Many neoliberal policies are concerned with the efficient functioning of free market capitalism and focus on limiting government spending, government regulation, and public ownership.

Neoliberalism is often associated with the leadership of Margaret Thatcher, Prime Minister of the United Kingdom from 1979 to 1990 (and leader of the Conservative Party from 1975 to 1990), and Ronald Reagan, the 40th President of the United States from 1981 to 1989. [1]2

More recently, neoliberalism has been associated with austerity policies and attempts to cut government spending on social programs.

Main gains

-Neoliberal policies typically support fiscal austerity, deregulation, free trade, privatization, and reduced government spending. -Neoliberalism is often associated with the economic policies of Margaret Thatcher in the UK and Ronald Reagan in the US.

• There are many criticisms of neoliberalism, including its potential dangers to democracy, the damage it does to workers' rights, and its structure of society and the economy around markets that are far less rational than they are supposed to be.
• It has also been accused of giving too much power to corporations and exacerbating economic inequality.

Understanding neoliberalism

Neoliberalism is a political and economic philosophy that emphasizes free trade, deregulation, globalization, and reduced government spending. It is related to laissez-faire economics, a school of thought that advocates minimal government intervention in the economic problems of individuals and society.

Laissez-faire economics is a philosophy that holds that minimal state intervention and involvement in the economy will maximize economic growth and prosperity.

Furthermore, neoliberalism is sometimes confused with libertarianism. However, neoliberals generally advocate more government intervention in the economy and society than libertarians. For example, while neoliberals generally favor a low-rate progressive tax system, libertarians tend to advocate a low-rate flat tax or the complete elimination of the income tax. The two also often differ philosophically. Libertarians focus on economic freedoms and rights, while neoliberals focus more on free market economics as a way to achieve more growth goals.

Furthermore, neoliberals generally do not oppose measures such as bailouts of major industries, which are anathema to libertarians.

Characteristics of neoliberalism

Neoliberalism encompasses the belief that greater economic freedom leads to greater economic and social progress for individuals. It supports:

• The importance of free enterprise, competition, deregulation and individual responsibility
• Oppose the expansion of government power, national welfare, and inflation
• Minimize government control of industry and promote private sector ownership of businesses and property
• Free market capitalism and efficient allocation of resources
• Free trade rather than heavily regulated markets and protectionism
• Reduce government spending and lower taxes
• Reduce government control over economic activities to improve the efficient functioning of the economy
• Increase the impact of the private sector on the economy
• Reduce union power and increase employment flexibility
• Government intervention when needed to help implement, maintain and protect free market activities

NOTE: President Jimmy Carter’s deregulation of the airline industry in 1978 is an example of a neoliberal policy. The Aviation Deregulation Act removed government control over fares, routes and who could enter the market. [3]

Liberalism vs. Neoliberalism

At its core, liberalism is a broad political philosophy. It holds freedom to a high standard and defines all aspects of society, the economy and politics, including the role of government.

Neoliberalism is essentially an economic ideology. Neoliberal policies are more narrowly focused, focusing primarily on markets and policies and measures that affect the economy.

Criticism of Neoliberalism

There are many criticisms of neoliberalism.

A common criticism of neoliberalism is that it is wrong to advocate free market approaches in areas such as health care and education because these services are public services. Public services are not subject to the same profit motive as other industries.

What’s more, adopting a free market approach to health care and education could lead to increased inequality and underfunding of resources (health care and education) necessary for the long-term health and viability of the economy.

The adoption of neoliberal policies in the Western world has coincided with rising wealth and income inequality. While skilled workers may be able to command higher wages, low-skilled workers are more likely to see wages stagnate.

Some argue that policies associated with neoliberalism encourage the existence of monopolies, thereby increasing corporate profits at the expense of consumers. [4]

Contrary to what proponents of neoliberalism often claim, deregulation of capital does not necessarily help economic development. Instead, capital deregulation has led to increased financial instability, including economic events that sometimes send shock waves around the world.

In fact, the International Monetary Fund (IMF) report on neoliberalism shows that increased capital flows are a factor that increases the risk of adverse business cycles. [5]

Research shows that neoliberal policies increase inequality. This inequality could hamper the economy's long-term growth prospects. On the one hand, those with lower incomes have limited spending power. At the same time, those who become wealthier have a higher propensity to save. [6]

In the latter case, wealth does not trickle down as proponents of neoliberalism claim.

Finally, neoliberal emphasis on economic efficiency has encouraged globalization, which opponents say has led to factories closing and jobs being moved overseas.

Opponents of neoliberalism also claim that its call to replace government-owned companies with private ones could cause various forms of social harm, such as reducing access to basic services and undermining workers' rights.

Furthermore, those who oppose neoliberalism claim that it is anti-democratic and can lead to exploitation and social injustice. They also claim it could lead to companies using their power and resources to subvert the will of the majority. Others assert that it leads to support for undemocratic regimes that implement neoliberal economies.

In simple terms, what is neoliberalism?

It is an economic model or philosophy that emphasizes that in a free society, greater economic and social progress can be achieved when government regulations are minimized, government spending and taxes are reduced, and the government does not exercise strict control over the economy. Neoliberalism is not opposed to all government intervention. However, it does want to limit it to being necessary only to support free markets and free enterprise.

What are the impacts of neoliberalism?

Some impacts could be freer markets, access to more products and services to meet consumer demand, greater revenues and higher profits. Lower prices due to greater competition may also be an impact. Allocating resources more efficiently can lead to savings. The ability to better organize the workforce and hire the talent needed for specific jobs may come from neoliberal policies. Others may point to some of the negative effects perceived to be associated with neoliberalism. These may include economic inequality, the growth of monopolies, lack of job security, job losses due to outsourcing, and growing indifference to individual needs and well-being.

What is an example of neoliberalism?

The North American Free Trade Agreement (NAFTA) is an example. Through the agreement, Canada, Mexico and the United States agreed to remove all trade restrictions between their countries to open up trade and increase economic benefits for each country.

Bottom line

Broadly speaking, neoliberalism is an economic policy position that government should play a limited role in the economy and privatize all functions in which it can play a role. Like many economic policy ideas and theories, neoliberalism has strengths and weaknesses.

References

[1] Gov.Uk. "Baroness Thatcher."

[2] The White House. "Ronald Reagan."

[3] National Air and Space Museum. "Airline Deregulation: When Everything Changed."

[4] Mike Konczal, Katy Milani, Ariel Evans. "The Empirical Failures of Neoliberalism," Page 12. The Roosevelt Institute, January 2020.

[5] International Monetary Fund. "Neoliberalism: Oversold?"

[6] Shahrazd Goudarzi, et. al. "Neoliberalism and the Ideological Construction of Equity Beliefs," Perspectives on Psychological Science, Volume 17, Issue 5. Sep, 2022.

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