Neo-liberalism

Meaning of neoliberalism

Throughout the 20th Century, neoliberalism has emerged as a dominant political ideology which today is applied to, and influences, the day-to-day running of many political systems globally. It's very likely that as you sit reading this article, you may become aware of the ways that neoliberalism directly influences the political world around you.

Neoliberalism as a political ideology champions the phenomenon of 'freedom'. Additionally, Neoliberalism can be defined by a number of key characteristics:

• support for laissez-faire economics

• minimal state intervention

• promotes free-market capitalism and economic competition

• the importance of the individual as an economic and political actor

• In support of the view that economic growth is a progressive force

Despite a strong focus on economic practices, it is important to remember that when applied, neoliberalism is an ideology that creates far-reaching economic, political and social impacts.

Neoliberalism theory

Throughout the 20th Century, neoliberalism is a political ideology which has been shaped by a number of key economic and political thinkers such as F. A Hayek and Milton Friedman.

As a theory, neoliberalism supports the philosophy of globalisation and encourages deregulation of the private sector. Further, neoliberalism champions free trade with proper checks and balances on state functions and by casting restrictions on taxation and introducing austerity measures.

Neoliberal politics

So we've examined some of the key concepts and theorists behind neoliberalism, now let's see what this ideology looks like in action! Neoliberalism can be applied to shape political, economic and social policies, meaning that it has far-reaching impacts on those living in neoliberal nation-states.

We will examine two key policy areas to get a greater picture of how neoliberalism is applied in politics:

1. Economic

2. Social/welfare

Neoliberal economic policies

When applied to state economies, neoliberalist economic policies centre on promoting free-market capitalism and placing checks and balances on a government's ability to intervene and influence the economy. Neoliberal economic policies are justified via political arguments such as:

• Economic growth is progressive and beneficial
• Neoliberalists support the view that free, unregulated markets provide the most efficient allocation of resources and materials using the principle of supply and demand
• Government interventions could result in distortions that can lead to market crashes.

Below are a few examples of what neoliberal economic policies look like in action.

Deregulation

Deregulation describes the process of removing government legislation which affects specific parts of an economy. Price deregulation relates to the removal of government protections, for example, controls which make prices for specific goods lower for consumers.

Private ownership

Neoliberalism also calls for government-owned businesses to be handed to the private sector. Such an economic approach intends to boost efficiency and lower costs through free-market competition between goods and service providers.

Economic competition

Neoliberalism strives to foster economic competition to encourage innovation, entrepreneurialism and efficiency within economies.

Neoliberalism and Conservatism

Throughout history, there have been a number of impactful neoliberal politicians who illustrate the connection between neoliberalism and conservatism. Below we will explore two key examples, Ronald Reagan and Margaret Thatcher.

Margret Thatcher and Ronald Reagan, Wikimedia Commons

Reaganomics (1981-1989)

Through his choice in economic policies, US President Ronald Regan became an important neoliberal figurehead. Reagan's economic policies were so significant, that they left a lasting legacy in US politics often referred to as "Reaganomics".

Ronald Reagan was the 40th President of the United States from 1981 to 1989. Reagan's economic policies were deeply influenced by neoliberal policies, as he sought to privatise state-owned industry, reduce income taxes and minimise government interference in the US economy.

For example, prior to Reagan's presidency in the 1970s, the highest tax rate for US earners was 70% but by the end of Reagan's presidency, the highest tax rate for US earners was just 28%.

Thatcherism (1979-1990)

Another famous neoliberal figurehead includes former UK Prime Minister, Margaret Thatcher. Conservative Prime Minister between 1979-1990, Thatcher's approach also left a lasting legacy often referred to as "Thatcherism".

Thatcher sought to reduce government intervention in the UK economy. Consequently, Thatcher followed neoliberal economic policies which resulted in the privatisation of state-owned industries. This included the UK energy and telecommunications sectors, a decision Thatcher argued would increase efficiency and lower prices for consumers.

Thatcher proposed that her economic politics would create a far-reaching cultural change in the UK. Thatcher advocated for smaller state intervention in the daily lives of British citizens to encourage greater self-reliance and economic stability.

Neoliberal social and welfare policies

When applied to a state's social and welfare structures, neoliberalist policies promote minimal state intervention and a reduction in public spending. In practice, neoliberal social and welfare policies support austerity-driven measures and favour the privatisation of essential services, such as areas of public health and care services.

The political logic for such an approach is largely justified by the arguments made by Hayek and Friedman which propose that neoliberal policies provide the most effective allocation of essential resources and competitive, efficient services.

The notion of 'economy’ in the understanding of identity politics plays a pivotal role in defining a person’s identity. The element of economy is embedded and contributes to a lot of the spheres of an individual life. So in identity politics, people of specific groups of culture, religion, ethnicity, and race try to promote and present their concerning interests/issues, parallel to the interests of a larger political group. These individual interests are often previewed as being misaligned with the interests of the larger political groups.

Difference between Keynesianism and Neoliberalism

While studying you may be asked to compare and contrast neoliberalism to other political ideologies. Such an approach reveals the similarities and differences between the two ideological approaches. Below, as an example, we will compare neoliberalism with Keynesianism to highlight how to two ideologies differ.

Before we begin, let's have a quick recap on Keynesianism.

Keynesianism is a theory of macroeconomics, developed by John Maynard Keynes in response to the US "Great Depression" of the 1920s. According to Keynes, in times of recession, global institutions and nation-states should have the instruments to exercise control over the economy.

One of Keynes’ key concepts, was the idea of a business cycle. Keynes argued that the economic market is not self-regulating and therefore state intervention was necessary.