his anti-democratic character.
This story helps explain the election last year of Gabriel Boric, Chile’s 36-year-old president. Boric ran on a deep change program after a period of unrest over the politics of the Pinochet era. His campaign slogan was “If Chile was the cradle of neoliberalism, it will also be its grave”.
An erroneous and contradictory ideology
Beginning in the 1980s and long after, for many Americans, neoliberalism meant individual freedom, consumer sovereignty, and corporate efficiency. Many Democrats and Republicans have championed it to justify their policies and appeal to voters.
But, in my view, it was just the popular facade of a deeply flawed ideology.
Just consider the consequences of US banking deregulation after the 2008 global financial crisis to see what’s going on when the government lets the markets manage themselves. American key economic indicators like class inequality also tell the dark story of uncontrolled markets.
For many Americans, however, the mythology of individual liberty stay strong. American politicians who suggest reducing it – by proposing, for example, more regulations or an increase in social spending – are often stigmatized “socialist.”
Ultimately, neoliberalism was a child of its time. It’s a grand narrative born out of the Cold War era, claiming to have the solution to society’s ills through the power of capitalist markets and government deregulation.
There is no lack of articles to show that he did not keep his promise. No doubt he has made things worse.