Adam Rangihana
Europe is Kaput. Long live Europe! - Slavoj Žižek, Yanis Varoufakis - full event
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Philosopher Slavoj Žižek and former Greek finance minister, Yanis Varoufakis and Wikileaks founder Julian Assange discuss Europe’s future. With the recent economic crisis in Greece, unprecedented challenges to centralised European policy, and the lack of consensus on the ongoing refugee crisis, many would agree that Europe faces its greatest ever predicament. Slavoj Žižek, regarded as ‘the most dangerous philosopher in the West’ (The New Republic), and Yanis Varoufakis, self-described ‘erratic Marxist’ and economic ‘rock-star’ (Business Insider and other publications), met in Croatia in 2013. They have never appeared together on the public stage – until now. Take your seat to hear them discuss the urgent task of building a different and more democratic Europe. The conversation explores the contradictions of late capitalism and some of the solutions that might just save the European project. It is moderated by Croatian philosopher Srecko Horvat.
http://www.southbankcentre.co.uk/what...
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Philosopher Slavoj Žižek and former Greek finance minister, Yanis Varoufakis and Wikileaks founder Julian Assange discuss Europe’s future. With the recent economic crisis in Greece, unprecedented challenges to centralised European policy, and the lack of consensus on the ongoing refugee crisis, many would agree that Europe faces its greatest ever predicament. Slavoj Žižek, regarded as ‘the most dangerous philosopher in the West’ (The New Republic), and Yanis Varoufakis, self-described ‘erratic Marxist’ and economic ‘rock-star’ (Business Insider and other publications), met in Croatia in 2013. They have never appeared together on the public stage – until now. Take your seat to hear them discuss the urgent task of building a different and more democratic Europe. The conversation explores the contradictions of late capitalism and some of the solutions that might just save the European project. It is moderated by Croatian philosopher Srecko Horvat.
http://www.southbankcentre.co.uk/what...
No copyright infringement is intended
Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use.
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The views and opinions expressed in the media or comments on this channel are those of the speakers or authors and do not necessarily reflect or represent the views and opinions held by this channel's broadcaster.
Due to the social nature of this broadcasting channel videls may contain content copyrighted by another entity or person. This channel's owner claims no copyright to said content. The broadcaster of this channel cannot be held accountable for the copyrighted content. The broadcaster of this channel is a messenger and sharer of this information and strives to verify, but cannot warrant the accuracy of copyrights or completeness of the information on this channel.
If you have a complaint about something or find your content is being used incorrectly PLEASE CONTACT THE BROADCASTER PRIOR TO MAKING A COPYRIGHT CLAIM. Any infringement was not done on purpose and will be rectified to all parties satisfaction.
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Adam Rangihana
Neoliberalism
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For the school of international relations, see Neoliberalism (international relations).
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Neoliberalism (or sometimes neo-liberalism)[1] is a term which has been used since the 1950s,[2] but became more prevalent in its current meaning in the 1970s and 80s by scholars in a wide variety of social sciences[3] and critics[4] primarily in reference to the resurgence of 19th century ideas associated with laissez-faire economic liberalism.[5] Its advocates support extensive economic liberalisation policies such as privatisation, fiscal austerity, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy.[6][7][8][9][10][11][12] Neoliberalism is famously associated with the economic policies introduced by Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States.[7] The implementation of neoliberal policies and the acceptance of neoliberal economic theories in the 1970s are seen by some academics as the root of financialization, with the financial crisis of 2007–08 one of the ultimate results.[13][14][15][16][17]
The definition and usage of the term has changed over time.[6] It was originally an economic philosophy that emerged among European liberal scholars in the 1930s in an attempt to trace a so-called 'Third' or 'Middle Way' between the conflicting philosophies of classical liberalism and socialist planning.[18] The impetus for this development arose from a desire to avoid repeating the economic failures of the early 1930s, which were mostly blamed by neoliberals on the economic policy of classical liberalism. In the decades that followed, the use of the term neoliberal tended to refer to theories at variance with the more laissez-faire doctrine of classical liberalism, and promoted instead a market economy under the guidance and rules of a strong state, a model which came to be known as the social market economy.
In the 1960s, usage of the term "neoliberal" heavily declined. When the term was reintroduced in the 1980s in connection with Augusto Pinochet's economic reforms in Chile, the usage of the term had shifted. It had not only become a term with negative connotations employed principally by critics of market reform, but it also had shifted in meaning from a moderate form of liberalism to a more radical and laissez-faire capitalist set of ideas. Scholars now tended to associate it with the theories of economists Friedrich Hayek and Milton Friedman.[6] Once the new meaning of neoliberalism was established as a common usage among Spanish-speaking scholars, it diffused into the English-language study of political economy.[6] Scholarship on the phenomenon of neoliberalism has been growing.[19] The impact of the global 2008-09 crisis has also given rise to new scholarship that critiques neoliberalism and seeks developmental alternatives.[20]
Contents [hide]
1Terminology
2Early history
2.1Colloque Walter Lippmann
2.2Mont Pelerin Society
3Post-WWII neo-liberal currents
3.1Germany
3.2Chile
3.3Australia
4Economic schools of thought
4.1Austrian School
4.2Chicago School
5Expanded definition
5.1Classical liberalism in the 20th century
5.1.1The rule of law
5.1.2Policy
5.1.3Conservatism
5.2Economic neoliberalism
5.2.1Neoliberal economics
5.3Criticism
5.3.1General liberal failure
5.3.2Class project
5.3.3Feminism
5.3.4Globalization
5.3.5Corporatism
6Policy implications
7Public debate and portrayal in media
7.1Noam Chomsky (April 2014)
7.2Marc Chesney (June 2015)
7.3March 2016 controversy in Belgium
8Reach and effects
8.1Effects in Latin American urbanization
8.2Effects on global health
9Support
9.1Political freedom
10Opposition
11Protest
12See also
13Notes
14Bibliography and further reading
15External links
15.1Online lectures
Terminology[edit]
The German scholar Alexander Rüstow coined the term "neoliberalism" in 1938 at the Colloque Walter Lippmann.[21][22][23] The colloquium defined the concept of neoliberalism as involving "the priority of the price mechanism, free enterprise, the system of competition, and a strong and impartial state".[24] To be "neoliberal" meant advocating a modern economic policy with State intervention.[25] Neoliberal State interventionism brought a clash with the opposite laissez-faire camp of classical liberals, like Ludwig von Mises.[26] While present-day scholars tend to identify Friedrich Hayek, Milton Friedman, and Ayn Rand as the most important theorists of neoliberalism, most scholars in the 1950s and 1960s understood neoliberalism as referring to the social market economy and its principal economic theorists such as Eucken, Röpke, Rüstow, and Müller-Armack. Although Hayek had intellectual ties to the German neoliberals, his name was only occasionally mentioned in conjunction with neoliberalism during this period due to his more pro-free market stance. Friedman's name essentially never appeared in connection with neoliberalism until the 1980s.[6] In the sixties, use of the term "neoliberal" heavily declined.[6]
Another movement from the American left that used the term "Neoliberalism" to describe its ideology formed in the United States in the 1970s. Prominent neoliberal politicians included Al Gore and Bill Clinton of the Democratic Party of the United States.[27] The neoliberals coalesced around two magazines, The New Republic and the Washington Monthly. The "godfather" of this version of neoliberalism was the journalist Charles Peters[28] who in 1983 published "A Neoliberal's Manifesto."[29]
Elizabeth Tandy Shermer argues that, "Academics (largely left-wing) started using “neoliberalism” in the 1970s to describe and decry a late twentieth-century effort by policy makers, think-tank experts, and industrialists to condemn social-democratic reforms and unapologetically implement free-market policies."[30] Other academics note that neoliberalism has critics from across the political spectrum.[31]
During the military rule under Augusto Pinochet (1973–1990) in Chile, opposition scholars took up the expression to describe the economic reforms implemented in Chile after 1973 and its proponents (the "Chicago Boys").[6] Once the new meaning of neoliberalism was established as a common usage among Spanish-speaking scholars, it diffused directly into the English-language study of political economy.[6] In the last two decades, according to the Boas and Gans-Morse study of 148 journal articles, neoliberalism is almost never defined but used in several senses to describe ideology, economic theory, development theory, or economic reform policy. It has largely become a term of condemnation employed by critics. And it now suggests a market fundamentalism closer to the laissez-faire principles of the "paleoliberals" than to the ideas of the original neoliberals who attended the colloquium. This leaves some controversy as to the precise meaning of the term and its usefulness as a descriptor in the social sciences, especially as the number of different kinds of market economies have proliferated in recent years.[6] In the book Neoliberalism: A Very Short Introduction, published by Oxford University Press (2010), the authors argue that neoliberalism is "anchored in the principles of the free-market economics."[15]
According to Boas and Gans-Morse, neoliberalism is nowadays an academic catchphrase used mainly by critics as a pejorative term, and has outpaced the use of similar terms such as monetarism, neoconservatism, the Washington Consensus and "market reform" in much scholarly writing.[6] Daniel Stedman Jones, a historian of the concept, says the term "is too often used as a catch-all shorthand for the horrors associated with globalization and recurring financial crises"[32] Nowadays the most common use of the term neoliberalism refers to market-oriented reform policies such as "eliminating price controls, deregulating capital markets, lowering trade barriers", and reducing state influence on the economy especially by privatization and fiscal austerity.[6] The term is used in several senses: as a development model it refers to the rejection of structuralist economics in favor of the Washington Consensus; as an ideology the term is used to denote a conception of freedom as an overarching social value associated with reducing state functions to those of a minimal state; and finally as an academic paradigm the term is closely related to neoclassical economic theory.[6] The sociologists Fred L. Block and Margaret R. Somers claim there is a dispute over what to call the influence of free market ideas which have been used to justify the retrenchment of New Deal programs and policies over the last thirty years: neoliberalism, laissez-faire or just "free market ideology."[33]
Other academics, such as Susan Braedley and Meg Luxton, assert that neoliberalism is a political philosophy which seeks to "liberate" the processes of capital accumulation.[14] American professor of political science and Democratic socialist Frances Fox Piven sees neoliberalism as essentially hyper-capitalism.[34] Robert W. McChesney, American professor at the University of Illinois at Urbana–Champaign and co-editor of the independent socialist magazine Monthly Review, claims that the term neoliberalism, which he defines as "capitalism with the gloves off," is largely unknown by the general public, particularly in the United States.[35] Lester Spence uses the term to critique trends in Black politics, defining neoliberalism as "the general idea that society works best when the people and the institutions within it work or are shaped to work according to market principles."[36]
Early history[edit]
Colloque Walter Lippmann[edit]
In the 1930s, the mood was decidedly anti-liberal. The worldwide Great Depression brought about high unemployment and widespread poverty. The crisis was widely regarded as the failure of economic liberalism. To renew liberalism a group of 25 liberals organised the Walter Lippman Colloquium, an international meeting that took place in Paris in August 1938. Among them were Louis Rougier, Walter Lippmann, Friedrich von Hayek, Ludwig von Mises, Wilhelm Röpke and Alexander Rüstow. Following the core message of Lippmann's book The Good Society participants like Rüstow, Lippmann and Rougier agreed that the old liberalism of laissez faire had failed and that a new liberalism needed to take its place. While for them it was a farewell to classical liberalism, which they thought to have failed, other participants like Mises and Hayek were not convinced to condemn the old liberalism of laissez faire. But all participants were united in their call for a new liberal project. Following Rüstow's original recommendation they called this project neoliberalism. The neoliberalism that came out of the Walter Lippman Colloquium was generally in line with Rüstow's theories of turning away from conceptions of laissez-faire towards a market economy under the guidance and the rules of a strong state.[37] It was an attempt to formulate an anti-capitalist, anti-communist Third Way. Neoliberalism was originally established as something quite different from the free market radicalism with which it is usually associated today.[38]
They agreed to turn the Walter Lippman Colloquium into a permanent think tank called Centre International d’Études pour la Rénovation du Libéralisme. But at the Walter Lippman Colloquium, the fundamental differences between 'true (third way) neoliberals' around Rüstow and Lippmann on the one hand and old school liberals around Mises and Hayek on the other were already quite visible. While ‘true neoliberals’ demanded state intervention to correct undesirable market structures, Mises had always insisted that the only legitimate role for the state was to abolish barriers to market entry. Similar differences of opinion also existed in other questions such as social policy and the scope for interventionism. After a few years the insurmountable differences between old liberals and the neoliberals became unbearable. Rüstow was bitter that Mises still adhered to a version of liberalism that Rüstow thought had failed spectacularly. In a letter Rüstow wrote that Hayek and his master Mises deserved to be put in spirits and placed in a museum as one of the last surviving specimen of an otherwise extinct species of liberals which caused the current catastrophe (the Great Depression). Mises became equally critical of the German neoliberals. He complained that Ordoliberalism really meant 'ordo-interventionism'.[39]
Michel Foucault uses the term in this sense in his famous 1978–79 lectures on "biopolitics".[40] He discusses the late 30s German meaning used by Walter Lippmann and others, of a middle way between capitalism and socialism. He says "Neo-liberalism is not Adam Smith; neo-liberalism is not market society" [41] and to him it clearly does not mean Hayek and Milton Friedman.
Mont Pelerin Society[edit]
The Mont Pelerin Society was founded in 1947 by Friedrich Hayek to bring together the widely scattered free market thinkers and political figures. "Hayek and others believed that classical liberalism had failed because of crippling conceptual flaws and that the only way to diagnose and rectify them was to withdraw into an intensive discussion group of similarly minded intellectuals."[42] With central planning in the ascendancy world-wide and few avenues to influence policymakers, the society served to bring together isolated advocates of liberalism as a "rallying point" – as Milton Friedman phrased it. Meeting annually, it would soon be a "kind of international 'who's who' of the classical liberal and neo-liberal intellectuals."[43] While the first conference in 1947 was almost half American, the Europeans concentration dominated by 1951. Europe would remain the "epicenter" of the community with Europeans dominating the leadership.[44]
Post-WWII neo-liberal currents[edit]
Germany[edit]
Ludwig Erhard
Neoliberal ideas were first implemented in West Germany. The neoliberal economists around Ludwig Erhard could draw on the theories they had developed in the 1930s and 1940s and contribute to West Germany’s reconstruction after the Second World War.[45] Erhard was a member of the Mont Pelerin Society and in constant contact with other neoliberals. He pointed out that he is commonly classified as neoliberal and that he accepted this classification.[46]
The ordoliberal Freiburg School was more pragmatic. The German neoliberals accepted the classical liberal notion that competition drives economic prosperity, but they argued that a laissez-faire state policy stifles competition as the strong devour the weak since monopolies and cartels could pose a threat to freedom of competition. They supported the creation of a well-developed legal system and capable regulatory apparatus. While still opposed to full-scale Keynesian employment policies or an extensive welfare state German neoliberals' theory was marked by their willingness to place humanistic and social values on par with economic efficiency. Alfred Müller-Armack coined the phrase "social market economy" to emphasize the egalitarian and humanistic bent of the idea.[6] According to Taylor C. Boas and Jordan Gans-Morse, Walter Eucken stated that "social security and social justice are the greatest concerns of our time".[6]
Erhard had always emphasized that the market was inherently social and did not need to be made so.[47] He had hoped that growing prosperity would enable the population to manage much of their social security by self-reliance and end the necessity for a widespread welfare state. By the name of Volkskapitalismus there were some efforts to foster private savings. But although average contributions to the public old age insurance were quite small, it remained by far the most important old age income source for a majority of the German population. Therefore, despite liberal rhetoric, the 1950s witnessed what has been called a ″reluctant expansion of the welfare state″. To end widespread poverty among the elderly the pension reform of 1957 brought a significant extension of the German welfare state which already had been established under Otto von Bismarck.[48] Rüstow, who had coined the label "neoliberalism", criticized that development tendency and pressed for a more limited welfare program.[47]
Hayek did not like the expression "social market economy", but he stated in 1976 that some of his friends in Germany had succeeded in implementing the sort of social order for which he was pleading while using that phrase. However, in Hayek's view the social market economy's aiming for both a market economy and social justice was a muddle of inconsistent aims.[49] Despite his controversies with the German neoliberals at the Mont Pelerin Society, Ludwig von Mises stated that Erhard and Müller-Armack accomplished a great act of liberalism to restore the German economy and called this "a lesson for the US".[50] According to different research, however, Mises believed that the ordoliberals were hardly better than socialists. As an answer to Hans Hellwigs complaints about the interventionist excesses of the Erhard ministry and the ordoliberals, Mises wrote, "I have no illusions about the true character of the politics and politicians of the social market economy." According to Mises, Erhard's teacher Franz Oppenheimer "taught more or less the New Frontier line of" President Kennedy's "Harvard consultants (Schlesinger, Galbraith, etc.)".[51]
In Germany, neoliberalism at first was synonymous with both ordoliberalism and social market economy. But over time the original term neoliberalism gradually disappeared since social market economy was a much more positive term and fitted better into the Wirtschaftswunder (economic miracle) mentality of the 1950s and 1960s.[47]
Chile[edit]
Further information: Crisis of 1982 and Miracle of Chile
In the 1960s, Latin American intellectuals began to notice the ideas of ordoliberalism; these intellectuals often used the Spanish term neoliberalismo to refer to this school of thought. They were particularly impressed by the social market economy and the Wirtschaftswunder (“economic miracle”) in Germany and speculated about the possibility of accomplishing similar policies in their own countries. Neoliberalism in 1960s meant essentially a philosophy that was more moderate than classical liberalism and favored using state policy to temper social inequality and counter a tendency toward monopoly.[6]
Pamphlet calling for a protest in 1983 following the economic crisis attributed to neoliberal experimentation[52][53]
In 1955, a select group of Chilean students (later known as the Chicago Boys) were invited to the University of Chicago to pursue postgraduate studies in economics. They worked directly under Friedman and his disciple Arnold Harberger, while also being exposed to Hayek. When they returned to Chile in the 1960s, the Chicago Boys began a concerted effort to spread the philosophy and policy recommendations of the Chicago and Austrian schools, setting up think tanks and publishing in ideologically sympathetic media. Under the military dictatorship headed by Pinochet and severe social repression, the Chicago boys implemented radical economic reform. The latter half of the 1970s witnessed rapid and extensive privatization, deregulation, and reductions in trade barriers. In 1978 policies that would reduce the role of the state and infuse competition and individualism into areas such as labor relations, pensions, health, and education were introduced.[6] These policies resulted in widening inequality as they negatively impacted the wages, benefits and working conditions of Chile's working class.[54][55] According to Chilean economist Alejandro Foxley, by the end of Pinochet's reign around 44% of Chilean families were living below the poverty line.[56] In The Shock Doctrine, Naomi Klein argues that by the late 1980s the economy had stabilized and was growing, but around 45% of the population had fallen into poverty while the wealthiest 10% saw their incomes rise by 83%.[57]
Two decades after it was first used by pro-market intellectuals in the 1960s, the meaning of neoliberalism changed. Those who regularly used the term neoliberalism in the 1980s typically applied it in its present-day, radical sense, denoting market fundamentalism.
In 1990 the military dictatorship ended. Hayek argued that increased economic freedom had put pressure on the dictatorship over time and increased political freedom. Many years earlier, in The Road to Serfdom (1944), Hayek had argued that "economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."[58] The Chilean scholars Javier Martínez and Alvaro Díaz reject that argument pointing to the long tradition of democracy in Chile. The return of democracy had required the defeat of the Pinochet regime though it had been fundamental in saving capitalism. The essential contribution came from profound mass rebellions and finally old party elites using old institutional mechanisms to bring back democracy.[59]
Australia[edit]
In Australia, neoliberal economic policies have been embraced by governments of both the Labor Party and the Liberal Party since the 1980s. The governments of Bob Hawke and Paul Keating from 1983 to 1996 pursued economic liberalisation and a program of micro-economic reform. These governments privatized government corporations, deregulated factor markets, floated the Australian dollar, and reduced trade protection.[60]
Keating, as federal treasurer, implemented a compulsory superannuation guarantee system in 1992 to increase national savings and reduce future government liability for old age pensions.[61] The financing of universities was deregulated, requiring students to contribute to university fees through a repayable loan system known as the Higher Education Contribution Scheme (HECS) and encouraging universities to increase income by admitting full-fee-paying students, including foreign students.[62] The admitting of domestic full fee paying students to public universities was stopped in 2009 by the Rudd Labor Government.[63]
Economic schools of thought[edit]
Austrian School[edit]
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The Austrian School is a school of economic thought which bases its study of economic phenomena on the interpretation and analysis of the purposeful actions of individuals.[64][65][66][67] It derives its name from its origin in late-19th and early-20th century Vienna with the work of Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others.[68] Currently, adherents of the Austrian School can come from any part of the world, but they are often referred to as "Austrian economists" or "Austrians" and their work as "Austrian economics".
Among the contributions of the Austrian School to economic theory are the subjective theory of value, marginalism in price theory, and the formulation of the economic calculation problem.[69] Many theories developed by "first wave" Austrian economists have been absorbed into most mainstream schools of economics. These include Carl Menger's theories on marginal utility, Friedrich von Wieser's theories on opportunity cost, and Eugen von Böhm-Bawerk's theories on time preference, as well as Menger and Böhm-Bawerk's criticisms of Marxian economics. The Austrian School differs significantly from many other schools of economic thought in that the Austrian analysis of the observed economy begins from a prior understanding of the motivations and processes of human action. The Austrian School follows an approach, termed methodological individualism, a version of which was codified by Ludwig von Mises and termed "praxeology" in his book published in English as Human Action in 1949.[70] Mises was the first Austrian economist to present a statement of a praxeological method. Since that time, few Austrian thinkers have adopted his approach and many have adopted alternative versions.[71] For example, Fritz Machlup, Friedrich von Hayek, and others, did not take Mises' strong a priori approach to economics.[72]
During the early 1950s, Murray Rothbard attended the seminar of Mises at New York University and was greatly influenced by Mises' book Human Action.[73][74] The Volker Fund paid Rothbard to write a textbook to explain Human Action in a fashion suitable for college students; a sample chapter he wrote on money and credit won Mises’s approval. As Rothbard continued his work, he enlarged the project. The result was Rothbard's book Man, Economy, and State, published in 1962. Upon its publication, Mises praised Rothbard's work effusively and, for Mises, uncharacteristically.[75]:14 Rothbard founded the Center for Libertarian Studies in 1976 and the Journal of Libertarian Studies in 1977. He was associated with the 1982 creation of the Ludwig von Mises Institute in Auburn, Alabama, and was vice president of academic affairs until 1995. During the 1970s and 1980s, Rothbard was active in the Libertarian Party. He was frequently involved in the party's internal politics. He was one of the founders of the Cato Institute, and "came up with the idea of naming this libertarian think tank after Cato’s Letters, a powerful series of British newspaper essays by John Trenchard and Thomas Gordon which played a decisive influence upon America's Founding Fathers in fomenting the Revolution."[76]
The former U.S. Federal Reserve Chairman, Alan Greenspan, speaking of the originators of the School, said in 2000, "the Austrian School have reached far into the future from when most of them practiced and have had a profound and, in my judgment, probably an irreversible effect on how most mainstream economists think in this country."[77] In 1987, Nobel Laureate James M. Buchanan told an interviewer, "I have no objections to being called an Austrian. Hayek and Mises might consider me an Austrian but, surely some of the others would not."[78] Republican U.S. congressman Ron Paul states that he adheres to Austrian School economics and has authored six books which refer to the subject.[79][80] Paul's former economic adviser, investment dealer Peter Schiff,[81] also calls himself an adherent of the Austrian School.[82] Jim Rogers, investor and financial commentator, also considers himself of the Austrian School of economics.[83] Chinese economist Zhang Weiying, who is known in China for his advocacy of free market reforms, supports some Austrian theories such as the Austrian theory of the business cycle.[84] Currently, universities with a significant Austrian presence are George Mason University, Loyola University New Orleans, and Auburn University in the United States and Universidad Francisco Marroquín in Guatemala. Austrian economic ideas are also promoted by bodies such as the Mises Institute and the Foundation for Economic Education.
Chicago School[edit]
Main article: Chicago school of economics
Milton Friedman, 2005
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The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of University of Chicago. Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations.[85] The school is strongly associated with economists such as Milton Friedman, George Stigler, Ronald Coase and Gary Becker.[86]
The school emphasizes non-intervention from government and generally rejects regulation in markets as inefficient with the exception of central bank regulation of the money supply (i.e., monetarism). Although the school's association with neoliberalism is sometimes resisted by its proponents,[85] its emphasis on reduced government intervention in the economy and a laissez-faire ideology have brought about an affiliation between the Chicago school and neoliberal economics.[87][88]
Expanded definition[edit]
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This section possibly contains original research. Please improve it by verifying the claims made and adding inline citations. Statements consisting only of original research should be removed. (November 2014)
The meaning of neoliberalism has changed over time and come to mean different things to different groups. As a result, it is very hard to define. This is seen by the fact that authoritative sources on neoliberalism, such as Friedrich Hayek,[89] Milton Friedman, David Harvey[90] and Noam Chomsky[91] do not agree about the meaning of neoliberalism. This lack of agreement creates major problems in creating an unbiased and unambiguous definition of neoliberalism. This section aims to define neoliberalism more accurately and to show how its evolution has influenced the different uses of the word.
One of the first problems with the meaning of neoliberalism is that liberalism, on which it is based, is also very hard to describe.[92] The uncertainty over the meaning of liberalism is commonly reflected in neoliberalism itself, and is the first serious point of confusion.
The second major problem with the meaning of neoliberalism is that neoliberalism went from being a purely theoretical ideology to become a practical and applied one. The 1970s onwards saw a surge in the acceptability of neoliberalism, and neoliberal governments swept in across the world, promising neoliberal reforms. However, governments did not always carry out their promised reforms, either through design or circumstances. This leads to the second serious point of confusion; namely, that most neoliberalism after this point isn't always ideologically neoliberal.
Classical liberalism in the 20th century[edit]
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Classical liberalism was revived in inter-War Austria by economists, including Friedrich Hayek and Ludwig von Mises. They were concerned about the erosion of liberty by both socialist and fascist governments in Europe at that time and tried to restate the case for liberty. Hayek's 1970s book, The Constitution of Liberty[89] sums up this argument. In the introduction he states: If old truths are to retain their hold on men's minds, they must be restated in the language and concepts of successive generations.
Hayek's belief in liberty stemmed from an argument about information.[93] He believed that no individual (or group, including the government) could ever understand everything about an economy or a society in order to rationally design the best system of governance. He argued this only got worse as scientific progress increased and the scope of human knowledge grew, leaving individuals increasingly more and more ignorant in their lifetimes. As a result, he believed it was impossible for any person or government to design the perfect systems under which people could be governed. The only solution to this, he believed, was to allow all possible systems to be tried in the real world and to allow the better systems to beat the worse systems through competition. In a liberal society, he believed, the few who used liberty to try out new things would come up with successful adaptations of existing systems or new ways of doing things. These discoveries, once shared and become mainstream, would benefit the whole of society, even those who did not directly partake of liberty.
Due to the ignorance of the individual, Hayek argued that an individual could not understand which of the various political, economic and social rules they had followed had made them successful. In his mind, this made the superstitions and traditions of a society in which an individual operated vitally important,[94] since in probability they had, in some way, aided the success of the individual. This would be especially true in a successful society, where these superstitions and traditions would, in all probability be successful ones that had evolved over time to exploit new circumstances.[95] However, this did not excuse any superstition or tradition being followed if it had outlived its usefulness: respect of tradition and superstition for the sake of tradition and superstition were not acceptable values to him.[96] Therefore, classical liberalism combined a respect for the old, drawn from conservatism, with the progressive striving towards the future, of liberalism.[97]
In emphasising evolution and competition of ideas, Hayek highlighted the divide between practical liberalism that evolved in a haphazard way in Britain, championed by such people as David Hume and Adam Smith, versus the more theoretical approach of the French, in such people as Descartes and Rousseau. Hayek christened these the pragmatic and rationalist schools, the former evolving institutions with an eye towards liberty and the later creating a brave new world by sweeping all the old and therefore useless ideas away.[98] Hayeks's ideas on information and the necessity of evolving evolutions placed liberalism firmly on the pragmatic side against both rationalist socialists (such as communists and social liberals) and rationalist capitalists (such as economic libertarians, laissez-faire capitalists) alike.
The rule of law[edit]
At the centre of liberalism was the rule of law. Hayek believed that liberty was maximised when coercion was minimised.[99] Hayek did not believe that a complete lack of coercion was possible, or even desirable, for a liberal society, and he argued that a set of traditions was absolutely necessary which allowed individuals to judge whether they would or would not be coerced. This body of tradition he notes as law and the use of this tradition the Rule of Law.[100] In designing a liberal system of law, Hayek believed that two things were vitally important: the protection and delineation of the personal sphere[101] and the prevention of fraud and deception,[102] which could be maintained only by threat of coercion from the state. In delineating a personal sphere, individuals could know under what circumstances they would or would not be coerced, and could plan accordingly.[103]
In designing such a system, Hayek believed that it could maintain a protected sphere by protecting against abuses by the ruling power, be it a monarch (e.g., Bill of Rights 1689), the will of the majority in a democracy[104] (e.g., the US Constitution[105]) or the administration[106] (e.g. the Rechtsstaat). He believed that the most important features of such protections were equality before the law, and generality of the law. Equality meant that all should be equal before the law and therefore subject to it, even those decisions of a legislature or government administration. Generality meant that the law should be general and abstract, focusing not on ends or means, as a command would, but on general rules which, by their lack of specificity, could not be said to grant privileges, discriminate or compel any specific individual to an end.[107] General laws could also be used to transmit knowledge and encourage spontaneous order in human societies (much like the use of Adam Smith's invisible hand in economics).[108] He also stressed the importance of individuals being responsible for their actions in order to encourage others to respect the law.[109]
Policy[edit]
Important practical tools for making these things work included separation of powers, the idea that those enforcing the law and those making it should be separate, to prevent the lawmakers from pursuing short-term ends[110] and constitutionalism, the idea that lawmakers should be legally bound about the laws they could pass,[105] thereby preventing absolute rule by the majority.
In the late 1980s, a practical statement of neoliberal aims was codified in the Washington Consensus.
Conservatism[edit]
Classical neoliberalism's respect for tradition, combined with its pragmatic approach to progress, endeared it to conservative movements around the world looking for a way to adapt to the changing nature of the modern world. This saw it adopted by conservative movements, most famously in Chile under Pinochet, the United Kingdom under Margaret Thatcher[111] and in the United States of America under Ronald Reagan.
David Harvey suggests that Lewis Powell's 1971 confidential memorandum to the US Chamber of Commerce, a call to arms to the business community to counter criticism of the free enterprise system, was a significant factor in the rise of conservative organizations and think-tanks which advocated for neoliberal policies, such as The Heritage Foundation, The Cato Institute, Citizens for a Sound Economy, Accuracy in Academia and the Manhattan Institute for Policy Research. For Powell, universities were becoming an ideological battleground and recommended the establishment of an intellectual infrastructure to serve as a counterweight to the increasingly popular ideas of Ralph Nader and other opponents of big business.[112]
Economic neoliberalism[edit]
The next important form of neoliberalism is economic neoliberalism. Economic neoliberalism stems out of the historical rift between classical liberalism and economic liberalism, and developed when the economically liberal minded co-opted the language and ideas of classical neoliberalism to place economic freedom at its heart, making it a right-wing ideology.[citation needed] Essentially, economic neoliberalism can be derived by taking the classical neoliberal definition above and taking the protected personal sphere to solely refer to property rights and contract. The liberal opposite of economic neoliberalism is modern liberalism, the corresponding left-wing ideology.[citation needed] The best known proponent of economic neoliberalism is Milton Friedman.[citation needed]
Economic neoliberalism is the most common form of neoliberalism, and is what is usually meant when a system is described as neoliberal.[113] According to Tayab Mahmud, quoting terminology from Anthony Carty
The neoliberal project is to turn the "nation-state" into a "market-state," one with the primary agenda of facilitating global capital accumulation unburdened from any legal regulations aimed at assuring welfare of citizens. In summary, neoliberalism seeks unbridled accumulation of capital through a rollback of the state, and limits its functions to minimal security and maintenance of law, fiscal and monetary discipline, flexible labor markets, and liberalization of trade and capital flows.[114]
Economic neoliberalism is distinct from classical neoliberalism for many reasons. Hayek believed that certain elements that now make up modern economic neoliberal thought are too rationalist, relying on preconceived notions of human behaviour, such as the idea of homo economicus.[115] Paul Treanor points out that it is too utopian, and therefore illiberal.[116] David Harvey points out that economic neoliberalism is "theory of economic political practices", rather than a complete ideology, and therefore, no correlation or connection needs to exist between a favourable assessment of neoliberal economic practises and a commitment to liberalism proper.[117] Likewise Anna-Maria Blomgren views neoliberalism as a continuum ranging from classical to economic liberalism.[118] A broad and, it is hoped, clearer restatement of the above is to point out that classic liberals must be economic liberals, but economic liberals do not have to be classically liberal, and it is the latter group that makes up the "new liberalism" of economic neoliberalism.[119]
Neoliberal economics[edit]
Friedman's chief argument about neoliberalism can be described as a consequentialist libertarian one: that the reason for adopting minimal government interference in the economy is for its beneficial consequences, and not any ideological reason. At the heart of economic neoliberalism are various theories that advocate the correctness of the economic neoliberal ideology.
Neoliberal economics in the 1920s took the ideas of the great liberal economists, such as Adam Smith, and updated them for the modern world. Friedrich Hayek's ideas on information flow, present in classical neoliberalism, were codified in economic form under the Austrian School as the economic calculation problem. This problem of information flow implied that a decentralised system, in which information travelled freely and was freely determined at each localised point (Hayek called this catallaxy), would be much better than a central authority trying to do the same, even if it was completely efficient and was motivated to act in the public good.[120] In this view, the free market is a perfect example of such a system in which the market determined prices act as the information signals flowing through the economy. Actors in the economy could make decent decisions for their own businesses factoring in all the complex factors that led to market prices without having to understand or be completely aware of all of those complex factors.
In accepting the ideas of the Austrian School regarding information flow, economic neoliberals were forced to accept that free markets were artificial, and therefore would not arise spontaneously, but would have to be enforced, usually through the state and the rule of law. In this way, economic neoliberalism enshrines the role of the state and becomes distinct from libertarian thought. However, in accepting the ideas of self-regulating markets, neoliberals drastically restrict the role of the government to managing those forms of market failure that the neoliberal economics allowed: property rights and information asymmetry. This restricted the government to maintaining property rights by providing law and order through the police, maintaining an independent judiciary and maintaining the national defence, and basic regulation to guard against fraud. This made neoliberal economics distinct from Keynesian economics of the preceding decades.
These ideas were then developed further. Milton Friedman introduced the idea of adaptive expectations during the stagflation of the 1970s, which claims to describe why government interference (in the form of printing money) resulted in increasing inflation, as shop owners started to predict the rate of increase in the money supply, rendering the government action useless. This developed into the idea of rational expectations, which concludes that all government interference is useless and disruptive because the free market would predict and undermine the government's proposed action. At the same time, the efficient-market hypothesis assumed that, because of catallaxy, the market could not be informationally wrong. Or, to paraphrase the famous quote of Warren Buffett, "the market is there to inform you, not serve you".[121] Combined with rational expectations, this showed that, if all of the neoliberal assumptions held, markets would be self-regulating, and regulation would be unnecessary and disruptive.
Additionally, claims proliferated that the free market would produce the socially optimum equilibrium with regard to production of goods and services, such as the fundamental theorems of welfare economics and general equilibrium theory, which led to the further contention that government intervention could only result in making society worse off (see Pareto efficient).[original research?]
Criticism[edit]
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The rise of neoliberalism in the 1970s as a practical system of government saw it implemented in various forms across the world. In some cases, the result was not anything that could be identified as neoliberalism, often with catastrophic results for the poor. This has resulted in many on the left claiming that this is a deliberate goal of neoliberalism,[122] while those on the right defend the original goals of neoliberalism and insist otherwise, an argument that rages to this day. Nevertheless, neoliberalism has come under attack not only from the political left (social democrats), but also elements of the right (cultural nationalists) and myriad activists and academics.[31] This section attempts to provide an unbiased overview of this discussion, focusing on all the forms of neoliberalism that are not in any way neoliberal, but which have come to be associated with it, as well as the reasons for why this has happened.
One of the best and least controversial examples of "neoliberal" reform is in Russia, whose reforms in 1989 were justified under neoliberal economic policy but which lacked any of the basic features of a neoliberal state (e.g. the rule of law, free press) which could have justified the reforms.
General liberal failure[edit]
The least controversial aspect of neoliberalism has often been presented by modern economists critical of neoliberalism's role in the world economic system. Among these economists, the chief voices of dissent are Joseph Stiglitz[123] and Paul Krugman.
Both use arguments about market failure to justify their views on neoliberalism. They argue that when markets are imperfect (which is to say all markets everywhere to some degree), then they can fail and may not work as neoliberals predict, resulting in some form of crony capitalism. The two chief modes of failure are usually due to imperfect property rights and due to imperfect information and correspond directly to Friedrich Hayek's assertion that classical liberalism will not work without protection of the private sphere and the prevention of fraud and deception.
The failure of property rights means that individuals can't protect ownership of their resources and control what happens to them, or prevent others from taking them away. This usually stifles free enterprise and results in preferential treatment for those who can.
Class project[edit]
Not all members of a society may have equal access to the law or to information, even when everyone is theoretically equal under the law, as in a liberal democracy. This is because access to the law and information is not free as liberals (such as Hayek) assume, but have associated costs. Therefore, in this context, it is sound to say that the wealthy have greater rights than the poor.[124][125][126] In some cases, the poor may have practically no rights at all if their income falls below the levels necessary to access the law and unbiased sources of information, while the very wealthy may have the ability to choose which rights and responsibilities they bear if they can move themselves and their property internationally, resulting in social stratification, also known as class. This alleged tendency to create and strengthen class has resulted in some (most famously David Harvey[90]) claiming that neoliberalism is a class project, designed to impose class on society through liberalism. Economist David M. Kotz contends that neoliberalism "is based on the thorough domination of labor by capital."[127] The emergence of the 'precariat', a new class facing acute socio-economic insecurity and alienation, has been attributed to the globalization of neoliberalism.[128]
Sociologist Thomas Volscho has argued that the imposition of "neoliberalism" in the United States arose from a conscious political mobilization by capitalist elites in the 1970s who faced two crises: the legitimacy of capitalism and a falling rate of profitability in industry. Various "neoliberal" ideologies (such as "monetarism" and "supply-side economics") had been long advanced by elites, translated into policies by the Reagan administration, and ultimately resulted in less governmental regulation and a shift from a tax-financed state to a debt-financed one. While the profitability of industry and the rate of economic growth never recovered to the heyday of the 1960s, the political and economic power of Wall Street and finance capital vastly increased due to the debt-financing of the state."[129]
Sociologist Loïc Wacquant argues that neoliberal policy for dealing with social instability among economically marginalized populations following the retrenchment of the social welfare state and the rise of punitive workfare, increased gentrification of urban areas, privatization of public functions, the shrinking of collective protections for the working class via economic deregulation, and the rise of underpaid, precarious wage labor is the criminalization of poverty followed by mass incarceration.[130][131] By contrast, it is extremely lenient in dealing with those in the upper echelons of society, in particular when it comes to economic crimes of the privileged classes and corporations such as fraud, embezzlement, insider trading, credit and insurance fraud, money laundering, and violation of commerce and labor codes.[126][132] According to Wacquant, neoliberalism doesn't shrink government but instead sets up a centaur state, with little governmental oversight for those at the top and strict control of those at the bottom.[126][133]
In expanding upon Wacquant's thesis, sociologist and political economist John L. Campbell of Dartmouth College suggests that through privatization, the prison system exemplifies the centaur state:
On the one hand, it punishes the lower class, which populates the prisons; on the other hand, it profits the upper class, which owns the prisons, and it employs the middle class, which runs them.
In addition, he says the prison system benefits corporations through outsourcing, as the inmates are "slowly becoming a source of low-wage labor for some US corporations." Both through privatization and outsourcing, Campbell argues, the US penal state reflects neoliberalism.[134] Campbell also argues that while neoliberalism in the US established a penal state for the poor, it also put into place a debtor state for the middle class, and that "both have had perverse effects on their respective targets: increasing rates of incarceration among the lower class and increasing rates of indebtedness—and recently home foreclosure—among the middle class."[135]
Feminism[edit]
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Neo-liberalism has been criticized by feminist theory for having a negative effect on the female workforce population across the globe -especially in the global south. Masculinist assumptions and objectives continue to dominate economic and geopolitical thinking.[136] Women's experiences in non-industrialized countries reveal often deleterious effects of modernization policies and undercut orthodox claims that development benefits everyone.[137] Proponents of neoliberalism have often theorized that by furthering women's participation in the workforce, there will be heightened economic progress, but feminist critics have noted that this participation alone does not further equality in gender relations.[138] Neoliberalism has failed to address significant problems such as the devaluation of feminized labour, the structural privileging of men and masculinity, and the politicization of women's subordination in the family and the workplace.[139] The 'feminization of employment' refers to a conceptual characterization of deteriorated and devalorized labour conditions that are less desirable, meaningful, safe and secure.[140] Employers in the global south have perceptions about feminine labour and seek workers who are perceived to be undemanding, docile and willing to accept low wages.[141] Social constructs about feminized labour have played a big part in this, for instance, employers often perpetuate ideas about women as 'secondary income earners to justify their lower rates of pay and not deserving of training or promotion.[142] The exploitation of female workers production centers is very widespread, women workforces are subject to high levels of control and surveillance, and worked under extreme measures to achieve production goals under the observation of their supervisors.[143] The privatization that comes along with neoliberal economic reforms for countries who want loans from western multinational corporations reduce public spending drastically and women are disproportionately affected because they depend on secure government jobs and public resources more often than men. When economic conditions deteriorate, women are culturally expected to fill the gap, in spite of few resources.[144]
Neoliberalism can also be seen as gutting liberal concepts under market values. Liberal feminism has seen the same effect with new definitions under neoliberalism using key liberal terms such as equality, opportunity, and free choice while displacing and replacing their content to individualized and entrepreneurial content.[145] The individualistic nature of this new feminism disavows the social, cultural, and economic forces producing this inequality, moving feminism from a structural problem into an individual affair. This hollows out the potential of liberal feminism to underscore the constitutive contradictions of liberal democracy and further entrenches neoliberal rationality and imperialistic logic.[146] The neoliberal shift in feminism neutralizes collective uprising and transfers the site of activity from the public arena to each individuals psyche. With no orientation beyond the self, feminism is not being steered towards the toppling of the political order or even coming to awareness of systematic male domination.[147] Liberal feminism when individualized rather than collectivized completely detaches from social inequality and consequently cannot offer any sustained analysis of the structures of male dominance, power, privilege.[148] The larger support in feminism for Hillary Clinton in 2016 (NOW and "Feminists for Clinton") is an example of this shift in feminism towards neoliberalism considering Clinton has consistently favored policies devastating to women and LGBT practices.[149] This shift reflects a narrowness of analysis, vision, and values that only apply to wealthy white women who share in the wealth from corporate capitalism and U.S. imperial power.[150]
Globalization[edit]
In practice, less developed nations have less developed rights and institutions, resulting in greater risk for international lenders and businesses. This means that developing countries usually have less privileged access to international markets than developed countries. Because of this effect, international lenders are also more likely to invest in foreign companies (i.e. multinational corporations) inside a country, rather than in local businesses,[151] giving international firms an unfair competitive advantage. Also, speculative flows of capital may enter the country during a boom and leave during a recession, deepening economic crises and destabilizing the economy.
Both of these problems imply that developing countries should have greater protections against international markets than developed ones and greater barriers to trade. Despite such problems, IMF policy in response to crises, which is supposed to be guided by neoliberal ideas such as the Washington Consensus, is to increase liberalization of the economy and decrease barriers, allowing bigger capital flight and the chance for foreign firms to shore up their monopolies. Additionally, the IMF acts to increase moral hazard, since international involvement will usually result in an international bailout with foreign creditors being treated preferentially, leading international firms to discount the risks of doing business in less developed countries[152] and forcing the government to pay for them instead.
The view of some that international involvement and the imposition of "neoliberal" policies usually serves to make things worse and acts against the interests of the country being "saved", has led some to argue that the policies have nothing to do with any form of liberalism, but hide some other purpose.[153] The most common assertion given by opponents is that they are a form of neocolonialism, where the more developed countries can exploit the less developed countries. However, even opponents do not agree. For example, Stiglitz assumes that there is no neoimperial plot, but that the system is driven by a mixture of ideology and special interests, in which neoliberal fundamentalists, who do not believe that neoliberalism can fail, work with financial and other multinational corporations, who have the most to benefit from opening up foreign markets. David Harvey, on the other hand, argues that local elites exploit neoliberal reforms in order to impose reforms that benefit them at the cost of the poor, while transferring the blame onto the "evil imperialist" developed countries,[90] citing the example of Argentina in 2001.
Corporatism[edit]
Mark Arthur has written that the influence of neoliberalism has given rise to an "anti-corporatist" movement in opposition to it. This "anti-corporatist" movement is articulated around the need to re-claim the power that corporations and global institutions have stripped governments of…". He says that Adam Smith's "rules for mindful markets" served as a basis for the anti-corporate movement, "following government's failure to restrain corporations from hurting or disturbing the happiness of the neighbor [Smith]".[154]
Policy implications[edit]
Neoliberalism seeks to transfer control of the economy from public to the private sector,[155] rationalized by the narrative that it will produce a more efficient government and improve the economic health of the nation.[156] The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's statement of the "Washington Consensus."[157] The Washington Consensus is a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the International Monetary Fund (IMF) and World Bank).[158] Williamson's list included ten points:
Fiscal policy – governments should not run large deficits that have to be paid back by future citizens, and such deficits can have only a short term effect on the level of employment in the economy. Constant deficits will lead to higher inflation and lower productivity, and should be avoided. Deficits should only be used for occasional stabilization purposes.
Redirection of public spending from subsidies (especially what neoliberals call "indiscriminate subsidies") and other spending neoliberals deem wasteful toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment
Tax reform – broadening the tax base and adopting moderate marginal tax rates to encourage innovation and efficiency;
Interest rates that are market determined and positive (but moderate) in real terms;
Floating exchange rates;
Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; thus encouraging competition and long term growth
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
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.
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;
Legal security for property rights;
Public debate and portrayal in media[edit]
Noam Chomsky (April 2014)[edit]
Noam Chomsky is the author of Profit over People which contains a critique of neoliberalism.
In an interview with Jan Nederveen Pieterse on University of California Television Noam Chomsky was asked a question about neoliberalism. He stated that it is not new and it is not liberal equating it with propaganda as masking "old-fashioned" class war and imperialism as programmes imposed on what is now the Third World. [159]
Marc Chesney (June 2015)[edit]
Marc Chesney, a professor of finance at the University of Zurich opened an interview with Le Temps about a financial transaction tax with the dramatic statement, "A financial aristocracy has taken hold of power. It is draped in clothes of liberalism, but its daily practice often contradicts the basic principles. This aristocracy manages to impose its policy and interests. These caused the crisis and undermine prospects for improvement. If the damage caused by the crisis are of a different nature than those of the Great War, they are nonetheless devastating". [160]
March 2016 controversy in Belgium[edit]
Manuela Cadelli, president of the Trade Union of Magistrates stated in an article in Le Soir that neoliberalism is a fascism, detailing that liberalism was originally a doctrine derived from the Enlightenment Period as being the engine of the advent and progress of Western democracies but neoliberalism has devolved into totalitarian economism. [161]
Although the President of the Parti Socialiste Elio Di Rupo agreed with the content of the article, Christophe Lacroix, the Socialist Minister of Budget stated that liberalism or neo-liberalism can never be compared to fascism in trivializing what is a dictatorship and an end to democracy. He further stated that his opposition to liberalism is due to its dominant thought with sole focus on the economy and that criticism and comparisons to Marine Le Pen and far-right parties should not apply to the Mouvement Réformateur. [162]
Corentin de Salle, Scientific Director of the Centre Jean Gol, responded to Manuela Cadelli's article by stating that the comparison is as absurd as to assert that neo-socialism is a fascism. He underlined that Manuela Cadelli took great care in distinguishing liberalism from neoliberalism due to the important contributions of the liberal tradition to society and stated his view that "neoliberalism" is a fictitious concept originating from liberal critics and that neoliberalism does not exist. He further gave arguments to underline that neoliberalism is not liberal. [163]
This brought about a backlash from public opinion with accusations of "revisionnism" or "negationism" to which De Salle replied on social media that he does not deny in any way the existence of problems but he attributes them to different and more complex causes. [164]
Reach and effects[edit]
Effects in Latin American urbanization[edit]
Between the 1930s and the late 1970s most countries in Latin America used the import substitution industrialization model (ISI) to build industry and reduce the dependency on imports from foreign countries. The result of ISI in these countries included: rapid urbanization of one or two major cities, a growing urban population of the worki
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For the school of international relations, see Neoliberalism (international relations).
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Neoliberalism (or sometimes neo-liberalism)[1] is a term which has been used since the 1950s,[2] but became more prevalent in its current meaning in the 1970s and 80s by scholars in a wide variety of social sciences[3] and critics[4] primarily in reference to the resurgence of 19th century ideas associated with laissez-faire economic liberalism.[5] Its advocates support extensive economic liberalisation policies such as privatisation, fiscal austerity, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy.[6][7][8][9][10][11][12] Neoliberalism is famously associated with the economic policies introduced by Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States.[7] The implementation of neoliberal policies and the acceptance of neoliberal economic theories in the 1970s are seen by some academics as the root of financialization, with the financial crisis of 2007–08 one of the ultimate results.[13][14][15][16][17]
The definition and usage of the term has changed over time.[6] It was originally an economic philosophy that emerged among European liberal scholars in the 1930s in an attempt to trace a so-called 'Third' or 'Middle Way' between the conflicting philosophies of classical liberalism and socialist planning.[18] The impetus for this development arose from a desire to avoid repeating the economic failures of the early 1930s, which were mostly blamed by neoliberals on the economic policy of classical liberalism. In the decades that followed, the use of the term neoliberal tended to refer to theories at variance with the more laissez-faire doctrine of classical liberalism, and promoted instead a market economy under the guidance and rules of a strong state, a model which came to be known as the social market economy.
In the 1960s, usage of the term "neoliberal" heavily declined. When the term was reintroduced in the 1980s in connection with Augusto Pinochet's economic reforms in Chile, the usage of the term had shifted. It had not only become a term with negative connotations employed principally by critics of market reform, but it also had shifted in meaning from a moderate form of liberalism to a more radical and laissez-faire capitalist set of ideas. Scholars now tended to associate it with the theories of economists Friedrich Hayek and Milton Friedman.[6] Once the new meaning of neoliberalism was established as a common usage among Spanish-speaking scholars, it diffused into the English-language study of political economy.[6] Scholarship on the phenomenon of neoliberalism has been growing.[19] The impact of the global 2008-09 crisis has also given rise to new scholarship that critiques neoliberalism and seeks developmental alternatives.[20]
Contents [hide]
1Terminology
2Early history
2.1Colloque Walter Lippmann
2.2Mont Pelerin Society
3Post-WWII neo-liberal currents
3.1Germany
3.2Chile
3.3Australia
4Economic schools of thought
4.1Austrian School
4.2Chicago School
5Expanded definition
5.1Classical liberalism in the 20th century
5.1.1The rule of law
5.1.2Policy
5.1.3Conservatism
5.2Economic neoliberalism
5.2.1Neoliberal economics
5.3Criticism
5.3.1General liberal failure
5.3.2Class project
5.3.3Feminism
5.3.4Globalization
5.3.5Corporatism
6Policy implications
7Public debate and portrayal in media
7.1Noam Chomsky (April 2014)
7.2Marc Chesney (June 2015)
7.3March 2016 controversy in Belgium
8Reach and effects
8.1Effects in Latin American urbanization
8.2Effects on global health
9Support
9.1Political freedom
10Opposition
11Protest
12See also
13Notes
14Bibliography and further reading
15External links
15.1Online lectures
Terminology[edit]
The German scholar Alexander Rüstow coined the term "neoliberalism" in 1938 at the Colloque Walter Lippmann.[21][22][23] The colloquium defined the concept of neoliberalism as involving "the priority of the price mechanism, free enterprise, the system of competition, and a strong and impartial state".[24] To be "neoliberal" meant advocating a modern economic policy with State intervention.[25] Neoliberal State interventionism brought a clash with the opposite laissez-faire camp of classical liberals, like Ludwig von Mises.[26] While present-day scholars tend to identify Friedrich Hayek, Milton Friedman, and Ayn Rand as the most important theorists of neoliberalism, most scholars in the 1950s and 1960s understood neoliberalism as referring to the social market economy and its principal economic theorists such as Eucken, Röpke, Rüstow, and Müller-Armack. Although Hayek had intellectual ties to the German neoliberals, his name was only occasionally mentioned in conjunction with neoliberalism during this period due to his more pro-free market stance. Friedman's name essentially never appeared in connection with neoliberalism until the 1980s.[6] In the sixties, use of the term "neoliberal" heavily declined.[6]
Another movement from the American left that used the term "Neoliberalism" to describe its ideology formed in the United States in the 1970s. Prominent neoliberal politicians included Al Gore and Bill Clinton of the Democratic Party of the United States.[27] The neoliberals coalesced around two magazines, The New Republic and the Washington Monthly. The "godfather" of this version of neoliberalism was the journalist Charles Peters[28] who in 1983 published "A Neoliberal's Manifesto."[29]
Elizabeth Tandy Shermer argues that, "Academics (largely left-wing) started using “neoliberalism” in the 1970s to describe and decry a late twentieth-century effort by policy makers, think-tank experts, and industrialists to condemn social-democratic reforms and unapologetically implement free-market policies."[30] Other academics note that neoliberalism has critics from across the political spectrum.[31]
During the military rule under Augusto Pinochet (1973–1990) in Chile, opposition scholars took up the expression to describe the economic reforms implemented in Chile after 1973 and its proponents (the "Chicago Boys").[6] Once the new meaning of neoliberalism was established as a common usage among Spanish-speaking scholars, it diffused directly into the English-language study of political economy.[6] In the last two decades, according to the Boas and Gans-Morse study of 148 journal articles, neoliberalism is almost never defined but used in several senses to describe ideology, economic theory, development theory, or economic reform policy. It has largely become a term of condemnation employed by critics. And it now suggests a market fundamentalism closer to the laissez-faire principles of the "paleoliberals" than to the ideas of the original neoliberals who attended the colloquium. This leaves some controversy as to the precise meaning of the term and its usefulness as a descriptor in the social sciences, especially as the number of different kinds of market economies have proliferated in recent years.[6] In the book Neoliberalism: A Very Short Introduction, published by Oxford University Press (2010), the authors argue that neoliberalism is "anchored in the principles of the free-market economics."[15]
According to Boas and Gans-Morse, neoliberalism is nowadays an academic catchphrase used mainly by critics as a pejorative term, and has outpaced the use of similar terms such as monetarism, neoconservatism, the Washington Consensus and "market reform" in much scholarly writing.[6] Daniel Stedman Jones, a historian of the concept, says the term "is too often used as a catch-all shorthand for the horrors associated with globalization and recurring financial crises"[32] Nowadays the most common use of the term neoliberalism refers to market-oriented reform policies such as "eliminating price controls, deregulating capital markets, lowering trade barriers", and reducing state influence on the economy especially by privatization and fiscal austerity.[6] The term is used in several senses: as a development model it refers to the rejection of structuralist economics in favor of the Washington Consensus; as an ideology the term is used to denote a conception of freedom as an overarching social value associated with reducing state functions to those of a minimal state; and finally as an academic paradigm the term is closely related to neoclassical economic theory.[6] The sociologists Fred L. Block and Margaret R. Somers claim there is a dispute over what to call the influence of free market ideas which have been used to justify the retrenchment of New Deal programs and policies over the last thirty years: neoliberalism, laissez-faire or just "free market ideology."[33]
Other academics, such as Susan Braedley and Meg Luxton, assert that neoliberalism is a political philosophy which seeks to "liberate" the processes of capital accumulation.[14] American professor of political science and Democratic socialist Frances Fox Piven sees neoliberalism as essentially hyper-capitalism.[34] Robert W. McChesney, American professor at the University of Illinois at Urbana–Champaign and co-editor of the independent socialist magazine Monthly Review, claims that the term neoliberalism, which he defines as "capitalism with the gloves off," is largely unknown by the general public, particularly in the United States.[35] Lester Spence uses the term to critique trends in Black politics, defining neoliberalism as "the general idea that society works best when the people and the institutions within it work or are shaped to work according to market principles."[36]
Early history[edit]
Colloque Walter Lippmann[edit]
In the 1930s, the mood was decidedly anti-liberal. The worldwide Great Depression brought about high unemployment and widespread poverty. The crisis was widely regarded as the failure of economic liberalism. To renew liberalism a group of 25 liberals organised the Walter Lippman Colloquium, an international meeting that took place in Paris in August 1938. Among them were Louis Rougier, Walter Lippmann, Friedrich von Hayek, Ludwig von Mises, Wilhelm Röpke and Alexander Rüstow. Following the core message of Lippmann's book The Good Society participants like Rüstow, Lippmann and Rougier agreed that the old liberalism of laissez faire had failed and that a new liberalism needed to take its place. While for them it was a farewell to classical liberalism, which they thought to have failed, other participants like Mises and Hayek were not convinced to condemn the old liberalism of laissez faire. But all participants were united in their call for a new liberal project. Following Rüstow's original recommendation they called this project neoliberalism. The neoliberalism that came out of the Walter Lippman Colloquium was generally in line with Rüstow's theories of turning away from conceptions of laissez-faire towards a market economy under the guidance and the rules of a strong state.[37] It was an attempt to formulate an anti-capitalist, anti-communist Third Way. Neoliberalism was originally established as something quite different from the free market radicalism with which it is usually associated today.[38]
They agreed to turn the Walter Lippman Colloquium into a permanent think tank called Centre International d’Études pour la Rénovation du Libéralisme. But at the Walter Lippman Colloquium, the fundamental differences between 'true (third way) neoliberals' around Rüstow and Lippmann on the one hand and old school liberals around Mises and Hayek on the other were already quite visible. While ‘true neoliberals’ demanded state intervention to correct undesirable market structures, Mises had always insisted that the only legitimate role for the state was to abolish barriers to market entry. Similar differences of opinion also existed in other questions such as social policy and the scope for interventionism. After a few years the insurmountable differences between old liberals and the neoliberals became unbearable. Rüstow was bitter that Mises still adhered to a version of liberalism that Rüstow thought had failed spectacularly. In a letter Rüstow wrote that Hayek and his master Mises deserved to be put in spirits and placed in a museum as one of the last surviving specimen of an otherwise extinct species of liberals which caused the current catastrophe (the Great Depression). Mises became equally critical of the German neoliberals. He complained that Ordoliberalism really meant 'ordo-interventionism'.[39]
Michel Foucault uses the term in this sense in his famous 1978–79 lectures on "biopolitics".[40] He discusses the late 30s German meaning used by Walter Lippmann and others, of a middle way between capitalism and socialism. He says "Neo-liberalism is not Adam Smith; neo-liberalism is not market society" [41] and to him it clearly does not mean Hayek and Milton Friedman.
Mont Pelerin Society[edit]
The Mont Pelerin Society was founded in 1947 by Friedrich Hayek to bring together the widely scattered free market thinkers and political figures. "Hayek and others believed that classical liberalism had failed because of crippling conceptual flaws and that the only way to diagnose and rectify them was to withdraw into an intensive discussion group of similarly minded intellectuals."[42] With central planning in the ascendancy world-wide and few avenues to influence policymakers, the society served to bring together isolated advocates of liberalism as a "rallying point" – as Milton Friedman phrased it. Meeting annually, it would soon be a "kind of international 'who's who' of the classical liberal and neo-liberal intellectuals."[43] While the first conference in 1947 was almost half American, the Europeans concentration dominated by 1951. Europe would remain the "epicenter" of the community with Europeans dominating the leadership.[44]
Post-WWII neo-liberal currents[edit]
Germany[edit]
Ludwig Erhard
Neoliberal ideas were first implemented in West Germany. The neoliberal economists around Ludwig Erhard could draw on the theories they had developed in the 1930s and 1940s and contribute to West Germany’s reconstruction after the Second World War.[45] Erhard was a member of the Mont Pelerin Society and in constant contact with other neoliberals. He pointed out that he is commonly classified as neoliberal and that he accepted this classification.[46]
The ordoliberal Freiburg School was more pragmatic. The German neoliberals accepted the classical liberal notion that competition drives economic prosperity, but they argued that a laissez-faire state policy stifles competition as the strong devour the weak since monopolies and cartels could pose a threat to freedom of competition. They supported the creation of a well-developed legal system and capable regulatory apparatus. While still opposed to full-scale Keynesian employment policies or an extensive welfare state German neoliberals' theory was marked by their willingness to place humanistic and social values on par with economic efficiency. Alfred Müller-Armack coined the phrase "social market economy" to emphasize the egalitarian and humanistic bent of the idea.[6] According to Taylor C. Boas and Jordan Gans-Morse, Walter Eucken stated that "social security and social justice are the greatest concerns of our time".[6]
Erhard had always emphasized that the market was inherently social and did not need to be made so.[47] He had hoped that growing prosperity would enable the population to manage much of their social security by self-reliance and end the necessity for a widespread welfare state. By the name of Volkskapitalismus there were some efforts to foster private savings. But although average contributions to the public old age insurance were quite small, it remained by far the most important old age income source for a majority of the German population. Therefore, despite liberal rhetoric, the 1950s witnessed what has been called a ″reluctant expansion of the welfare state″. To end widespread poverty among the elderly the pension reform of 1957 brought a significant extension of the German welfare state which already had been established under Otto von Bismarck.[48] Rüstow, who had coined the label "neoliberalism", criticized that development tendency and pressed for a more limited welfare program.[47]
Hayek did not like the expression "social market economy", but he stated in 1976 that some of his friends in Germany had succeeded in implementing the sort of social order for which he was pleading while using that phrase. However, in Hayek's view the social market economy's aiming for both a market economy and social justice was a muddle of inconsistent aims.[49] Despite his controversies with the German neoliberals at the Mont Pelerin Society, Ludwig von Mises stated that Erhard and Müller-Armack accomplished a great act of liberalism to restore the German economy and called this "a lesson for the US".[50] According to different research, however, Mises believed that the ordoliberals were hardly better than socialists. As an answer to Hans Hellwigs complaints about the interventionist excesses of the Erhard ministry and the ordoliberals, Mises wrote, "I have no illusions about the true character of the politics and politicians of the social market economy." According to Mises, Erhard's teacher Franz Oppenheimer "taught more or less the New Frontier line of" President Kennedy's "Harvard consultants (Schlesinger, Galbraith, etc.)".[51]
In Germany, neoliberalism at first was synonymous with both ordoliberalism and social market economy. But over time the original term neoliberalism gradually disappeared since social market economy was a much more positive term and fitted better into the Wirtschaftswunder (economic miracle) mentality of the 1950s and 1960s.[47]
Chile[edit]
Further information: Crisis of 1982 and Miracle of Chile
In the 1960s, Latin American intellectuals began to notice the ideas of ordoliberalism; these intellectuals often used the Spanish term neoliberalismo to refer to this school of thought. They were particularly impressed by the social market economy and the Wirtschaftswunder (“economic miracle”) in Germany and speculated about the possibility of accomplishing similar policies in their own countries. Neoliberalism in 1960s meant essentially a philosophy that was more moderate than classical liberalism and favored using state policy to temper social inequality and counter a tendency toward monopoly.[6]
Pamphlet calling for a protest in 1983 following the economic crisis attributed to neoliberal experimentation[52][53]
In 1955, a select group of Chilean students (later known as the Chicago Boys) were invited to the University of Chicago to pursue postgraduate studies in economics. They worked directly under Friedman and his disciple Arnold Harberger, while also being exposed to Hayek. When they returned to Chile in the 1960s, the Chicago Boys began a concerted effort to spread the philosophy and policy recommendations of the Chicago and Austrian schools, setting up think tanks and publishing in ideologically sympathetic media. Under the military dictatorship headed by Pinochet and severe social repression, the Chicago boys implemented radical economic reform. The latter half of the 1970s witnessed rapid and extensive privatization, deregulation, and reductions in trade barriers. In 1978 policies that would reduce the role of the state and infuse competition and individualism into areas such as labor relations, pensions, health, and education were introduced.[6] These policies resulted in widening inequality as they negatively impacted the wages, benefits and working conditions of Chile's working class.[54][55] According to Chilean economist Alejandro Foxley, by the end of Pinochet's reign around 44% of Chilean families were living below the poverty line.[56] In The Shock Doctrine, Naomi Klein argues that by the late 1980s the economy had stabilized and was growing, but around 45% of the population had fallen into poverty while the wealthiest 10% saw their incomes rise by 83%.[57]
Two decades after it was first used by pro-market intellectuals in the 1960s, the meaning of neoliberalism changed. Those who regularly used the term neoliberalism in the 1980s typically applied it in its present-day, radical sense, denoting market fundamentalism.
In 1990 the military dictatorship ended. Hayek argued that increased economic freedom had put pressure on the dictatorship over time and increased political freedom. Many years earlier, in The Road to Serfdom (1944), Hayek had argued that "economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."[58] The Chilean scholars Javier Martínez and Alvaro Díaz reject that argument pointing to the long tradition of democracy in Chile. The return of democracy had required the defeat of the Pinochet regime though it had been fundamental in saving capitalism. The essential contribution came from profound mass rebellions and finally old party elites using old institutional mechanisms to bring back democracy.[59]
Australia[edit]
In Australia, neoliberal economic policies have been embraced by governments of both the Labor Party and the Liberal Party since the 1980s. The governments of Bob Hawke and Paul Keating from 1983 to 1996 pursued economic liberalisation and a program of micro-economic reform. These governments privatized government corporations, deregulated factor markets, floated the Australian dollar, and reduced trade protection.[60]
Keating, as federal treasurer, implemented a compulsory superannuation guarantee system in 1992 to increase national savings and reduce future government liability for old age pensions.[61] The financing of universities was deregulated, requiring students to contribute to university fees through a repayable loan system known as the Higher Education Contribution Scheme (HECS) and encouraging universities to increase income by admitting full-fee-paying students, including foreign students.[62] The admitting of domestic full fee paying students to public universities was stopped in 2009 by the Rudd Labor Government.[63]
Economic schools of thought[edit]
Austrian School[edit]
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Main article: Austrian School
Friedrich von Hayek
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The Austrian School is a school of economic thought which bases its study of economic phenomena on the interpretation and analysis of the purposeful actions of individuals.[64][65][66][67] It derives its name from its origin in late-19th and early-20th century Vienna with the work of Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others.[68] Currently, adherents of the Austrian School can come from any part of the world, but they are often referred to as "Austrian economists" or "Austrians" and their work as "Austrian economics".
Among the contributions of the Austrian School to economic theory are the subjective theory of value, marginalism in price theory, and the formulation of the economic calculation problem.[69] Many theories developed by "first wave" Austrian economists have been absorbed into most mainstream schools of economics. These include Carl Menger's theories on marginal utility, Friedrich von Wieser's theories on opportunity cost, and Eugen von Böhm-Bawerk's theories on time preference, as well as Menger and Böhm-Bawerk's criticisms of Marxian economics. The Austrian School differs significantly from many other schools of economic thought in that the Austrian analysis of the observed economy begins from a prior understanding of the motivations and processes of human action. The Austrian School follows an approach, termed methodological individualism, a version of which was codified by Ludwig von Mises and termed "praxeology" in his book published in English as Human Action in 1949.[70] Mises was the first Austrian economist to present a statement of a praxeological method. Since that time, few Austrian thinkers have adopted his approach and many have adopted alternative versions.[71] For example, Fritz Machlup, Friedrich von Hayek, and others, did not take Mises' strong a priori approach to economics.[72]
During the early 1950s, Murray Rothbard attended the seminar of Mises at New York University and was greatly influenced by Mises' book Human Action.[73][74] The Volker Fund paid Rothbard to write a textbook to explain Human Action in a fashion suitable for college students; a sample chapter he wrote on money and credit won Mises’s approval. As Rothbard continued his work, he enlarged the project. The result was Rothbard's book Man, Economy, and State, published in 1962. Upon its publication, Mises praised Rothbard's work effusively and, for Mises, uncharacteristically.[75]:14 Rothbard founded the Center for Libertarian Studies in 1976 and the Journal of Libertarian Studies in 1977. He was associated with the 1982 creation of the Ludwig von Mises Institute in Auburn, Alabama, and was vice president of academic affairs until 1995. During the 1970s and 1980s, Rothbard was active in the Libertarian Party. He was frequently involved in the party's internal politics. He was one of the founders of the Cato Institute, and "came up with the idea of naming this libertarian think tank after Cato’s Letters, a powerful series of British newspaper essays by John Trenchard and Thomas Gordon which played a decisive influence upon America's Founding Fathers in fomenting the Revolution."[76]
The former U.S. Federal Reserve Chairman, Alan Greenspan, speaking of the originators of the School, said in 2000, "the Austrian School have reached far into the future from when most of them practiced and have had a profound and, in my judgment, probably an irreversible effect on how most mainstream economists think in this country."[77] In 1987, Nobel Laureate James M. Buchanan told an interviewer, "I have no objections to being called an Austrian. Hayek and Mises might consider me an Austrian but, surely some of the others would not."[78] Republican U.S. congressman Ron Paul states that he adheres to Austrian School economics and has authored six books which refer to the subject.[79][80] Paul's former economic adviser, investment dealer Peter Schiff,[81] also calls himself an adherent of the Austrian School.[82] Jim Rogers, investor and financial commentator, also considers himself of the Austrian School of economics.[83] Chinese economist Zhang Weiying, who is known in China for his advocacy of free market reforms, supports some Austrian theories such as the Austrian theory of the business cycle.[84] Currently, universities with a significant Austrian presence are George Mason University, Loyola University New Orleans, and Auburn University in the United States and Universidad Francisco Marroquín in Guatemala. Austrian economic ideas are also promoted by bodies such as the Mises Institute and the Foundation for Economic Education.
Chicago School[edit]
Main article: Chicago school of economics
Milton Friedman, 2005
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The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of University of Chicago. Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations.[85] The school is strongly associated with economists such as Milton Friedman, George Stigler, Ronald Coase and Gary Becker.[86]
The school emphasizes non-intervention from government and generally rejects regulation in markets as inefficient with the exception of central bank regulation of the money supply (i.e., monetarism). Although the school's association with neoliberalism is sometimes resisted by its proponents,[85] its emphasis on reduced government intervention in the economy and a laissez-faire ideology have brought about an affiliation between the Chicago school and neoliberal economics.[87][88]
Expanded definition[edit]
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The meaning of neoliberalism has changed over time and come to mean different things to different groups. As a result, it is very hard to define. This is seen by the fact that authoritative sources on neoliberalism, such as Friedrich Hayek,[89] Milton Friedman, David Harvey[90] and Noam Chomsky[91] do not agree about the meaning of neoliberalism. This lack of agreement creates major problems in creating an unbiased and unambiguous definition of neoliberalism. This section aims to define neoliberalism more accurately and to show how its evolution has influenced the different uses of the word.
One of the first problems with the meaning of neoliberalism is that liberalism, on which it is based, is also very hard to describe.[92] The uncertainty over the meaning of liberalism is commonly reflected in neoliberalism itself, and is the first serious point of confusion.
The second major problem with the meaning of neoliberalism is that neoliberalism went from being a purely theoretical ideology to become a practical and applied one. The 1970s onwards saw a surge in the acceptability of neoliberalism, and neoliberal governments swept in across the world, promising neoliberal reforms. However, governments did not always carry out their promised reforms, either through design or circumstances. This leads to the second serious point of confusion; namely, that most neoliberalism after this point isn't always ideologically neoliberal.
Classical liberalism in the 20th century[edit]
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Classical liberalism was revived in inter-War Austria by economists, including Friedrich Hayek and Ludwig von Mises. They were concerned about the erosion of liberty by both socialist and fascist governments in Europe at that time and tried to restate the case for liberty. Hayek's 1970s book, The Constitution of Liberty[89] sums up this argument. In the introduction he states: If old truths are to retain their hold on men's minds, they must be restated in the language and concepts of successive generations.
Hayek's belief in liberty stemmed from an argument about information.[93] He believed that no individual (or group, including the government) could ever understand everything about an economy or a society in order to rationally design the best system of governance. He argued this only got worse as scientific progress increased and the scope of human knowledge grew, leaving individuals increasingly more and more ignorant in their lifetimes. As a result, he believed it was impossible for any person or government to design the perfect systems under which people could be governed. The only solution to this, he believed, was to allow all possible systems to be tried in the real world and to allow the better systems to beat the worse systems through competition. In a liberal society, he believed, the few who used liberty to try out new things would come up with successful adaptations of existing systems or new ways of doing things. These discoveries, once shared and become mainstream, would benefit the whole of society, even those who did not directly partake of liberty.
Due to the ignorance of the individual, Hayek argued that an individual could not understand which of the various political, economic and social rules they had followed had made them successful. In his mind, this made the superstitions and traditions of a society in which an individual operated vitally important,[94] since in probability they had, in some way, aided the success of the individual. This would be especially true in a successful society, where these superstitions and traditions would, in all probability be successful ones that had evolved over time to exploit new circumstances.[95] However, this did not excuse any superstition or tradition being followed if it had outlived its usefulness: respect of tradition and superstition for the sake of tradition and superstition were not acceptable values to him.[96] Therefore, classical liberalism combined a respect for the old, drawn from conservatism, with the progressive striving towards the future, of liberalism.[97]
In emphasising evolution and competition of ideas, Hayek highlighted the divide between practical liberalism that evolved in a haphazard way in Britain, championed by such people as David Hume and Adam Smith, versus the more theoretical approach of the French, in such people as Descartes and Rousseau. Hayek christened these the pragmatic and rationalist schools, the former evolving institutions with an eye towards liberty and the later creating a brave new world by sweeping all the old and therefore useless ideas away.[98] Hayeks's ideas on information and the necessity of evolving evolutions placed liberalism firmly on the pragmatic side against both rationalist socialists (such as communists and social liberals) and rationalist capitalists (such as economic libertarians, laissez-faire capitalists) alike.
The rule of law[edit]
At the centre of liberalism was the rule of law. Hayek believed that liberty was maximised when coercion was minimised.[99] Hayek did not believe that a complete lack of coercion was possible, or even desirable, for a liberal society, and he argued that a set of traditions was absolutely necessary which allowed individuals to judge whether they would or would not be coerced. This body of tradition he notes as law and the use of this tradition the Rule of Law.[100] In designing a liberal system of law, Hayek believed that two things were vitally important: the protection and delineation of the personal sphere[101] and the prevention of fraud and deception,[102] which could be maintained only by threat of coercion from the state. In delineating a personal sphere, individuals could know under what circumstances they would or would not be coerced, and could plan accordingly.[103]
In designing such a system, Hayek believed that it could maintain a protected sphere by protecting against abuses by the ruling power, be it a monarch (e.g., Bill of Rights 1689), the will of the majority in a democracy[104] (e.g., the US Constitution[105]) or the administration[106] (e.g. the Rechtsstaat). He believed that the most important features of such protections were equality before the law, and generality of the law. Equality meant that all should be equal before the law and therefore subject to it, even those decisions of a legislature or government administration. Generality meant that the law should be general and abstract, focusing not on ends or means, as a command would, but on general rules which, by their lack of specificity, could not be said to grant privileges, discriminate or compel any specific individual to an end.[107] General laws could also be used to transmit knowledge and encourage spontaneous order in human societies (much like the use of Adam Smith's invisible hand in economics).[108] He also stressed the importance of individuals being responsible for their actions in order to encourage others to respect the law.[109]
Policy[edit]
Important practical tools for making these things work included separation of powers, the idea that those enforcing the law and those making it should be separate, to prevent the lawmakers from pursuing short-term ends[110] and constitutionalism, the idea that lawmakers should be legally bound about the laws they could pass,[105] thereby preventing absolute rule by the majority.
In the late 1980s, a practical statement of neoliberal aims was codified in the Washington Consensus.
Conservatism[edit]
Classical neoliberalism's respect for tradition, combined with its pragmatic approach to progress, endeared it to conservative movements around the world looking for a way to adapt to the changing nature of the modern world. This saw it adopted by conservative movements, most famously in Chile under Pinochet, the United Kingdom under Margaret Thatcher[111] and in the United States of America under Ronald Reagan.
David Harvey suggests that Lewis Powell's 1971 confidential memorandum to the US Chamber of Commerce, a call to arms to the business community to counter criticism of the free enterprise system, was a significant factor in the rise of conservative organizations and think-tanks which advocated for neoliberal policies, such as The Heritage Foundation, The Cato Institute, Citizens for a Sound Economy, Accuracy in Academia and the Manhattan Institute for Policy Research. For Powell, universities were becoming an ideological battleground and recommended the establishment of an intellectual infrastructure to serve as a counterweight to the increasingly popular ideas of Ralph Nader and other opponents of big business.[112]
Economic neoliberalism[edit]
The next important form of neoliberalism is economic neoliberalism. Economic neoliberalism stems out of the historical rift between classical liberalism and economic liberalism, and developed when the economically liberal minded co-opted the language and ideas of classical neoliberalism to place economic freedom at its heart, making it a right-wing ideology.[citation needed] Essentially, economic neoliberalism can be derived by taking the classical neoliberal definition above and taking the protected personal sphere to solely refer to property rights and contract. The liberal opposite of economic neoliberalism is modern liberalism, the corresponding left-wing ideology.[citation needed] The best known proponent of economic neoliberalism is Milton Friedman.[citation needed]
Economic neoliberalism is the most common form of neoliberalism, and is what is usually meant when a system is described as neoliberal.[113] According to Tayab Mahmud, quoting terminology from Anthony Carty
The neoliberal project is to turn the "nation-state" into a "market-state," one with the primary agenda of facilitating global capital accumulation unburdened from any legal regulations aimed at assuring welfare of citizens. In summary, neoliberalism seeks unbridled accumulation of capital through a rollback of the state, and limits its functions to minimal security and maintenance of law, fiscal and monetary discipline, flexible labor markets, and liberalization of trade and capital flows.[114]
Economic neoliberalism is distinct from classical neoliberalism for many reasons. Hayek believed that certain elements that now make up modern economic neoliberal thought are too rationalist, relying on preconceived notions of human behaviour, such as the idea of homo economicus.[115] Paul Treanor points out that it is too utopian, and therefore illiberal.[116] David Harvey points out that economic neoliberalism is "theory of economic political practices", rather than a complete ideology, and therefore, no correlation or connection needs to exist between a favourable assessment of neoliberal economic practises and a commitment to liberalism proper.[117] Likewise Anna-Maria Blomgren views neoliberalism as a continuum ranging from classical to economic liberalism.[118] A broad and, it is hoped, clearer restatement of the above is to point out that classic liberals must be economic liberals, but economic liberals do not have to be classically liberal, and it is the latter group that makes up the "new liberalism" of economic neoliberalism.[119]
Neoliberal economics[edit]
Friedman's chief argument about neoliberalism can be described as a consequentialist libertarian one: that the reason for adopting minimal government interference in the economy is for its beneficial consequences, and not any ideological reason. At the heart of economic neoliberalism are various theories that advocate the correctness of the economic neoliberal ideology.
Neoliberal economics in the 1920s took the ideas of the great liberal economists, such as Adam Smith, and updated them for the modern world. Friedrich Hayek's ideas on information flow, present in classical neoliberalism, were codified in economic form under the Austrian School as the economic calculation problem. This problem of information flow implied that a decentralised system, in which information travelled freely and was freely determined at each localised point (Hayek called this catallaxy), would be much better than a central authority trying to do the same, even if it was completely efficient and was motivated to act in the public good.[120] In this view, the free market is a perfect example of such a system in which the market determined prices act as the information signals flowing through the economy. Actors in the economy could make decent decisions for their own businesses factoring in all the complex factors that led to market prices without having to understand or be completely aware of all of those complex factors.
In accepting the ideas of the Austrian School regarding information flow, economic neoliberals were forced to accept that free markets were artificial, and therefore would not arise spontaneously, but would have to be enforced, usually through the state and the rule of law. In this way, economic neoliberalism enshrines the role of the state and becomes distinct from libertarian thought. However, in accepting the ideas of self-regulating markets, neoliberals drastically restrict the role of the government to managing those forms of market failure that the neoliberal economics allowed: property rights and information asymmetry. This restricted the government to maintaining property rights by providing law and order through the police, maintaining an independent judiciary and maintaining the national defence, and basic regulation to guard against fraud. This made neoliberal economics distinct from Keynesian economics of the preceding decades.
These ideas were then developed further. Milton Friedman introduced the idea of adaptive expectations during the stagflation of the 1970s, which claims to describe why government interference (in the form of printing money) resulted in increasing inflation, as shop owners started to predict the rate of increase in the money supply, rendering the government action useless. This developed into the idea of rational expectations, which concludes that all government interference is useless and disruptive because the free market would predict and undermine the government's proposed action. At the same time, the efficient-market hypothesis assumed that, because of catallaxy, the market could not be informationally wrong. Or, to paraphrase the famous quote of Warren Buffett, "the market is there to inform you, not serve you".[121] Combined with rational expectations, this showed that, if all of the neoliberal assumptions held, markets would be self-regulating, and regulation would be unnecessary and disruptive.
Additionally, claims proliferated that the free market would produce the socially optimum equilibrium with regard to production of goods and services, such as the fundamental theorems of welfare economics and general equilibrium theory, which led to the further contention that government intervention could only result in making society worse off (see Pareto efficient).[original research?]
Criticism[edit]
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The rise of neoliberalism in the 1970s as a practical system of government saw it implemented in various forms across the world. In some cases, the result was not anything that could be identified as neoliberalism, often with catastrophic results for the poor. This has resulted in many on the left claiming that this is a deliberate goal of neoliberalism,[122] while those on the right defend the original goals of neoliberalism and insist otherwise, an argument that rages to this day. Nevertheless, neoliberalism has come under attack not only from the political left (social democrats), but also elements of the right (cultural nationalists) and myriad activists and academics.[31] This section attempts to provide an unbiased overview of this discussion, focusing on all the forms of neoliberalism that are not in any way neoliberal, but which have come to be associated with it, as well as the reasons for why this has happened.
One of the best and least controversial examples of "neoliberal" reform is in Russia, whose reforms in 1989 were justified under neoliberal economic policy but which lacked any of the basic features of a neoliberal state (e.g. the rule of law, free press) which could have justified the reforms.
General liberal failure[edit]
The least controversial aspect of neoliberalism has often been presented by modern economists critical of neoliberalism's role in the world economic system. Among these economists, the chief voices of dissent are Joseph Stiglitz[123] and Paul Krugman.
Both use arguments about market failure to justify their views on neoliberalism. They argue that when markets are imperfect (which is to say all markets everywhere to some degree), then they can fail and may not work as neoliberals predict, resulting in some form of crony capitalism. The two chief modes of failure are usually due to imperfect property rights and due to imperfect information and correspond directly to Friedrich Hayek's assertion that classical liberalism will not work without protection of the private sphere and the prevention of fraud and deception.
The failure of property rights means that individuals can't protect ownership of their resources and control what happens to them, or prevent others from taking them away. This usually stifles free enterprise and results in preferential treatment for those who can.
Class project[edit]
Not all members of a society may have equal access to the law or to information, even when everyone is theoretically equal under the law, as in a liberal democracy. This is because access to the law and information is not free as liberals (such as Hayek) assume, but have associated costs. Therefore, in this context, it is sound to say that the wealthy have greater rights than the poor.[124][125][126] In some cases, the poor may have practically no rights at all if their income falls below the levels necessary to access the law and unbiased sources of information, while the very wealthy may have the ability to choose which rights and responsibilities they bear if they can move themselves and their property internationally, resulting in social stratification, also known as class. This alleged tendency to create and strengthen class has resulted in some (most famously David Harvey[90]) claiming that neoliberalism is a class project, designed to impose class on society through liberalism. Economist David M. Kotz contends that neoliberalism "is based on the thorough domination of labor by capital."[127] The emergence of the 'precariat', a new class facing acute socio-economic insecurity and alienation, has been attributed to the globalization of neoliberalism.[128]
Sociologist Thomas Volscho has argued that the imposition of "neoliberalism" in the United States arose from a conscious political mobilization by capitalist elites in the 1970s who faced two crises: the legitimacy of capitalism and a falling rate of profitability in industry. Various "neoliberal" ideologies (such as "monetarism" and "supply-side economics") had been long advanced by elites, translated into policies by the Reagan administration, and ultimately resulted in less governmental regulation and a shift from a tax-financed state to a debt-financed one. While the profitability of industry and the rate of economic growth never recovered to the heyday of the 1960s, the political and economic power of Wall Street and finance capital vastly increased due to the debt-financing of the state."[129]
Sociologist Loïc Wacquant argues that neoliberal policy for dealing with social instability among economically marginalized populations following the retrenchment of the social welfare state and the rise of punitive workfare, increased gentrification of urban areas, privatization of public functions, the shrinking of collective protections for the working class via economic deregulation, and the rise of underpaid, precarious wage labor is the criminalization of poverty followed by mass incarceration.[130][131] By contrast, it is extremely lenient in dealing with those in the upper echelons of society, in particular when it comes to economic crimes of the privileged classes and corporations such as fraud, embezzlement, insider trading, credit and insurance fraud, money laundering, and violation of commerce and labor codes.[126][132] According to Wacquant, neoliberalism doesn't shrink government but instead sets up a centaur state, with little governmental oversight for those at the top and strict control of those at the bottom.[126][133]
In expanding upon Wacquant's thesis, sociologist and political economist John L. Campbell of Dartmouth College suggests that through privatization, the prison system exemplifies the centaur state:
On the one hand, it punishes the lower class, which populates the prisons; on the other hand, it profits the upper class, which owns the prisons, and it employs the middle class, which runs them.
In addition, he says the prison system benefits corporations through outsourcing, as the inmates are "slowly becoming a source of low-wage labor for some US corporations." Both through privatization and outsourcing, Campbell argues, the US penal state reflects neoliberalism.[134] Campbell also argues that while neoliberalism in the US established a penal state for the poor, it also put into place a debtor state for the middle class, and that "both have had perverse effects on their respective targets: increasing rates of incarceration among the lower class and increasing rates of indebtedness—and recently home foreclosure—among the middle class."[135]
Feminism[edit]
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Neo-liberalism has been criticized by feminist theory for having a negative effect on the female workforce population across the globe -especially in the global south. Masculinist assumptions and objectives continue to dominate economic and geopolitical thinking.[136] Women's experiences in non-industrialized countries reveal often deleterious effects of modernization policies and undercut orthodox claims that development benefits everyone.[137] Proponents of neoliberalism have often theorized that by furthering women's participation in the workforce, there will be heightened economic progress, but feminist critics have noted that this participation alone does not further equality in gender relations.[138] Neoliberalism has failed to address significant problems such as the devaluation of feminized labour, the structural privileging of men and masculinity, and the politicization of women's subordination in the family and the workplace.[139] The 'feminization of employment' refers to a conceptual characterization of deteriorated and devalorized labour conditions that are less desirable, meaningful, safe and secure.[140] Employers in the global south have perceptions about feminine labour and seek workers who are perceived to be undemanding, docile and willing to accept low wages.[141] Social constructs about feminized labour have played a big part in this, for instance, employers often perpetuate ideas about women as 'secondary income earners to justify their lower rates of pay and not deserving of training or promotion.[142] The exploitation of female workers production centers is very widespread, women workforces are subject to high levels of control and surveillance, and worked under extreme measures to achieve production goals under the observation of their supervisors.[143] The privatization that comes along with neoliberal economic reforms for countries who want loans from western multinational corporations reduce public spending drastically and women are disproportionately affected because they depend on secure government jobs and public resources more often than men. When economic conditions deteriorate, women are culturally expected to fill the gap, in spite of few resources.[144]
Neoliberalism can also be seen as gutting liberal concepts under market values. Liberal feminism has seen the same effect with new definitions under neoliberalism using key liberal terms such as equality, opportunity, and free choice while displacing and replacing their content to individualized and entrepreneurial content.[145] The individualistic nature of this new feminism disavows the social, cultural, and economic forces producing this inequality, moving feminism from a structural problem into an individual affair. This hollows out the potential of liberal feminism to underscore the constitutive contradictions of liberal democracy and further entrenches neoliberal rationality and imperialistic logic.[146] The neoliberal shift in feminism neutralizes collective uprising and transfers the site of activity from the public arena to each individuals psyche. With no orientation beyond the self, feminism is not being steered towards the toppling of the political order or even coming to awareness of systematic male domination.[147] Liberal feminism when individualized rather than collectivized completely detaches from social inequality and consequently cannot offer any sustained analysis of the structures of male dominance, power, privilege.[148] The larger support in feminism for Hillary Clinton in 2016 (NOW and "Feminists for Clinton") is an example of this shift in feminism towards neoliberalism considering Clinton has consistently favored policies devastating to women and LGBT practices.[149] This shift reflects a narrowness of analysis, vision, and values that only apply to wealthy white women who share in the wealth from corporate capitalism and U.S. imperial power.[150]
Globalization[edit]
In practice, less developed nations have less developed rights and institutions, resulting in greater risk for international lenders and businesses. This means that developing countries usually have less privileged access to international markets than developed countries. Because of this effect, international lenders are also more likely to invest in foreign companies (i.e. multinational corporations) inside a country, rather than in local businesses,[151] giving international firms an unfair competitive advantage. Also, speculative flows of capital may enter the country during a boom and leave during a recession, deepening economic crises and destabilizing the economy.
Both of these problems imply that developing countries should have greater protections against international markets than developed ones and greater barriers to trade. Despite such problems, IMF policy in response to crises, which is supposed to be guided by neoliberal ideas such as the Washington Consensus, is to increase liberalization of the economy and decrease barriers, allowing bigger capital flight and the chance for foreign firms to shore up their monopolies. Additionally, the IMF acts to increase moral hazard, since international involvement will usually result in an international bailout with foreign creditors being treated preferentially, leading international firms to discount the risks of doing business in less developed countries[152] and forcing the government to pay for them instead.
The view of some that international involvement and the imposition of "neoliberal" policies usually serves to make things worse and acts against the interests of the country being "saved", has led some to argue that the policies have nothing to do with any form of liberalism, but hide some other purpose.[153] The most common assertion given by opponents is that they are a form of neocolonialism, where the more developed countries can exploit the less developed countries. However, even opponents do not agree. For example, Stiglitz assumes that there is no neoimperial plot, but that the system is driven by a mixture of ideology and special interests, in which neoliberal fundamentalists, who do not believe that neoliberalism can fail, work with financial and other multinational corporations, who have the most to benefit from opening up foreign markets. David Harvey, on the other hand, argues that local elites exploit neoliberal reforms in order to impose reforms that benefit them at the cost of the poor, while transferring the blame onto the "evil imperialist" developed countries,[90] citing the example of Argentina in 2001.
Corporatism[edit]
Mark Arthur has written that the influence of neoliberalism has given rise to an "anti-corporatist" movement in opposition to it. This "anti-corporatist" movement is articulated around the need to re-claim the power that corporations and global institutions have stripped governments of…". He says that Adam Smith's "rules for mindful markets" served as a basis for the anti-corporate movement, "following government's failure to restrain corporations from hurting or disturbing the happiness of the neighbor [Smith]".[154]
Policy implications[edit]
Neoliberalism seeks to transfer control of the economy from public to the private sector,[155] rationalized by the narrative that it will produce a more efficient government and improve the economic health of the nation.[156] The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's statement of the "Washington Consensus."[157] The Washington Consensus is a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the International Monetary Fund (IMF) and World Bank).[158] Williamson's list included ten points:
Fiscal policy – governments should not run large deficits that have to be paid back by future citizens, and such deficits can have only a short term effect on the level of employment in the economy. Constant deficits will lead to higher inflation and lower productivity, and should be avoided. Deficits should only be used for occasional stabilization purposes.
Redirection of public spending from subsidies (especially what neoliberals call "indiscriminate subsidies") and other spending neoliberals deem wasteful toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment
Tax reform – broadening the tax base and adopting moderate marginal tax rates to encourage innovation and efficiency;
Interest rates that are market determined and positive (but moderate) in real terms;
Floating exchange rates;
Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; thus encouraging competition and long term growth
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
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.
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;
Legal security for property rights;
Public debate and portrayal in media[edit]
Noam Chomsky (April 2014)[edit]
Noam Chomsky is the author of Profit over People which contains a critique of neoliberalism.
In an interview with Jan Nederveen Pieterse on University of California Television Noam Chomsky was asked a question about neoliberalism. He stated that it is not new and it is not liberal equating it with propaganda as masking "old-fashioned" class war and imperialism as programmes imposed on what is now the Third World. [159]
Marc Chesney (June 2015)[edit]
Marc Chesney, a professor of finance at the University of Zurich opened an interview with Le Temps about a financial transaction tax with the dramatic statement, "A financial aristocracy has taken hold of power. It is draped in clothes of liberalism, but its daily practice often contradicts the basic principles. This aristocracy manages to impose its policy and interests. These caused the crisis and undermine prospects for improvement. If the damage caused by the crisis are of a different nature than those of the Great War, they are nonetheless devastating". [160]
March 2016 controversy in Belgium[edit]
Manuela Cadelli, president of the Trade Union of Magistrates stated in an article in Le Soir that neoliberalism is a fascism, detailing that liberalism was originally a doctrine derived from the Enlightenment Period as being the engine of the advent and progress of Western democracies but neoliberalism has devolved into totalitarian economism. [161]
Although the President of the Parti Socialiste Elio Di Rupo agreed with the content of the article, Christophe Lacroix, the Socialist Minister of Budget stated that liberalism or neo-liberalism can never be compared to fascism in trivializing what is a dictatorship and an end to democracy. He further stated that his opposition to liberalism is due to its dominant thought with sole focus on the economy and that criticism and comparisons to Marine Le Pen and far-right parties should not apply to the Mouvement Réformateur. [162]
Corentin de Salle, Scientific Director of the Centre Jean Gol, responded to Manuela Cadelli's article by stating that the comparison is as absurd as to assert that neo-socialism is a fascism. He underlined that Manuela Cadelli took great care in distinguishing liberalism from neoliberalism due to the important contributions of the liberal tradition to society and stated his view that "neoliberalism" is a fictitious concept originating from liberal critics and that neoliberalism does not exist. He further gave arguments to underline that neoliberalism is not liberal. [163]
This brought about a backlash from public opinion with accusations of "revisionnism" or "negationism" to which De Salle replied on social media that he does not deny in any way the existence of problems but he attributes them to different and more complex causes. [164]
Reach and effects[edit]
Effects in Latin American urbanization[edit]
Between the 1930s and the late 1970s most countries in Latin America used the import substitution industrialization model (ISI) to build industry and reduce the dependency on imports from foreign countries. The result of ISI in these countries included: rapid urbanization of one or two major cities, a growing urban population of the worki
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