Neoliberalism

Conceptual History

As its name suggests, neoliberalism sees itself as standing within the tradition of liberalism. Though today the term liberal refers primarily to those on the political left, political theorist John Gray reminds us that liberalism was the defining political ideology of Western culture during the late 18th and 19th centuries. Gray notes that liberalism in its most classic sense—rooted in what he describes as the Enlightenment's individualistic, egalitarian, universalist, and meliorist conception of humanity—saw in the creative capacity of the individual the power to improve the human condition indefinitely, as long as the individual was unencumbered by the artificial constraints of tradition or religion, and the market was left to run its course.

This first statement of the liberal tradition, what is often called classical liberalism, did not last. The challenges of industrialization, urbanization, and bureaucratization during the late 19th and early 20th centuries encouraged many—most notably the British economist John Maynard Keynes—to move toward what anthropologist David Harvey calls embedded liberalism. Where classical liberalism tended to emphasize what Gray describes as negative liberty, in which freedom was understood narrowly as the right to be left alone, embedded liberalism was far more concerned about positive liberty, in which freedom was understood in terms of the capacity to participate substantively in public life. As Keynes's economic theories gave a rationale and practical strategy for enabling the development and participation of persons in the market and the broader society, embedded liberalism became increasingly committed to rigorous governmental interventions in the economy, the redistribution of wealth through progressive taxation, and broad social welfare programs.

During the quarter century following the Great Depression and the World War II, Keynesian economics and the welfare state it created were largely unassailable. But for some scholars, embedded liberalism's apparent triumph amounted to a betrayal of the liberal tradition. At the height of World War II, when the intellectual consensus in Britain and the United States saw Nazi Germany as the natural outgrowth of unfettered capitalism, Friedrich A. Hayek's The Road to Serfdom made the controversial claim that it was not capitalism but the interventionist posture of the socialist welfare state that was to blame for the rise of German fascism. The Austrian economist's book became an instant classic and influenced an entire generation of intellectuals. By 1962, when U.S. economist Milton Friedman published Capitalism and Freedom, what would become the tenets of neoliberalism—the demand for individual economic freedom; the concern about the size, inefficiency, and inordinate expense of the welfare state's constantly expanding bureaucracy; and the belief in the creativity of the free market to meet social needs—were already beginning to be developed.

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