NEOLIBERALISM

:''For the school of international relations, see Neoliberalism (international relations).''
'Neoliberalism' refers to a political movement that espouses economic liberalism as a means of promoting economic development and securing political liberty. The movement is sometimes described as an effort to revert to the economic policies of the 18th and 19th centuries classical liberalism.^[1] Strictly in the context of English-language usage the term is an abbreviation of "neoclassical liberalism", since in other languages liberalism has more or less retained its classical meaning.

Contents

Overview

Policies Advanced by Neoliberalism

History

Before Neoliberalism

An Economic Golden Age

The System Collapses

Neoliberalism's Monetarist Foundation

Criticisms of Neoliberalism

The State-centric Approach to Neoliberalism

Response to Criticisms

See also

References

External links

Online Lectures

Overview

Neoliberalism refers to a historically-specific reemergence of economic liberalism's influence among economic scholars and policy-makers during the 1970s and through at least the late-1990s, and possibly into the present (its continuity is a matter of dispute). In many respects, the term is used to denote a group of neoclassical-influenced economic theories, right-wing libertarian political philosophies, and political rhetoric that portrayed government control over the economy as inefficient, corrupt or otherwise undesirable. Neoliberalism is not a unified economic theory or political philosophy -- it is a label denoting an apparent shift in social-scientific and political sentiments that manifested themselves in theories and political platforms supporting a reform of largely centralized postwar economic institutions in favor of decentralized ones -- and few supporters of neoliberal policies use the word itself. Neoliberal arguments gained a great deal of currency after the Stagflation Crisis of the 1970s, the Developing World Debt Crisis of the 1980s (which primarily affected Latin America but was felt elsewhere^[2]),and the Soviet Collapse of the early-1990s.

Policies Advanced by Neoliberalism

The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's^[3] "Washington Consensus" , a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the IMF and World Bank). These reforms are described by Dani Rodrik^[4] as:

★ 'Fiscal rectitude', meaning that governments would cut expenditures and/or raise taxes to maintain a budget surplus

★ 'Competitive exchange rates', whereby governments would accept market-determined exchange rates, as opposed to implemented government-fixed exchange rates, as had prevailed under the Bretton Woods System

★ 'Free Trade', which means the removal of trade barriers, like tariffs, subsidies, and regulatory trade barriers

★ 'Privatization', which means the transfer of previously-public-owned enterprises, goods, and services to the private sector.

★ 'Undistorted Market Prices', meaning that governments would refrain from policies that would alter market prices.

★ 'Limited Intervention', with the exception of intervention designed to promote exports, some kinds of education or infrastructural development.^[4]

History

Before Neoliberalism

Arguments that stress the economic benefits of unfettered markets first began to appear with Adam Smith's (1776) ''Wealth of Nations'' and David Hume's writings on commerce. These writings were directed against the Mercantilist ideas that had been dominant during the previous centuries, and served to guide the policies of governments throughout much of the 19th century. Nevertheless, statist ideas slowly began to regain a following amongst the intellectuals that had rejected them during the early Enlightenment. While state interventionism increased towards the end of the 19th century, the Progressive Era saw an accelerated movement to re-institutionalize government controls over the economy.
With an intellectual and political foundation in place, the onset of the Great Depression and the rapid industrialization of the Soviet Union led to increased support for government economic control as a means of securing rapid industrialization.^[6] By the end of World War II, many countries decided to expand their governments dramatically.[1]
Across much of the world, the economics of John Maynard Keynes, which sought to formulate the means by which governments could stabilize and fine-tune free markets, became a highly-influential ideology. Within the developing world, several developments - among them decolonization, a desire for national independence and the destruction of the pre-war global economy^[7], and the view that countries could not effectively industrialize under free market systems (e.g., the Prebisch-Singer hypothesis) - encouraged economic policies that were influenced by communist, socialist and import substitution precepts.

An Economic Golden Age

The period of government interventionism in the 1950s and 1960s was characterized by exceptional economic prosperity, as economic growth was generally high, inflation was contained^[8], and economic distribution was comparatively equalized^[9].

The System Collapses

By the late-1960s, however, the statist systems that had been instituted during the 1930s showed strains. Some of these strains can be located in the international financial system.^[10][11], and culminated in the dissolution of the Bretton Woods system, which some argue had set the stage for the Stagflation crisis that would discredit Keynesianism in the English-speaking world. In addition, some argue that the postwar economic system was premised on a society that excluded women and minorities from economic opportunities, and the political and economic integration given to these groups strained the postwar system.^[12]

Neoliberalism's Monetarist Foundation

Neoliberalism is associated with Friedrich Hayek and the Austrian School of economics, economics departments such as that at the University of Chicago (and such professors as Milton Friedman and Arnold Harberger), and international organizations such as the International Monetary Fund and The World Bank. None of these parties uses the typically-critical label "neoliberal"; but some have identified with monetarism. Neoliberalism was founded in the movement away from the Keynesian economics that were dominant immediately after World War II in such countries as the U.S. and England, although it has spread to countries without Keynesian policies, as disparate as Sweden, South Africa, Argentina, and Russia. The philosophy promotes a "liberalization" of capital markets (thus called "neoliberal reform").

Criticisms of Neoliberalism

"The standard neoliberal policy package includes cutting back on taxes and government social spending; eliminating tariffs and other barriers to free trade; reducing regulations of labor markets, financial markets, and the environment; and focusing macroeconomic policies on controlling inflation rather than stimulating the growth of jobs," reports economist Robert Pollin (2003).^[13] Arising out of a rejection of the class compromises embedded in previous liberal political-economic policies, including Keynesian and Active Labour Market Policies (ALMPs), neoliberal theory, institutions, policies, and practices are not regarded as politically neutral by their opponents.
Economists remind us that free markets are theoretically efficient, not fair,^[14] and this distinction is a foundation of the critique of neoliberalism. Opponents critique neoliberalism's effects on wages, working class institutions, inequality, social mobility, working class well-being, health, the environment, and democracy. Notable opponents to neoliberalism in theory or practice include economists Joseph Stiglitz, Amartya Sen, and Robert Pollin,^[15] linguist Noam Chomsky,^[16] geographer David Harvey,^[17] the anti-globalization movement in general, including groups such as ATTAC. The economists and policy analysts at the Canadian Centre for Policy Alternatives (CCPA) offer progressive policy alternatives to neoliberal policies. In addition, a significant opposition to neoliberalism has grown in Latin America, a region that has been a target of neoliberal policies. Prominent Latin American opponents include the Zapatista Army of National Liberation rebellion, and the governments of Venezuela, and Cuba.
Critics of neoliberalism view neoliberalism as both an economic and political project aimed at reconfiguring class relations in societies. Not only have many core countries' labor aristocracy families been forced to have more than one income-earner, but workers have been so heavily disciplined by capital and the capitalist state that, as Alan Greenspan said, they are "traumatized". ^[18] Daniel Brook's "The Trap: Selling Out to Stay Afloat in Winner-Take-All America" (2007) describes the anti-democratic political effect of decreased middle class welfare.^[19] The massive U.S. military-industrial complex adds an extra layer of repression to working class "traumatization," according to David Harvey (2005), making resistance seem unfeasible to most workers. A "traumatized" working class allows the capitalist class absolute reign, which Harvey claims--citing the economic crises of 1873 and the 1920s--to be disastrous for economies around the globe, states, and working class people; though, he points out, on average capitalists were not negatively impacted by these crises.^[20]
Critics of neoliberalism sometimes refer to it as the "American Model", which they find promotes low wages and high inequality.^[21] According to the economists Howell and Diallo (2007), neoliberal policies have contributed to a U.S. economy in which 30% of workers earn "low wages" (less than two-thirds the median wage for full-time workers), and 35% of the labor force is "underemployed"; only 40% of the working age population in the U.S. is considered adequately employed. The Center for Economic Policy Research's (CEPR) Dean Baker (2006) has shown that the driving force behind rising inequality in the United States has been a series of deliberate, neoliberal policy choices including anti-inflationary bias, anti-unionism, and profiteering in the health industry.^[22] However, countries have applied neoliberal policies at varying levels of intensity; for example, the OECD has calculated that only 6% of Swedish workers are beset with low wages.^[23] John Schmitt and Ben Zipperer (2006) of the CEPR have analyzed the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, concluding "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor-market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility" than all the continental European countries for which data is available.^[24]
Critics of neoliberalism examine the political foundations of the neoliberal project as well as its economic foundations. One of the most famous moments in neoliberal political history occurred when then-U.S. President Ronald Reagan's advisors had him deregulate the thrift industry. This was promoted with the claim that a gigantic bonanza of growth and investment was sure to follow. Reagan signed the deregulation bill in 1982, saying, "All in all, I think we've hit the jackpot." Columnist Joe Conason has argued that "The best reckoning of the costs of his benign intentions is a trillion dollars." ^[25] While Reagan and the United Kingdom's Margaret Thatcher laid the groundwork for what Alan Greenspan called working class "traumatization", through eliminating collective assets by sales to the private sector, enacting policies to diminish labor unions, and promoting militarization, other politicians have steadily continued the neoliberal tradition.
According to Pollin (2003), neoliberalism under the U.S. Clinton administration--steered by Alan Greenspan and Robert Rubin-- was the temporary and unstable policy inducement of economic growth via government-supported financial and housing market speculation, with low unemployment, but also with low inflation. This unusual coincidence was made possible by the disorganization and dispossession of the American working class.^[26] Berkeley sociologist Angela Davis has argued and Princeton sociologist Bruce Western has shown that the astonishingly high rate of incarceration in the U.S. (1 out of every 37 American adults is in the prison system), heavily promoted by the Clinton administration, is the neoliberal U.S. policy tool for keeping unemployment statistics low, and stimulating economic growth through maintaining a contemporary slave population within the U.S. and promoting prison construction and militarized policing.^[27]
Harvey (2005) sums up neoliberalism as a global capitalist class power restoration project. Neoliberalism, he explains, is a theory of political-economic practices that dedicates the state to championing private property rights, free markets, and free trade, while deregulating business and privatizing collective assets. Ideologically, neoliberals promote entrepreneurialism as the normative source of human happiness. Harvey also considers neoliberalization a form of capitalist "creative destruction", a Schumpeterian concept.^[28] This indicates that while neoliberalism is a critical concept with a critique of capitalist class relations, it is not strictly a Marxist concept; the Marxist term for neoliberalism is "primitive accumulation."
Harvey (2000) observes that neoliberalism has become hegemonic world-wide, sometimes by coercion. Opponents of neoliberalism argue that neoliberalism is the implementation of global capitalism through government/military interventionism to protect the interests of multinational corporations. Even neoliberal proponent Thomas Friedman has argued approvingly, “The hidden hand of the market will never work without a hidden fist."^[29] In its commitment to belligerent capitalism, neoliberalism is linked to neoconservatism. In fact other critics argue that not only is neoliberalism's critique of socialism wrong but that it cannot deliver the liberty that is supposed to be one of its strong points.^[30].

The State-centric Approach to Neoliberalism

The state-centric approach to neoliberalism concurs with the critical approach that neoliberal ideas are really just laissez-faire liberal prescriptions that overthrew Keynesianism. State-centric theorists hold that neoliberalism is "the attempt to reduce the role of the state in the market through tax cuts, decreases in social spending, deregulation, and privatization."^[31] However, the state-centric approach argues that state actors were the political entrepreneurs who formulated neoliberalism--rather than, as critics of neoliberalism would claim, capitalist political organizations, and economists and economic departments, think tanks, and politicians all supported by class-conscious capitalists. State-centric theorists argue that neoliberalism spread because it fit the voters' preferences best; they disagree in this with the critical approach, which maintains that neoliberal framing and policies were propagated by well-heeled, highly organized political machines that insisted to the public, "There is no alternative". State-centric sociologist Monica Prasad (2006) further argues that neoliberalism became dominant where labor institutions were too strong and confrontative; she claims that labor organizations and the welfare state were the strongest in the U.S. and England.

Response to Criticisms

Proponents of neoliberalism criticize the protectionist policies that were supported by advocates of mixed economies for the difficulties that these workers are enduring, as they theorize that artificially higher wages attract workers that would otherwise have been employed in other, more competitive sectors of the economy, unless Active Labor Market Policies ALMPs were in place to intervene.

See also

★ Capitalism

★ Economic liberalism

★ Free market

★ Globalization

★ Liberalisation

★ Liberism

★ Libertarianism

★ Market fundamentalism

★ Neoconservatism

★ Neosocialism

★ Ordoliberalism

★ Privatization

References

1. Portes, Alejandro (1997) "Neoliberalism and the Sociology of Development: Emerging Trends and Unanticipated Facts" ''Population and Development Review'', 23(2): 229-259
2. see Sachs, Jeffrey (ed.) (1989) Developing Country Debt and the World Economy (Cambridge, MA: National Bureau of Economic Research)
3. Williamson, John (1990) "What Washinngton Means by Policy Reform" in John Williamson, ed. ''Latin American Adjustment: How Much Has Happened?'' (Washington, DC: Institute for International Economics
4. Rodrik, Dani (1996) "Understanding Economic Policy Reform" ''Journal of Economic Literature'' 34(1): 9 - 41
5. Rodrik, Dani (1996) "Understanding Economic Policy Reform" ''Journal of Economic Literature'' 34(1): 9 - 41
6. Hobsbawm, Eric (1994) ''Age of Extremes'' (Vintage)
7. Sachs, Jeffrey and Andrew Warner (1995) "Economic Reforms and the Process of Global Integration" ''Brookings Papers on Economic Activity:'' 1 - 118
8. Fischer, Stanley, Ratna Sahay and Carlos A. Veigh (2002) "Modern Hyper- and High Inflations" ''Journal of Economic Literature'': 837 - 880.
9. For example, see Piketty, Thomas and Emmanuel Saez (2003) "Income Inequality in the United States" ''Quarterly Journal of Economics'', 118(1):1-38
10. Helleiner, Eric (1994) ''States and the Resurgence of Global Finance: From Bretton Woods to the 1990s'' (Ithaca: Cornell University Press)
11. Block, Fred (1977) ''The Origins of International Economic Disorder: A Study of U.S. International Monetary Policy from WWII to the Present'' (Berkeley: University of California Press)
12. Piore, Michael J. and Charles F. Sabel (1984) ''The Second Industrial Divide: Possibilities for Prosperity'' (New York: Basic)
13. Pollin, Robert. 2003. Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. New York: Verso: 196.
14. Blount-Lyon, Sally. 2002. “Grand Illusion: Contrary to Popular Belief, Free Markets Never Were Fair.” SternBusiness, Fall/Winter. http://www.stern.nyu.edu/Sternbusiness/fall_winter_2002/grandillusions.html.
15. Pollin, Robert. 2003. Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. New York: Verso.
16. ''Profit Over People: Neoliberalism and Global Order''. Seven Stories Press. November, 1998. ISBN 1888363827
17. Harvey, David. 2005. A Brief History of Neoliberalism. Oxford: Oxford University Press.
18. Pollin, Robert. 2003. Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. New York: Verso: 53.
19. Brooks, Daniel. 2007. The Trap: Selling Out to Stay Afloat in Winner-Take-All America. New York: Times Books.
20. Harvey, David. 2005. A Brief History of Neoliberalism. Oxford: Oxford University Press: 153
21. Howell, David R. and Mamadou Diallo. 2007. "Charting U.S. Economic Performance with Alternative Labor Market Indicators: The Importance of Accounting for Job Quality." SCEPA Working Paper 2007-6.
22. Baker, Dean. 2006. "Increasing Inequality in the United States." Post-autistic Economics Review 40.
23. OECD. 2007. “OECD Employment Outlook. Statistical Annex.” http://www.oecd.org/dataoecd/29/27/38749309.pdf.
24. Schmitt, John and Ben Zipperer. 2006. "Is the U.S. a Good Model for Reducing Social exclusion in Europe?" Post-autistic Economics Review 40.
25. Conason, Joe. 2004. "Reagan without Sentimentality." Salon.com, June 8. http://dir.salon.com/story/opinion/conason/2004/06/08/reagan/index.html.
26. Pollin, Robert. 2003. Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. New York: Verso.
27. Western, Bruce. 2006. Punishment and Inequality in America. New York: Russell Sage Foundation.
28. Harvey, David. 2005. A Brief History of Neoliberalism. Oxford: Oxford University Press: 2-3.
29. Friedman, Thomas. 2000. The Lexus and the Olive Tree. Anchor Press.
30. Luke Martell, 'Rescuing the Middle Ground: Neoliberalism and Associational Socialism', ''Economy and Society'', 22, 1, February 1993
31. Prasad, Monica. 2006. The Politics of Free Markets: The Rise of Neoliberal economic Policies in Britain, France, Germany, & The United States. Chicago: University of Chicago Press.
★ Note the publisher is one of the foundational neoliberal incubator institutions.


★ Bowles, Samuel, David M. Gordon, and Thomas E. Weisskopf. 1989. "Business Ascendancy and economic Impasse: A Structural Retrospective on Conservative Economics, 1979-87." Journal of Economic Perspectives 3(1):107-134.

External links

★ What is Neoliberalism? by Dag Einar Thorsen and Amund Lie of the University of Oslo

★ Neoliberalism: origins, theory, definition by Paul Treanor

★ A Skeptic's Guide to the Cross-national Evidence by D Rodrik, F Rodriguez. NBER Macroeconomics Annual, 2000.

★ The Last Development Crusade

★ Canadian Centre for Policy Alternatives

★ ATTAC

★ "Monetarism" at The New School's Economics Department's History of Economic Thought website.

★ Adam Curtis' The Trap (television documentary series) (2007) provides a critical anti-managerial view on the genesis, rise, and impact of neoliberalism. It uses a history of ideas approach to the subject.

★ 'Rescuing the Middle Ground: Neoliberalism and Associational Socialism', debate between neoliberal and socialist

★ IDENTITIES: How Governed, Who Pays?

Online Lectures

★ The Neoliberal City, David Harvey at the University Channel