Neoliberalism: From the Foundations Up

In the milieu of global politics and associated academic debates, it is quite difficult to come up with a term that causes as much confusion as “neoliberalism”. Nonetheless, it is this very mysterious ideology that holds the key to our current political and economic mess. Neoliberalism is not only a big wheel responsible for the Brexit and Donald Trump’s election, but it continues to dictate the policies of governments, and single-handedly shapes the actions of key institutions such as the WTO, IMF, World Bank, and European Central Bank.


So why despite the overshadowing importance that it commands, is neoliberalism so often misunderstood? The riposte to this enigma lies in the fact that anyone who wants to understand what the neoliberal ideology essentially is, faces a daunting initial mystery. That is, it’s nearly impossible to find anyone who has written adequately about neoliberalism from a sympathetic or even a neutral point of view. Practically everyone who has ever written about neoliberalism has been a critique of the neoliberal ideology or a part of political propaganda. So, to eliminate the bias, and to gain an in-depth perspective about the nitty-gritty of neoliberalism, let’s begin with the very fundamentals.


“Neoliberalism” is an ideology that finds its roots in the French term “néo-libéralisme”, néo meaning “new”, and libéralisme meaning “liberalism”. As the definition suggests, neoliberalism signifies the recent revival of liberalism. It further explains that the political ideology of liberalism has been a pariah from political discussions and policy-making for a brief period, after which it has recently reemerged in a revamped form. In other words, liberalism has undergone a three-stage process of initial growth, eventual decline, and finally a recent rejuvenation. To summarise, neoliberalism, at this scaffold, might be thought of as a distinct ideology, emanating from, but not identical to liberalism.


So what exactly is liberalism in this regard? “Liberalism” is undoubtedly a rather vague and often highly contested concept. It usually explains the tendency towards individual liberty and democracy concerning a person’s political perspective or the political culture of a country. Just as it seems, liberalism, indeed, is anything but a well-defined and demarcated set of political beliefs. Its goals include most prominently the diffusion, intensification, and protection of constitutional democracy, restricted government, individual liberty, and the basic human and civil rights. Like other ideologies, liberalism, too, diverges into a distinct set of meanings and interpretations. ‘Classical liberalism’ argues that the government regulations must be restricted to a bare minimum, which means that the control of practically everything except the armed forces, and law enforcement, must be handed over to the citizens and the organizations that the citizens choose to establish. Such a state is often portrayed as a “night-watchman state”, and its sole purpose is the maintenance of the most fundamental and trivial features of public law and order.


So how does liberalism relate to the economy? To get a gist of the explanation, let delve into the concept of the liberal state. Liberals often consider the state to be a freely established association between individuals. Intriguingly, the members of the state have a justified cause for rebellion if the state seizes more power than what has been originally endowed to it by its citizens. In this regard, classical liberalism certainly has much common ground with economic liberalism. And it uses this ground to penetrate and become a major factor influencing the economic policies of the modern nations. Also, since classical liberals do tend to favor laissez-faire economic policies (which argues for the complete abstention by governments from interfering in the workings of the free market), they are widely portrayed as the leading proponents of neoliberalism. This relationship between liberalism and the economy becomes even more apparent from the context of Modern liberalism.


Modern liberalism is characterized by a greater propensity to let the state become an active participant in the economy. It advocates the tendency of the state to regulate the marketplace and set the prices of all the essential goods and services. Modern liberalism, thus, tries to establish itself as a profound revision of liberalism, and associated economic policies. It juxtaposes itself in striking contrast with classical or economic liberals who favor laissez-faire economic policies because they believe that it leads to more freedom and real democracy. According to modern liberals, this argument is misleading, and governments must play a pioneering role to achieve liberal goals and prospects.


On the contrary, neoliberalism, to an extent, goes along with classical liberalism, to establish a firm ground for the modern capitalist economies of the world. It does so by being a proponent of the belief that freely adopted market mechanisms are the optimal way of organizing all exchanges of goods and services across markets that may even transcend national boundaries. According to them, the free markets and free trade will set free the creative potential and the entrepreneurial spirit which is built into the spontaneous order of any human society and thereby lead to more individual liberty, improved standard of living, and more efficient allocation of resources, which will ultimately pave the way for global peace and prosperity.


So despite the glorious future that neoliberalism promises, what’s the rationale behind the dire criticism that the neoliberals continue to face? And why is neoliberalism still pinned down by almost every other social scientist? To demystify these perplexities, we’ll have to ascertain as to whether the unrestrained free markets truly promote peace and prosperity, or do they also exacerbate significant economic and social inequalities in the process. To do so, let’s ponder upon it from the epistemology of a critic.


The critics of neoliberalism often consider the neoliberal ideology to be a major force that eliminates or at least weakens the main barrier that we have against the threats of mankind’s destruction. According to them, deregulating the private institutions, lowering international trade barriers, and getting rid of federal regulations only causes more harm than good. In their view, this creates economic inequality, market fundamentalism, corporatocracy, and ruptures the local health-care systems. For instance, in Venezuela (before the Venezuelan crisis) the deregulation of the labor market resulted in greater informal employment and a considerable increase in industrial accidents and occupational diseases. Even in Sweden, some scholars argue that the adoption of neoliberal reforms (in particular the privatization of public services and the reduction of state benefits) is the reason it has the fastest-growing income inequality among all the Scandinavian nations. In addition to the above claims, a significant number of scholars also argue that neoliberalism, through its principles, undermines the mechanisms of social solidarity, mutual support, and popular engagement in determining policies. In doing so, it cages human societies, limits public freedom, and causes subordination to the decisions of concentrated, unaccountable private power. This inevitably results in the systematic weakening institutions of governance and other associations that can allow people to participate in democratic decision making. Subsequently, the well informed and engaged public, which would otherwise act together with solidarity to develop means to confront the threat, only become more passive and apathetic towards each other.


To conclude, although neoliberalism can be argued to have succeeded as an engine of economic growth, its success is often ridiculed for channeling wealth from subordinate classes to dominant ones, and from poorer to richer countries. What remains explicitly perspicuous, is that the ideas of this school of thought often feel outdated, and are in need of renewal.



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