Neoliberalism

Neoliberalism, as the prefix neo suggests, is an old concept that reemerged as a policy response to the crisis of Keynesianism and was made popular by the political ascendancy of Margaret Thatcher in Great Britain and Ronald Reagan in the United States in the late 1970s and early 1980s. While neoliberalism has become a central concept in the social sciences describing the structural changes in the global economy since the 1970s, the concept is much contested. At the most fundamental level, neoliberalism builds on the classical liberal notion implying the triumph of market forces and individual autonomy over state power. But there is a considerable normative divergence between advocates of neoliberal ideas, who celebrate the ascendancy of the market, and those who suggest that the policies of neoliberalism are associated with global inequality, economic disparity, growth of unemployment, social exclusion, environmental destruction, and cultural homogeneity. Optimists stipulate that unfettered market forces will result in global prosperity, freedom, democracy, and peace. For pessimists, neoliberalism has become an ideological construct associated with radical market fundamentalism based on the universal imperatives of competitive deregulation, liberalization, and privatization. This latter interpretation is often used synonymously with the concept of an exploitative form of neoliberal economic globalization.

Defining neoliberalism is all the more difficult because the concept as it emerged first in the 1930s differs fundamentally from the form in which it reemerged in the 1970s. In fact, Andreas Renner, of the Walter Eucken Institute in Germany, suggests that there are two neoliberalisms. One is a [Page 1677]continental European (i.e., German) version and the other an Anglo-Saxon interpretation. Historically, the European concept of neoliberalism originated in the 1930s in opposition to the Anglo-Saxon laissez-faire liberalism of self-regulating markets. The best account of such a laissez-faire economic system is found in Karl Polanyi's The Great Transformation, in which he argues that the collapse of the international economic system in the 1930s was a direct consequence of the attempt to organize the economy on the basis of laissez-faire ideas influenced by the British and Austrian schools of liberal (laissez-faire) economics. In today's social sciences, the terms laissez-faire and neoliberalism are used interchangeably, referring to the ascendancy of the market over state authority. The historical origin of neoliberalism tells a different story. The next section explores the origin of this concept and its relations to laissez-faire liberalism of the 19th century before turning to the reemergence of neoliberalism in the late 1970s and early 1980s.