Neoliberalism is an ideology that permeates most of how the world currently operates. It can also be somewhat difficult to define and, in some circles, has become synonymous with various problems that have arisen in capitalist society. It’s also incredibly pervasive, having moulded many aspects of life in the Global North.
In order to adequately present alternatives and work towards a more abundant future, it’s useful to truly understand what neoliberalism entails and why it hasn’t worked. It’s also helpful to know that the world hasn’t always been run on neoliberal terms, and that many facets of modern life come from conscious decisions to reshape global power and economic relations. Here’s what you need to know.
What is neoliberalism
Neoliberalism is an economic philosophy that has become widespread in recent decades. As an umbrella term, neoliberalism encompasses a movement dominated by free market thinking and selling off public services to transfer ownership from governments to the private sector. It favours free market capitalism over heavily regulated markets that are common in socialist models, while the private sector’s influence on the economy increases due to reductions in government control and spending. Since the 1980s it has been associated with trickle-down economics, and the policies implemented by Ronald Reagan and Margaret Thatcher.
Neoliberalism sees competition as a key component of human relations. Citizens are viewed as consumers, who exercise choice through buying and selling, while the market is said to deliver benefits that the state can’t achieve. In practice, this looks like minimising taxation and regulation, privatising services, opposing unionisation and workers’ rights movements, and viewing inequality as an indicator of who works hard and who doesn’t (which is inherently not how inequality works). Efforts to make society more equitable are seen as counterproductive, as the market ensures everyone gets what they deserve.
The key components of neoliberalism include:
- Privatisation: state-owned entities and businesses are sold to the private sector, which is thought to be more effective.
- Deregulation: reducing government involvement in economic activities such as trade or taxation of certain businesses. Governments don’t create better conditions for citizens, instead they simple enable conditions that allow individuals and organisations to be responsible for their own welfare through enterprise and competition within the market. The state is only legitimate if it keeps the market functioning and protects individual economic freedom, even if this infringes on other forms of freedom.
- Free trade: free markets are characterised by globalisation, more openness towards investment and trade, and complete freedom of movement of capital.
- Reduced public spending: spending on areas such as education, health, water supplies, maintenance, infrastructure, and the safety net for the poor are all reduced. Instead, the private sector decides how to manage these services and how accessible they are.
- The rule of the market: private enterprise is ‘free’ from any restrictions imposed by the government, regardless of social damage. This can include wage reductions, union busting, removal of workers’ rights, and no price controls. Economic growth is viewed as something that will ultimately benefit everyone in a trickle-down model (which we know doesn’t work).
- Replacing community with individualism: people are encouraged to work towards their individual wellbeing rather than working in community or towards the public good. The poorest in society are viewed as lazy and unmotivated when they don’t find solutions to their lack of resources.
- Valuing economic freedom: economic freedom is viewed as more important than other kinds of freedom. Neoliberalism believes economic freedom is key to a free and just society, while other forms are either considered secondary, derived from economic freedom, or not important enough for state action. For example, neoliberal countries may ensure economic freedoms, but not the right to standards of living that include access to food, energy, shelter and healthcare.
The history of neoliberalism
Liberal economics became known in 1776, when Scottish economist Adam Smith published a book called The Wealth of Nations. Alongside others, he advocated for the abolition of government intervention in economic matters, including no restrictions on manufacturing, no barriers to commerce, and no tariffs, arguing that free trade was the best way for a nation’s economy to develop. These ideas were seen as ‘liberal’ because there were no controls or barriers within the free market.
Economic liberalism grew in popularity in the United States through the 1800s and early 1900s. When the Great Depression hit, economist John Maynard Keynes proposed a theory that challenged liberalism as the best policy for capitalists. He argued that full employment is necessary for capitalism to grow, which can be achieved only if governments and central banks intervene to increase employment. This argument was influential on President Roosevelt’s New Deal, and the idea that governments should work for the common good became popular.
The specific term neoliberalism is said to have first been coined in 1938, at a conference of economists in Paris. Neoliberalism was defined as an emphasis on ‘the priority of the price mechanism, free enterprise, the system of competition, and a strong and impartial state.’ Support for the concept was renewed when the Mont Pelerin Society was founded in 1947. Funded by millionaires, this society was comprised of economists, philosophers, and historians including Friedrich Hayek, Ludwig von Mises, and Milton Friedman, all dedicated to the ideas of the free market.
This society was particularly concerned by models such as Britain’s new welfare state and Roosevelt’s New Deal. They viewed these models as ways for governments to hold too much power over their people, with ideas of collectivism being too close to nazism and communism. From there, Friedrich Hayek began to make the term global.
With their help, he [Hayek] began to create what Daniel Stedman Jones describes in Masters of the Universe as “a kind of neoliberal international”: a transatlantic network of academics, businessmen, journalists and activists. The movement’s rich backers funded a series of thinktanks which would refine and promote the ideology. Among them were the American Enterprise Institute, the Heritage Foundation, the Cato Institute, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia…
…At first, despite its lavish funding, neoliberalism remained at the margins. The postwar consensus was almost universal: John Maynard Keynes’s economic prescriptions were widely applied, full employment and the relief of poverty were common goals in the US and much of western Europe, top rates of tax were high and governments sought social outcomes without embarrassment, developing new public services and safety nets.
Keynesian policies began to fall apart in the 1970s due to a world recession and oil crisis. The adoption of neoliberalism that followed became a complete reversal of Keynes’ ideas. This expanded in the 1980s when Ronald Reagan and Margaret Thatcher implemented multiple neoliberal economic reforms. Of the 76 economic advisers on Ronald Reagan’s 1980 campaign staff, 22 were members of the Mont Pelerin Society.
the rest of the package soon followed: massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services. Through the IMF, the World Bank, the Maastricht treaty and the World Trade Organisation, neoliberal policies were imposed – often without democratic consent – on much of the world. Most remarkable was its adoption among parties that once belonged to the left: Labour and the Democrats, for example. As Stedman Jones notes, “it is hard to think of another utopia to have been as fully realised.”
In modern times, neoliberalism is deeply entrenched due to both its wide adoption by political parties across the spectrum, and because many of the tenets of neoliberalism are presented as ‘normal’ rather than active choices influenced by a subset of powerful players.
Criticisms of Neoliberalism
Neoliberalism has been critiqued for reducing vital social services, giving too much power to corporations, and exacerbating inequality. Since the 2008 financial crash, criticism has also become more widespread.
- Market fundamentalism: the argument that free market principles don’t work in areas such as health and education, because these are public services that aren’t driven by profit potential. A free market approach increases inequality in the provision of and access to essential services.
- Market failures are everywhere: it’s clear that the market is not always the most effective, as neoliberal structures constantly come up against market failures. Corporations that take on public services can’t be allowed to collapse if the services are essential, meaning that the concept of natural competition in a neoliberal model can’t actually take place. Governments still have to take on the risk, while corporations take the profits (we can see this in the UK in areas such as the cost of living crisis, terrible management of a privatised water system, and railway privatisation).
- Corporate dominance: neoliberalism promotes economic and political policies that enable large corporations to gain disproportionate power and monopolies, simultaneously shifting an unfair share of benefits to the upper class.
- Dangers of globalisation: globalisation has created the emergence of a global ‘precariat’, a social class of people forced to live precariously without any predictability or security. This ‘life on the edge’ existence of renters in unstable, low paid work, is extremely detrimental to wellbeing.
- Inequality: neoliberal policies have led to massive inequality, including an extortionate wealth gap and wealth that fundamentally doesn’t trickle down.
- Lack of concern for wellbeing: prioritising privatisation and profits disincentivises choices that would materially improve conditions of life but potentially cut into profit. It also incentivises actions that increase profits, even when they harm real people.
Neoliberalism at play
Neoliberal ideology is credited as a major player in a variety of significant world events including the financial crash of 2007‑8, the offshoring of wealth and power (as evidenced in the Panama Papers) the collapse of infrastructure in health, education and basic services, the climate crisis, and the rise of populist figures such as Donald Trump.
Freedom from trade unions and collective bargaining means the freedom to suppress wages. Freedom from regulation means the freedom to poison rivers, endanger workers, charge iniquitous rates of interest and design exotic financial instruments. Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty…
…Where neoliberal policies cannot be imposed domestically, they are imposed internationally, through trade treaties incorporating “investor-state dispute settlement”: offshore tribunals in which corporations can press for the removal of social and environmental protections. When parliaments have voted to restrict sales of cigarettes, protect water supplies from mining companies, freeze energy bills or prevent pharmaceutical firms from ripping off the state, corporations have sued, often successfully.
However, none of these circumstances appear in isolation or from a vacuum. The wealthiest tell themselves their wealth has been acquired through hard work and merit alone, ignoring systemic advantages such as class, education opportunities and family support that may have helped secure their positions, all the while encouraging the poor to blame themselves for economic circumstances beyond their control.
We have also seen a transfer of wealth within the elite class, from those who earn by producing goods and services to those who make money by controlling existing assets. Earned income has been replaced by those making money from extortionate rents, interest and capital gains. This also defeats the neoliberal ideas around meritocracy, as the wealthiest earn on their assets, not hard work.
Individualism vs community care
It’s also important to recognise how neoliberal perspectives contribute to models that create loneliness and isolation. Continued emphasis on individualism inherently leads to a disconnection from local communities, especially models of mutual aid and grassroots organising. In a neoliberal lens, people are reduced to exercising power through consumption alone, which is both insufficient to tackle climate and social justice crises, and impossible in a world where consumption needs to decrease in line with finite resources.
In this kind of model, we must ask about those who don’t have money to spend. If spending is how we exercise choice, this removes agency from those with less money. People become disempowered and disenfranchised, as their voices are ignored. During times of recession (or the current cost of living crisis), this removes agency from vast swathes of society. There must be alternative ways to hear the voices of a diverse range of people in society.
Additionally, many other countries and societies have historically modelled more communal, reciprocal ways of organising. We have to also question neoliberalism’s role in Global North dominance, and the continued legacy of colonialism.
It is common in some circles to argue that neoliberal regimes are colonialist in character, though in an unusually direct way. The thought is that neoliberalism was adopted by regimes in the Anglophone world and in much of Western Europe, and that this formed an international elite consensus about how economies around the world should be run. This led to a “Washington Consensus” that caused policy interventions that interfered with the democratic governance of developing nations, increased inequality, and made the poor worse off.
What could an alternative look like?
For all that, there is something admirable about the neoliberal project, at least in its early stages. It was a distinctive, innovative philosophy promoted by a coherent network of thinkers and activists with a clear plan of action. It was patient and persistent.
The crux of the problem we now face is that there are no robust alternatives to neoliberalism ready to go. When the great depression hit, Keynesian theories were in place. When crisis arrived in the 1970s, neoliberal thinkers presented a ready alternative. In the wake of the financial crash of 2008, there were no new, clear economic frameworks that could be easily adopted. We need a new alternative, one that addresses the climate crisis, doesn’t prescribe to trickle-down ideas, and pushes back on the idea of constant economic growth.
It’s not enough to point out the problems of the neoliberal ideology. We also need to be able to propose solid, workable alternatives. It’s time for a new system, and we need to be prepared to work together to uncover what that could be.
The good news is that there appears to be a clear realisation among society (especially in recent months in the UK) that existing neoliberal structures of the economy and society are fundamentally broken. The majority of working people in most capitalist societies are experiencing increasingly worse quality of life, and that a political choice. We are also seeing continued uprisings around the globe, from marginalised communities, young people, and those concerned about climate justice. There is global support for a new wave of progressive projects and ideas.
We have not yet defined the alternative to neoliberalism in practical terms, but it seems these ideas may be on their way. We must now be actively involved in making sure people don’t move towards more disastrous ideas, such as ecofascism, but instead towards regenerative, abundant and radical futures that prioritise justice for all. These things are all within our reach, we must be vigilant in working together to achieve them.