Neoliberalism

The terms neoliberal and neoliberalism have been variously used to refer to leading political exponents of the ideology, such as former U.S. president Ronald Reagan (yielding the label "Reaganomics") and former prime minister of the United Kingdom Margaret Thatcher ("Thatcherism"); particular intellectual trends, such as supply-side economics and monetarism, associated with academics such as Milton Friedman (b. 1912); intellectual traditions associated with particular institutions, such as the Chicago School (after the University of Chicago, where most of the leading proponents originated); the policy stance of particular institutions that have been crucial in promoting its policy implications, such as the Bretton Woods Institutions (the World Bank and the International Monetary Fund, yielding the "Washington Consensus"); or more forthrightly "market fundamentalism" and "neoclassical orthodoxy." In the developing world, neoliberalism emerged in the form of stabilization and structural adjustment programs (SAPs) that entailed a standard package of the above policy measures regardless of the situation in a given country.

Neoliberalism arose as a major paradigm shift facilitated by the conjuncture of a number of eventualities: persistent and intractable recessions beginning in the 1970s for which standard economic policy tools, primarily based on Keynesianism, appeared ineffectual; the impasse in economic policy at national and global levels; and the unsustainability of some welfare regimes, including those of social democracy, in the developed world in the face of recessionary trends and fiscal constraints. In the context of these developments, proponents of neoliberalism saw the state as the major constraint on the efficient operation of the market and the resuscitation of growth at both national and global levels. Accordingly, neoliberalism directed its criticism against what was seen as an overextended role of the state in the economy consequent upon Keynesianism, socialism, and social democracy. Thus the main thrust of neoliberalism entails the need to roll back the state by restricting its role to the provision of pure public goods and the need to ensure that the state provides the appropriate environment for the market to operate by protecting property rights and associated contractual obligations, facilitating the free mobility of resources within and across nations, and ensuring safety and security.

As the term is applied in the early 2000s, neoliberalism refers to an all-embracing economic and political ideology that advocates the supremacy of the market over any alternative social arrangements, viewed from both a comparative and historical perspective, in ensuring the efficient allocation and utilization of scarce resources for the maximum satisfaction of relatively unlimited human wants. The market, based on freedom of choice and respect for private property and individual rights, and underpinned by competition among producers and consumers alike, is seen as the ideal and optimal vehicle for the realization of human ends. Thus neoliberalism leads to the conclusion that individuals, rather than collectives, are the best basis for decision making and that the role of the state (or any similar collective agencies) should be limited to creating and ensuring an environment conducive to individuals freely and competitively making decisions and choosing between alternatives, thereby facilitating and consolidating the expansion of the market and protecting private property rights, and to the provision of pure public goods, which, by definition, cannot be provided for efficiently by the market. This recalls the "invisible hand" notion of the market in enhancing economic welfare articulated by Adam Smith in the eighteenth century in his The Wealth of Nations (1776).