What is neoliberalism? A political scientist explains the use and evolution of the term

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Neoliberalism is a complex concept that many people use – and overuse – in different and often conflicting ways.

So, what is it, really?

When discussing neoliberalism with my students at the University of Southern California, I explain the phenomenon’s origins in political thought, its ambitious claims of promoting liberty and its problematic global track record.

‘Markets work; governments don’t’

Neoliberalism contends that markets allocate scarce resources, promote efficient growth and secure individual liberty better than governments.

According to the progressive journalist Robert Kuttner, the “basic argument of neoliberalism can fit on a bumper sticker. Markets work; governments don’t.”

From such a perspective, government represents bureaucratic bloat and political imposition. Government is wasteful. The verve of capitalism, along with a limited democratic politics, is neoliberalism’s balm for all that ails humankind.

Completing his bumper-sticker mantra, Kuttner continues, “there are two corollaries: Markets embody human freedom. And with markets, people basically get what they deserve; to alter market outcomes is to spoil the poor and punish the productive.”

Evolution of neoliberalism

The moniker “neoliberalism” was coined by Austrian economists Friedrich von Hayek and Ludwig Von Mises in 1938. Each elaborated his own version of the notion in 1944 books: “The Road to Serfdom” and “Bureaucracy,” respectively.

Neoliberalism ran contrary to the prevailing economic strategies promoted by John Maynard Keynes, which encourage governments to stimulate economic demand. It was the opposite of big-government socialism, whether in its Soviet manifestation or its European Social Democratic version. Neoliberalism’s proponents embraced classical liberal principles such as laissez-faire – the policy of not intervening in markets.

By the 1970s, Keynesian policies were faltering. Hayek’s organization, the Mont Pelerin Society, had drawn wealthy European and American benefactors to its ranks and funded powerful think tanks such as the American Enterprise Institute and the Cato Institute. These groups refined neoliberalism’s message, making it a viable and attractive ideology.

By the 1980s, neoliberalism had gained ascendancy with Republicans such as president Ronald Reagan. High-ranking officials in the Democratic presidential administrations of Jimmy Carter and, later, Bill Clinton also embraced neoliberalism.

Neoliberalism was also championed by conservatives like British Prime Minister Margaret Thatcher and by international institutions such as the World Bank and International Monetary Fund.

But deregulating free markets had some unfortunate political consequences. It promoted financial and labor crises in the U.S. and U.K. and exacerbated poverty and political instability. The crisis was felt from the Global South to the U.S. Northwest, manifesting in the anti-World Trade Organization protests often referred to as the “The Battle of Seattle.” To critics like Frantz Fanon and David Harvey, neoliberalism is more akin to neoimperialism or neocolonialism. Basically, they contend, it achieves old ends – exploiting the global working class – through new means.