Critically examine the concept of neoliberalism and evaluate its
benefits and costs.
Introduction
Neoliberalism was an economic reform policy adopted by many countries from the
1970s to present day. The basis of its ideas were inspired by the previous Liberalism
ideology; that every person should have free rights and civil liberties (Tribe, 2009). This
new concept gained in popularity, especially in the 1980s, both in the United States and
Great Britain as a result of Ronald Reagan’s and Margaret Thatcher’s campaign policies
(King, 1999). Chile was one of the first countries to experiment with this new concept
under the rule of Augusto Pinochet; miraculously, the policy helped move the country
out of poverty, but at what cost? Many other Latin American countries followed after
seeing the wealth that it could provide their economies; nevertheless, the percentage of
people under the poverty line actually rose (Walton, 2004). In addition, some left wing
scholars even go as far as to say that Neoliberalism was a tool for the US to establish
their control over Latin America during the Cold War (Buono, 2007). All matters aside,
the following subheadings will critically analyse the concept of Neoliberalism as well as
looking at its costs and benefits with respect to countries that implemented the policy.
Concept of Neoliberalism
In essence Neoliberalism means “New Liberalism”, an updated version of the previous
Classical Liberalism ideology. The term was first used in the 1930s by economic
scholars, such as Ludwig (2016), who were trying to improve the condition of the global
economy after the Wall Street Crash of 1929. Classical Liberalism was deemed not a
powerful enough policy to pull the world out of the Great Depression as having a
competitive and free society was no longer enough to boost the economy. The idea of
Liberalism therefore moved away from relating to the liberty and happiness of
individuals to mainly focusing on the liberty of countries’ economies (Hardin, 2014). In
other words, Neo-liberalism had a heavy focus on promoting free market trade to allow
as much capital as possible to circulate and be reinvested on the open market. When
Chile implemented Neoliberalism into their economy in the 1970s, it was evident that
the grounds of what the economic reform policy would entail were set. The policy aimed
to reduce hyperinflation and boost economic growth by reducing state influence in the
economy and privatising most sectors (Budds, 2013). The short term success of the
, policy created a domino effect whereby most of the Western and some Asian countries
inevitably also adopted it. The US and the UK were the most prominent countries to
pursue this new policy during the late 1970s to modern day. America eventually formed
the Washington Consensus, which were economic points rejecting the previous
structuralist models of development (Williamson, 1997).
Influential Scholars, such as Adam Smith (1937), agreed with Neoliberalism as in his
book, “The Wealth of Nations” he stated that people should have the right to the
freedom of their capital. He used the term, “Laissez-Faire” and also stated that people
will inevitably find a way to trade with one another (Viner, 1927). Hayek (2001) had a
similar view in his book, “Road to Serfdom” where he stated that a free market is the
most effective. Moreover, Milton adds to this point as his beliefs are that individuals are
most able to pursue their own goals when the market is open and allows them to do so.
This is because Neoliberalism implies that skills and hard work allow individuals to be
creative and move up the social ladder (Friedman, 2007). Nevertheless, Marxists
believe that in society there inevitably has to be losers for there to be winners, until it
gets to a point where the winners are too far ahead (Peters, 2001). Ultimately, Freeman
(1996) believes that the economy is controlled by the current generations’ technological
innovations. He uses the term, “Long Wave Theory” to suggest that during economic
booms, innovations are high whereas during recessions they have stagnated.
Neoliberal Leaders and their Policies
Augusto Pinochet was the first leader to implement Neoliberal reform policies into
Chile’s economy after his military coup in 1973. Students from Chile famously went to
Chicago where they were taught by Milton Freidman about Neoliberalism and how it can
be used as a tool to reform struggling economies (Nik-Khah, 2011). On their return,
economic reform policies were put in place and they were remembered in history as the
“Chicago Boys”. The policies focused on deregulating and reducing their government’s
involvement in the economy to reduce the risk of hyperinflation taking place. Throughout
the 1980s other countries in Latin America such as Argentina, Mexico and Brazil would
also adopt similar if not the same reform policies (Silva, 2009). In hindsight, the
Washington Consensus resulted in America controlling the markets of developing
countries throughout Latin America and Asia that adopted the policy. As a result, terms
such as “hyper-capitalism” were common terminologies used by Left-wing scholars to
define Neoliberalism (Vujnovic, 2012).
benefits and costs.
Introduction
Neoliberalism was an economic reform policy adopted by many countries from the
1970s to present day. The basis of its ideas were inspired by the previous Liberalism
ideology; that every person should have free rights and civil liberties (Tribe, 2009). This
new concept gained in popularity, especially in the 1980s, both in the United States and
Great Britain as a result of Ronald Reagan’s and Margaret Thatcher’s campaign policies
(King, 1999). Chile was one of the first countries to experiment with this new concept
under the rule of Augusto Pinochet; miraculously, the policy helped move the country
out of poverty, but at what cost? Many other Latin American countries followed after
seeing the wealth that it could provide their economies; nevertheless, the percentage of
people under the poverty line actually rose (Walton, 2004). In addition, some left wing
scholars even go as far as to say that Neoliberalism was a tool for the US to establish
their control over Latin America during the Cold War (Buono, 2007). All matters aside,
the following subheadings will critically analyse the concept of Neoliberalism as well as
looking at its costs and benefits with respect to countries that implemented the policy.
Concept of Neoliberalism
In essence Neoliberalism means “New Liberalism”, an updated version of the previous
Classical Liberalism ideology. The term was first used in the 1930s by economic
scholars, such as Ludwig (2016), who were trying to improve the condition of the global
economy after the Wall Street Crash of 1929. Classical Liberalism was deemed not a
powerful enough policy to pull the world out of the Great Depression as having a
competitive and free society was no longer enough to boost the economy. The idea of
Liberalism therefore moved away from relating to the liberty and happiness of
individuals to mainly focusing on the liberty of countries’ economies (Hardin, 2014). In
other words, Neo-liberalism had a heavy focus on promoting free market trade to allow
as much capital as possible to circulate and be reinvested on the open market. When
Chile implemented Neoliberalism into their economy in the 1970s, it was evident that
the grounds of what the economic reform policy would entail were set. The policy aimed
to reduce hyperinflation and boost economic growth by reducing state influence in the
economy and privatising most sectors (Budds, 2013). The short term success of the
, policy created a domino effect whereby most of the Western and some Asian countries
inevitably also adopted it. The US and the UK were the most prominent countries to
pursue this new policy during the late 1970s to modern day. America eventually formed
the Washington Consensus, which were economic points rejecting the previous
structuralist models of development (Williamson, 1997).
Influential Scholars, such as Adam Smith (1937), agreed with Neoliberalism as in his
book, “The Wealth of Nations” he stated that people should have the right to the
freedom of their capital. He used the term, “Laissez-Faire” and also stated that people
will inevitably find a way to trade with one another (Viner, 1927). Hayek (2001) had a
similar view in his book, “Road to Serfdom” where he stated that a free market is the
most effective. Moreover, Milton adds to this point as his beliefs are that individuals are
most able to pursue their own goals when the market is open and allows them to do so.
This is because Neoliberalism implies that skills and hard work allow individuals to be
creative and move up the social ladder (Friedman, 2007). Nevertheless, Marxists
believe that in society there inevitably has to be losers for there to be winners, until it
gets to a point where the winners are too far ahead (Peters, 2001). Ultimately, Freeman
(1996) believes that the economy is controlled by the current generations’ technological
innovations. He uses the term, “Long Wave Theory” to suggest that during economic
booms, innovations are high whereas during recessions they have stagnated.
Neoliberal Leaders and their Policies
Augusto Pinochet was the first leader to implement Neoliberal reform policies into
Chile’s economy after his military coup in 1973. Students from Chile famously went to
Chicago where they were taught by Milton Freidman about Neoliberalism and how it can
be used as a tool to reform struggling economies (Nik-Khah, 2011). On their return,
economic reform policies were put in place and they were remembered in history as the
“Chicago Boys”. The policies focused on deregulating and reducing their government’s
involvement in the economy to reduce the risk of hyperinflation taking place. Throughout
the 1980s other countries in Latin America such as Argentina, Mexico and Brazil would
also adopt similar if not the same reform policies (Silva, 2009). In hindsight, the
Washington Consensus resulted in America controlling the markets of developing
countries throughout Latin America and Asia that adopted the policy. As a result, terms
such as “hyper-capitalism” were common terminologies used by Left-wing scholars to
define Neoliberalism (Vujnovic, 2012).
