Neoliberalism
Markets do not arise on their own — the state must build and defend them, then submit its own services to competition.
What does this mean?
Neoliberalism is often used simply to mean "policies I dislike", which has made it hard to state. As a tradition it has a specific content. Against laissez-faire, it holds that competitive markets are artificial achievements requiring continuous legal construction: property rules, contract enforcement, competition law, central bank independence, and constitutional limits that put certain economic questions beyond ordinary democratic revision. Against social democracy, it holds that the state should not supply services directly where a market can be created to supply them.
In practice this produced privatisation of state industry, deregulation of finance and labour, inflation targeting by independent central banks, competitive tendering inside remaining public services, and free movement of capital. Its advocates argue it ended the stagnation and inflation of the 1970s and lifted more people out of poverty than any prior arrangement, chiefly through trade. Its critics argue it raised inequality sharply within countries, made states unable to respond to shocks they had deregulated themselves out of controlling, and deliberately insulated economic policy from voters.
It is separated from classical liberalism because their views on the state differ substantially: the classical liberal wants the state out of the way, the neoliberal wants it actively arranging the conditions under which competition occurs.
Where did it come from?
Formed at the Mont Pèlerin Society from 1947 around Hayek, Mises and later Friedman, entered government with Pinochet’s Chile from 1975, Thatcher from 1979 and Reagan from 1981, and became the default framework of the IMF and World Bank as the Washington Consensus through the 1990s.
Major thinkers
- Friedrich Hayek
- Milton Friedman
- James M. Buchanan
- Wilhelm Röpke
Historical figures
- Margaret Thatcher
- Ronald Reagan
- Augusto Pinochet
- Manmohan Singh
What it looks like today
- Independent central banks with statutory inflation targets, now near-universal
- Chile’s privatised pension system, the first of its kind
- European Union single market and competition rules
Where it sits on each dimension
Wealth and inequality
Redistribution is limited to a safety net; inequality is treated as the price of the incentives that generate growth.
The state in the economy
Private provision is the default, including inside public services through tendering and internal markets.
Personal liberty
Tradition and change
Nation and the world
Strongly favours open trade and capital movement, though its record on labour movement is far more mixed.
Religion and the state
Power and its limits
Favours removing monetary policy, trade rules and fiscal limits from the reach of ordinary majorities, which is the most contested element of the programme.
Environment and growth
Crime and punishment
Its strongest arguments
- The period of its dominance coincided with the largest reduction in absolute global poverty in history, driven mainly by trade liberalisation.
- Independent central banks ended the persistent high inflation of the 1970s across most developed economies.
- Competition in previously monopolised sectors — telecoms, aviation — cut prices sharply for consumers.
Its strongest criticisms
- Inequality within countries rose substantially over the same period, and the gains were distributed very unevenly.
- Financial deregulation is widely held to have made the 2008 crisis both possible and more severe.
- Putting economic policy beyond democratic revision is a design feature, not a side-effect, and it hollows out what elections can decide.
Common misconceptions
- That it means a small state. Public spending as a share of GDP rose or held steady in most countries that adopted it; what changed was what the state did, not how much it spent.
- That it is the same as libertarianism. Neoliberals accept a substantial regulatory and monetary state; libertarians generally do not.
- That no one identifies with it. Few use the label now, but the Mont Pèlerin founders used it of themselves, and its policy content is openly defended.
A caveat
The word is used far more often by opponents than adherents. This entry states the position as its architects argued it, which is the only way to make agreement or disagreement with it meaningful.
Sources
- Friedrich Hayek, The Constitution of Liberty · 1960
- Milton Friedman, Capitalism and Freedom · 1962
- Quinn Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism · Harvard University Press · 2018