Neoliberalism Some History Theory Practice Neoliberal Theorists

Neoliberalism is a political philosophy and a political-economic movement beginning in the 1970s – and increasingly prominent since 1980 – that de-emphasizes or rejects positive government intervention in the economy, focusing instead on achieving progress and even social justice by encouraging free-market methods and less restricted operations of business. Because of close association between this philosophy and neoclassical economics, and confusion with the overloaded term " liberal", some advocate the term "neoclassical philosophy". In some areas of the world, it is simply called " liberalism". Though many liberals adhere to neoliberalism, their ideology has a broader content and other liberals oppose neoliberalism.

Neoliberalism is not a version of new liberalism of John Dewey, Woodrow Wilson, John Maynard Keynes, Franklin Roosevelt, or the Liberal Party of Britain, which saw a positive role for government (in cooperation with business) in serving the public interest. Rather, it focuses on the establishment of a stable medium of exchange, and the reduction of localized rules, regulations and barriers to commerce, and the privatization of state-run enterprises.

Neo-liberalism, since it focuses on international relationships, is criticized (in different ways) by socialist, liberal and conservative partiesA political party is a political organization subscribing to a certain ideology or formed around very special issues. In party-list proportional representation, parties (and sometimes multi-party cartels) can play a functional role in the voting system., intellectuals, and economists. Some portray neoliberalism as the imposition of "free markets from the top-down" since it has been promoted by international financial institutions such as the IMF and the World BankThe International Bank for Reconstruction and Development (IBRD, in Romance languages BIRD), better known as the World Bank is an international organization created to fight poverty by means of financing states. Its operation is maintained through payment and by centralized state organizations such as the European UnionFor other uses, see EU (disambiguation). The European Union or EU is a supranational organisation of 25 European states. It was established with that name by the Treaty on European Union (commonly known as the Maastricht Treaty) in 1992 but many aspects o. Others identify neoliberalism with neo-corporatismThe term corporatism has different meanings in different contexts. Most notably, the historical usage of the term is not the same as its modern usage. This article deals with both types of "corporatism". Historical meaning of the term Historically, corpor, and domination by multinational corporationsA corporation is a legal entity (distinct from a natural person) that often has similar rights in law to those of a natural person. Civil law systems may refer to corporations as "moral persons;" they may also go by the name "SA" (anonymous society) or so.

The use of the term "neoliberalism" in the manner of the rest of this page has not caught on in the United States, because there the center-left describes itself by the term "liberal". In the United States, the word was used with a totally different meaning prior to its expression on the world economic stage. For example, the political magazine Washington MonthlyThe Washington Monthly is a magazine based in Washington DC which covers American politics and government. Its founder was Charles Peters, a bureaucrat, a legislator, a lawyer, and a soldier who established the magazine "in the spirit of I. External link presented modest tips for incrementally improving the Welfare state, hardly to the degree of Johnson's Great Society. Though they were declared to be "neoliberal", in terms of much of the continental political discussion, it instead expresses a new liberal ideology.

1 Some history

Just as classical liberal philosophy justified and encouraged the "first era of globalization" which came to an end with the shocks of the First World War, the collapse of the Gold Standard, and the Great Depression, neoliberalism is associated with the contemporary "second era of globalization," the seeds of which were planted after the Second World War.

Neo-liberalism's economic roots begin with the re-establishment of international monetary stability with the Bretton Woods Agreement, which fixed currencies to the US Dollar and the US Dollar to gold. As a ideological movement, it became increasingly prevalent based on the work of Robert Mundell and Arthur Flemming. The Mont Pelerin Society, founded at about the same time by thinkers such as Friedrich Hayek, Milton Friedman, and Michael Polanyi spawned free-market think tanks and advocacy groups in the UK and the US during the 1960s and 1970s. They drew upon the theories of the Austrian School of economics and monetarism. Neo-liberalism argued that protectionism produced economic inefficiencies, and that developing nations should open their markets to the outside, and focus on exporting. Also emphasized was the liquidation of state-owned corporations, and the reduction in rules designed to hinder business. Neo-liberal ideas found expression in a series of trade talks to form the General Agreement on Tariffs and Trade as well as regional free trade agreements such as the European Union and the North American Free Trade Agreement. These agreements went beyond textbook "free trade" to encourage the free movement of capital funds and direct private investment and to limit national restriction of business privileges.

The slow and quantitative development of neoliberalism after World War II became more rapid in the 1970s, and not always by peaceful means. One of the often-touted neo-liberal success stories is General Augusto Pinochet's Chile – which began with a CIA-backed coup, violently ousting the democratically-elected government of Salvador Allende in Chile. The Allende government had pursued radical social-democratic policies and has sometimes been labeled " Marxist." "Free market" policies, including privatization of state assets, were imposed by " los Chicago Boys," Chicago school economists inspired by Milton Friedman. These policies were later imitated by the Bretton Woods institutions operating in many other poor countries, particularly in Latin America.

The rise of neoliberalism culminated with the Reagan government in the United States and that of Margaret Thatcher in Britain – along with the fall of the Soviet Union and the fading of social democracy and new liberalism as counterbalances or alternatives to unbridled capitalism. The Reagan and Thatcher governments not only shifted their own countries' policies toward laissez-faire but used their control of the major Bretton Woods institutions to impose their policies on the rest of the world. So nowadays, neoliberalism is generally seen as synonymous with the " Washington Consensus," the dominant policy view at the International Monetary Fund (IMF), the World Bank, and the U.S. Treasury at the end of the 20th century and the start of the 21st. A major axiom of the neoliberal school is that (to quote Thatcher) " There Is No Alternative" to unregulated capitalism. This slogan is often abbreviated as " TINA".

In the late 1980s and early 1990s neo-liberal policies had been embraced by the center-left, as Bill Clinton of the United States backed the North American Free Trade Agreement. Free trade was seen as essential to his Rubinomics, which promoted the creation of technology and intellectual property rights as the means by which America would be able to manage a persistent balance of trade deficit. Some center-left neo-liberal economists such as Joseph Stiglitz argued that protectionism is not a left or right issue, but an issue of asymmetry, and therefore a general cause for concern.

Critics of neo-liberalism in both theory and practice are numerous. This is particularly true in developing nations whose assets have been sold off to foreigners and whose domestic political and economic institutions had been undermined by the effects of being exposed to trade and rapid flows of capital.

Even within the neo-liberal movement there is intense criticism of how many developed nations have demanded that others liberalize their markets for manufactured goods, while protecting their own domestic agricultural markets.

Anti- globalization advocates are the most vociferous opponents of neo-liberalism, particular its implementation as "free capital flows" but not free labor flows. They argue that neo-liberal policies encourage a "race to the bottom" as capital flows to the lowest environmental and labor standards, and is merely updated "beggar they neighbor" imperialism, dating back 200 years. In this they are in fundamental agreement with many of neo-liberalism's supporters who argue that neo-liberalism represents classical liberalism.

Some economists argue that neo-liberal policies can create "moral hazard": governments and international financial institutitions must bail out developing nations and their creditors because they are "too big to fail". This simply encourages further risk-taking and crises. They point to the string of currency melt-downs in the – Mexico, Russia, Eastern Europe, East Asia and Argentina – as proof that there is a danger to allowing risk-taking without sufficient penalty or regulation.

2 Theory

As described by UC-Berkeley economic historian and defender of neoliberalism Professor Bradford DeLong, this "ism" has two main tenets:

"The first is that close economic contact between the industrial core [of the capitalist world economy] and the developing periphery is the best way to accelerate the transfer of technology which is the sine qua non for making poor economies rich (hence all barriers to international trade should be eliminated as fast as possible). The second is that governments in general lack the capacity to run large industrial and commercial enterprises. Hence, [except] for core missions of income distribution, public-good infrastructure, administration of justice, and a few others, governments should shrink and privatize)."

To critics of neo-liberalism, these two principles represent parts of the " trickle-down theory," i.e., that under free-market capitalism, economic growth and technological change benefit even the poorest countries and people, even if that process is dominated by multinational corporations, rich domestic elites, and organizations such as the IMF dominated by rich countries' financiers. To defenders, such as Amartya Sen, "Development is Freedom". More economic growth, more specialization and more opportunity create chances for individuals to achieve than more rigid structures which provide only illusory protection.

The concept of neoliberalism became popular among economists not only as the balance of political power changed (as discussed above), but as many decided that post- World War II national development strategies for poor countries were not having the intended effects. In particular, funding for mega-projects left poor countries with high debts but little growth to show for it. It is also a reaction to the perceived failures populist and modern liberal economic policies, such as import-substituting industrialization.

Failures of the East-Asian ( Taiwanese, South Korean) policies of state-guided export-led economic growth and of the centrally-planned or " communist" economies also were interpreted as requiring neoliberal medicine. The export-led economies were criticized as involving " crony capitalism," while most of the centrally-planned countries fell apart economically and politically in late 1980s and early 1990s.

As noted, the neoliberal doctrine is linked to the so-called " Washington consensus," a set of specific policy goals designed for Latin American countries. In addition to the tenets of neoliberalism noted by Professor deLong, the Washington consensus stipulated that a country should have stable exchange rates and a government budget in balance.

While some use the terms neoliberal and libertarian or classical liberalism interchangeably there is a difference between the two philosophies. While both share a belief in market economics and free trade, neoliberal economics theory shares with neoliberal international relations theory (and liberal internationalism ) a belief in international regimes and a degree of global governance as a means of negotiating and administering international agreements. Neoliberals believe that greater economic and political interdependence will lead to progress and a reduction of international tensions or at least divert states from utilizing military means to resolve conflict. Libertarians reject the neoliberal belief that global governance bodies or state negotiated treaty regimes that bind the individual are desirable.

Much of neoliberalism accepts macro-economic theory that assumes full employment and rational expectations, that is, it is a modern neoclassical and free-market economic theory. Others rely on the benevolence and technical expertise of the IMF and other international financial institutions to solve the world's economic problems.

3 Practice

The practice of neo-liberal ideas varies widely. Some proponents see transparency, development and uniformity of regulations as the most important goals, while many others see the dismantling of state regulations, as such, as the primary purpose. Many leading implementors of neo-liberal policies criticize the manner in which those policies are implemented. Some blame the institutions such as the World Bank and IMF directly, while others argue that by the time the IMF and World Bank are involved, the problems have already become endemic – they blame the "shock therapy" approach which was taken in the 1980s for much of the economic damage, and argue that "big bang" marketization, such as was pursued in Russia, leads to centralized corrupt economic oligarchy, the very opposite of what neo-liberalism proposes.

There were also catastrophic failures. In particular, Nobel prize winner and former World Bank chief economist Joseph Stiglitz argues that the IMF is guilty of forcing neoliberal and Washington consensus policy goals on countries at times when it was not appropriate (i.e., the Asian Economic Crisis), with devastating results. The "cookie cutter" approach of applying the same policy no matter what the specificities were can be seen in this crisis, as the I.M.F. pushed for government budget cuts even though government budget deficits had nothing to do with the crisis. Neoliberalism has also been criticised by populists, social democrats, and anti-capitalists, who argue that unbridled market forces inevitably increase inequality in wealth and hence power.

In a recent book, Professor Robert Pollin summarizes the neoliberal record. Excluding the People's Republic of China, which did not follow the neoliberal lead, the era of the "developmental state" (1961-80) saw a per capita growth rate of real gross domestic product that averaged 3.2 percent per year. On the other hand, during the neoliberal era (1981-99) this growth rate fell to 0.7 percent per year, slowing both absolutely and relative to the wealthier countries of the OECD. China, which shifted from pure state planning to state-guided export promotion, saw its per capita growth rate rise from 2.5 to 8.4 percent between these periods. (See Robert Pollin, Contours of Descent, p. 131. BooksEnthsiast.com) Thus, according to the neoliberals' own standards, their policies can be seen as a failure. Pollin also shows the rapid increase in income inequality between these periods, especially when China is excluded from the sample. The increase in economic inequality is one major hallmark of neoliberalism.

It is an open question as to whether the western world continues to be dominated by neoliberal policies. Whilst the European Union and many individual countries have policies which support workers' rights, some scholars argue that these are adaptations of the core neoliberal economic model rather than a fundamental move away from it.

This short entry cannot end the debate. One question is whether it is better to define neoliberalism in terms of its self-image (as Professor deLong does) or in terms of its actual practice. Either way, these critiques do not automatically indicate that neoliberalism should be dumped. It is possible, as the more militant advocates of laissez faire say, that neoliberal policies were not applied in a pure enough form. Alternatively, one might argue that if neoliberalism had not been pursued, economic events would have been even worse. Further, it is possible that neoliberalism could be reformed.

4 Neoliberal theorists

Prominent exponents of neo-liberal policies include former US Treasury Secretary Robert Rubin, as well as economists such as Robert Solow, Gregory Mankiw, and Robert Mundell.

5 External critical resources

Liberalism Political theories

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