Mon. May 27th, 2024

Key Features of Neoliberalism

Neoliberalism is a policy framework and ideology highlighting the importance of free market competition. It is tied to the idea of sustainable economic growth and efficient allocation of resources through market forces. This approach calls for minimal government intervention, supports capital and trade, and emerged from classical liberalism, which aimed to protect individual freedoms from excessive government control. In the 1970s, a resurgence of classical liberalism called neoliberalism gained prominence, attracting attention from economists like Milton Friedman and Friedrich Hayek. This ideology influenced prominent conservative figures such as Ronald Reagan and Margaret Thatcher, leading to policies like unrestricted trade and limited government involvement. Neoliberalism’s global influence expanded, fostering the growth of limited government advocacy, like libertarianism. Nevertheless, the 2007 financial crisis led to demands for increased government oversight in the financial sector.

Core Principles of Neoliberalism

Neoliberalism is an economic and political philosophy centered on decreasing government spending, promoting global connections, removing regulations, and encouraging free trade. It is associated with laissez-faire economics, which proposes minimal government interference in economic matters. Neoliberalism is sometimes mistaken for libertarianism but supports more extensive government interventions. Neoliberals endorse progressive taxation, while libertarians prefer flat tax rates. Unlike libertarians, neoliberals do not inherently oppose rescuing struggling industries. Despite its perceived conservatism, US neoliberal initiatives like tax reductions, deregulation, and free trade pacts garnered support from both major political parties.

In a neoliberal society, profit and market transactions take precedence. George Monbiot perceives competition as a central element that transforms citizens into consumers. On the other hand, David Harvey argues that neoliberalism elevates market transactions to an ethical guideline. Neoliberals focus on designing social systems rather than dictating specific ways of life. They resist excessive emphasis on social justice but do not always endorse consumerism. Thinkers like James Buchanan, Hayek, and Friedman emphasize the value of a free society in allowing diverse ways of life. While Buchanan and Friedman discuss economic behavior, they do not solely advocate maximizing wealth. They acknowledge non-economic factors like religious motivations and personal ethics as vital for a free society.

Neoliberalism’s Stance on the Nation-State and Human Rights

At its core, some theoretical experts consider classical liberalism, the term used for the discussed neoliberalism, as a valuable framework for comprehending social structure. However, despite often being associated with utilitarianism, Friedman rejects the label himself. In contrast, Buchanan dismisses utilitarianism due to challenges in aggregating personal values. Friedman’s support for free markets does not undermine fundamental rights. Furthermore, Hayek opposes consequentialist theory and utilitarianism, instead advocating for a contract-based perspective. To be more precise, Hayek is described as a proponent of the contractual view.

In their perspective on the nation-state, neoliberals differ from libertarians as they lean more towards support. While libertarians draw institutional structures from moral theory, neoliberals often steer clear of detailed theories of justice. Neoliberal figures like Friedman, Hayek, and Buchanan do not strongly advocate for human rights theories. Instead, they emphasize a consequence-based argument within liberalism without fully adopting consequentialism. Neoliberalism, a 20th-century revival of classical liberal ideas, emerged in response to social democracy, fascism, and communism. Neoliberals aimed to limit state power because this ideology supports larger states. Their responses to specific challenges include Hayek’s work on public choice theory, Buchanan’s public choice theory, Friedman’s monetarism, and information systems.

Philosophers understand the ideal theory as the best political depiction and social order based on the behavior and capabilities of highly rational humans aiming for a just society. Neoliberals reject ideal theory due to their skepticism about acquiring moral knowledge and their ability to describe an ideal society. Although Buchanan and Friedman express specific political aspirations, they believe that pursuing these aspirations can backfire. Neoliberal groups like Buchanan, Friedman, and Hayek also reject the assumption that society will comply with laws and justice, acknowledging human imperfections. Compliance cannot be taken lightly; their model links compliance and social norms. They oppose all forms of socialism due to its unrealistic assumptions about feasibility and human nature.

Prioritizing Individual Freedom and Small Groups

Buchanan, Friedman, and Hayek prioritize defending small groups and individual freedom. They interpret freedom as upholding the rule of law and minimizing coercion. Neoliberals reject the approach of an ideal society and emphasize ignorance as a justification for freedom. They stress epistemic humility, believing it is crucial for understanding societal organization and policy consequences. Neoliberals argue that freedom fosters cooperation, peace, and diverse objectives. Private ownership and contractual freedom are critical to their viewpoint, facilitating planning, reducing dependency, preventing coercion, and distributing power. Embracing capitalism is crucial to respecting these rights.

Defined by private solid ownership and market-driven pricing, capitalism is embraced to varying degrees by neoliberals. In contrast, they oppose Keynesianism and socialism. Neoliberals target the centralized planning inherent in socialism, arguing it is inefficient due to the absence of price systems effectively harnessed by markets. Friedman stresses diversity, rapid adaptation, and market-driven innovation and creativity. Hayek also supports competitive discovery processes.

On the other hand, Buchanan focuses on markets offering better incentives compared to government-controlled systems. Socialism is criticized for creating conflict by imposing values on everyone, concentrating power, and promoting power struggles. Neoliberals argue capitalism’s strength lies in avoiding unnecessary conflicts and distributing power through impersonal markets. While the counter-arguments favor equitable distribution through capitalism, emphasizing efficiency, its ability to promote peace, and protection against government failures, neoliberals also oppose Keynesianism, stressing that government intervention in the economy can lead to resource misallocation, inflation, and inefficiency. Friedman introduced monetarism as an alternative to Keynesian fiscal stimulus, while Buchanan argues that personal interests often influence government actions and can lead to long-term debt and economic issues.

Neoliberal Approach to Democracy

Neoliberals advocate for democracy, focusing on equal voting rights and parliamentary democracy. Buchanan, Friedman, and Hayek support democracy but also stress limitations to prevent potential negative impacts. They believe democracy is essential but criticize its unrestricted form. Buchanan supports constitutional constraints to prevent majority tyranny, Friedman is concerned about excessive regulation, and Hayek is worried about unlimited democracy leading to tyranny. Neoliberals value individualism and the protection of democratic rights through constitutional limits. They emphasize power decentralization and prevention of oppression, although they do not overly emphasize public deliberation. The association of neoliberals with the Augusto Pinochet dictatorship does not negate their overall commitment to democracy, but Hayek’s partial endorsement raises concerns about liberalism becoming detached from democracy.

Neoliberals support a moderate welfare state, including taxation, wealth redistribution, public goods provision, and social insurance. Due to market failures, Buchanan, Friedman, and Hayek advocated for government intervention in public goods. They criticize government regulations but support welfare policies. Hayek even supports countercyclical policies, government healthcare insurance, and basic income. Friedman proposed negative income tax and school vouchers. Despite being more libertarian, he acknowledges the need for wealth redistribution. Buchanan’s contractarianism supports a productive state with social insurance and even agreed-upon redistribution. Neoliberals reject egalitarian social justice goals and favor focusing on equality of opportunity over equality of outcomes. They implement limited welfare measures in an imperfect context to enhance economic freedom and individual liberty.

Critique of Neoliberalism’s Societal Organization

Critics of neoliberalism argue that it organizes society based on market principles, treats human interactions as economic transactions, and prioritizes economic goals. Neoliberalism creates a subtle shift towards a money-oriented society, distinct from pure capitalism. While not an ethos, it is accused of fostering overly capitalistic and transactional relationships between individuals. Scholars like Wendy Brown and Jessica Whyte argue that neoliberalism is often seen as an amoral economic ideology, placing economic rationality above all values. Drawing on Michel Foucault, this perspective suggests that neoliberalism reduces practical reasoning to economic calculations, blurring the lines between minor infractions and serious crimes. Some argue that neoliberalism not only cultivates selfish attitudes but also encourages biased, hierarchical, and traditional perspectives.

Neoliberalism is criticized for potentially fostering economic growth while exacerbating economic inequality, which has problematic implications. There are two main categories of critiques on inequality. The initial category centers around observable data, such as the content presented in Capital in the Twenty-First Century by Thomas Piketty and the studies conducted by Martin Gilens. These sources demonstrate that neoliberal policies alarmingly elevate inequality and potentially endanger the democratic system. John Rawls’ ideas influence the second category. Rawls rejects the welfare state capitalism and strong capitalism, as they fail to uphold principles of justice. He argues that these systems enable capital concentration, leading to economic dominance over politics and limiting society’s access to capital ownership. Additionally, concerns arise about power imbalances within corporations in a neoliberal society; as Elizabeth Anderson suggests, this might lead to the formation of “private governments,” weakening the equality of freedom between capitalists and workers.

Neoliberalism’s Impact on Democracy

A standard critique of neoliberalism is that it weakens democracy. This can happen as economic inequality erodes the influence of democracy, an idea supported by scholars like Gilens and Larry Bartels. Neoliberalism might also hinder democracy by prioritizing classical liberal economic freedoms and limiting the capacity for wealth redistribution through democratic means. Hayek’s support for the Pinochet regime in Chile further highlights this issue, as he saw it as an effort to avoid threats to democratic socialism. The conflict between the liberal and democratic elements within neoliberalism frequently harms implementing democratic processes.

The neoliberal system is built upon market mechanisms, with neoliberals emphasizing markets’ high economic efficiency or productivity (although there are differing opinions). However, behavioral economists like Daniel Ariely and Daniel Kahneman have revealed human reasoning biases that challenge the homo economicus model, which neoliberals purportedly use to understand economic growth (although their relationship with this model is complex). This concept is elaborated in the entry on bounded rationality.

Neoliberalism emerged, among other reasons, in response to the dominance of Keynesian economic policies. Keynesian critics like Paul Krugman have countered neoliberal arguments, particularly their view that fiscal policies are less effective than monetary stimuli. During the Great Recession, Krugman argued that fiscal policies were necessary as monetary stimulus had reached its limits. Neoliberal “austerity” during recessions has been criticized based on Keynesian models, with opponents arguing that government spending cuts harm people with low incomes. However, neoliberals believe such cuts do not harm people experiencing poverty for specific reasons.

Neoliberalism and Libertarianism

Neoliberalism is criticized for its false promises of “trickle-down” benefits, asserting that favorable economic growth for the wealthy eventually benefits the poor. While not a distinct economic ideology, Buchanan, Friedman, and Hayek argue that the prosperity of free markets will benefit everyone, although it does not always favor the wealthy first. Hayek mentions a trickle-down effect on prices, where luxury goods for the rich become affordable for the poor over time. Mainstream economics supports the idea that firms can offer higher wages as they accumulate capital, thus benefiting people with low incomes. Despite these arguments, many neoliberal policies still need to deliver the promised benefits to people experiencing poverty.

Libertarianism and neoliberalism are separate yet interconnected ideologies. Some neoliberal groups exhibit libertarian tendencies, and Buchanan even advocates for moral anarchy, though this is practically implausible. There is debate within libertarianism, with more extreme libertarians like Murray Rothbard and Robert Nozick criticizing moderate libertarians for supporting wealth redistribution. Additionally, some libertarians like Geoffrey Brennan prioritize non-democratic decision-making over democratic ones.

There is a common perception that neoliberal regimes display a form of colonialism, albeit more indirect. This argument posits that neoliberalism is embraced by Anglophone and Western European governments, creating a global elite agreement on economic governance. It forms the basis of the Washington Consensus, which imposes policies on developing countries, weakens democratic governance, exacerbates inequality, and harms impoverished communities.

Right-Wing Populist Critique of Neoliberalism

Right-wing populist groups are increasingly critiquing neoliberal policies, arguing that their emphasis on free trade and immigration has negative consequences. It includes the decline of industrial sectors in wealthy democratic countries like the US, as proposed by Patrick Deneen. Some express more significant concerns that allowing immigrants from diverse cultures to gain citizenship could negatively impact a nation’s culture and politics.

Critics like Nancy Fraser worry that neoliberalism has distorted feminism by aligning it with market-driven meritocracy. In this view, feminism promotes goals like successful careers, women entrepreneurship, and CEO positions within a market context. This focus has sidelined concerns about women negatively affected by neoliberalism. Further details on this topic can be found in the entry on feminist perspectives on globalization.

Neoliberalism faces several critiques, but many of these criticisms are not unique and also apply to other theories of liberal democracy. For example, conflicts between liberal rights and democracy and issues regarding freedom of association and oppression are shared concerns. Neoliberals have diverse ideas about freedom, often hostile, accompanied by standard critiques of these views. Neoliberal defenses that use a contractarian framework, as done by Buchanan and Hayek, also inherit challenges associated with contractarianism as a whole.

Neoliberalism’s Role in Crises

Neoliberalism, often unnamed and unnoticed, has played a role in various crises, such as financial crises, wealth inequality, public health issues, and the rise of figures like Donald Trump. This ideology promotes competition as a human characteristic, reshaping society into consumers and prioritizing markets over planning. The spread of neoliberalism has coincided with reduced state influence, diminished democratic voice, and corporate power concentration. Center and left-wing groups have yet to develop a new economic framework, and there is a need for coherent alternatives to address current challenges, including environmental crises.

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