What is neoliberalism?

The late Margaret Thatcher oversaw a number
of neoliberal reforms

Neoliberalism has become something of a dirty word over the past
few years.

Labour leader Jeremy Corbyn said last month: “Neoliberalism
is an ideology that ruins communities and ruins lives. It’s an
ideology that this Government is still absolutely wedded to as they
continue to wreak havoc with their incessant cuts.”

The term has “become a means of identifying a seemingly
ubiquitous set of market-oriented policies as being largely
responsible for a wide range of social, political, ecological and
economic problems”, explains the Handbook of Neoliberalism.

However, the handbook argues, to view the term as merely a
pejorative or “radical political slogan” is to “reduce its capacity
as an analytic frame”.

“If neoliberalism is to serve as a way of understanding the
transformation of society over the last few decades then the
concept is in need of unpacking,” say the book’s editors.

So what exactly is neoliberalism and why is it so
controversial?

What is the history of the term?

Traditionally, neoliberalism refers to a system of economic and
political thought that prioritises private ownership of
infrastructure, deregulation of national economies and the
extension of marketplace ideas to many domains of life, including
education, healthcare and even personal relationships.

The term itself was coined at a meeting of intellectuals and
state officials in Paris in 1938. Attendees included Friedrich von
Hayek, an Austrian-British economist and philosopher, and
Milton Friedman, an American economist, “who rejected government
fiscal policy as a means of influencing the business cycle”. The
pair came to dominate political discussions in the 1970s and
1980s.

Broadly, neoliberalism “sees competition as the defining
characteristic of human relations”, says political writer and activist George
Monbiot.

“It redefines citizens as consumers, whose democratic choices
are best exercised by buying and selling, a process that rewards
merit and punishes inefficiency,” he says.

Neoliberalism maintains that “the market” delivers benefits that
could never be achieved by planning, Monbiot adds.

How did it become popular?

Neoliberalism was taken up by political leaders including
Margaret Thatcher in Britain, Ronald Reagan in the US and Deng
Xiaoping in China. Indeed, many commentators argue that since the
1970s and 1980s, neoliberalism has been a dominant force in most
nations and international institutions.

Neoliberal ideology and policies became increasingly influential
during the following decades, as illustrated by the UK Labour
Party’s official abandonment in 1995 of its
commitment to the “common ownership of the means of
production”.

The clearest sign of the new importance of neoliberalism,
however, “was the emergence of libertarianism as a political
force”, says Encyclopedia Britannica. Those who follow the doctrine
hold the value of liberty as a core principle. 

The EU referendum result in the UK has been widely regarded as a
“libertarian dream”, a stance backed by Boris
Johnson in his famous “independence day” speech in the run-up to the 2016 vote.

Why is it so controversial?

As ever, where you fall on the political spectrum tends to
inform your view of neoliberalism.

For the Left, “neoliberalism often connotes a form of liberal
politics that has embraced market-based solutions to social
problems”, says The New Republic magazine.

Although “the insights of Hayek and Friedman about the utility
of markets – in particular the access to the socially dispersed
knowledge embedded in them – are valuable”, says The Independent’s Ben Chu, “it’s also true that
a mentality that presents the extension of markets as the answer to
every social question is a destructive pathology”.

This “falsehood of ‘free choice’ demotivates and depoliticises”,
agrees Ruth Cain, senior lecturer in law at the University of Kent,
in an article on The Conversation. In such a world,
“depression, anxiety, narcissism are entirely logical responses”,
she writes.

Cain cites studies that have shown that “neoliberal societies
make their citizens physically as well as mentally sick; the effect
is magnified the more unequal the society and the more unprotected
its citizens from free-market ‘competitiveness’”.

But others argue that neoliberal economic models are
conventional, since they dictate that governments should keep their
finances under control, property rights be protected, and that
businesses should have space to make decisions without
hindrance.

As the left-leaning economist Dani Rodrik has previously pointed out, there
is no inherent problem with these principles – but they are not a
one-size-fits-all solution, says Sky News’s Ed Conway.

“Undoubtedly, following the fall of the Berlin Wall they were
overzealously implemented and sometimes misapplied, with the
encouragement of the IMF and World Bank (in what became known as
the Washington Consensus). This is unfortunate, but hardly equals
an ideology,” Conway argues. 

In fact, he adds, “since the 1960s we have shifted from a world
where many of the economic institutions were far simpler, far more
regulated and, frankly, more comprehensible, to one which is
inherently more complex, chaotic and disconnected”.

But it is “far easier to give the impression that your enemies
are following a mysterious multisyllabic ideology than to admit
that the problems we’re facing are far more complex and intractable
than that”, Conway concludes.