{"id":32899,"date":"2022-06-10T08:00:15","date_gmt":"2022-06-10T07:00:15","guid":{"rendered":"https:\/\/www.redpepper.org.uk\/?p=32899"},"modified":"2025-08-17T12:46:28","modified_gmt":"2025-08-17T11:46:28","slug":"key-words-neoliberal-economics","status":"publish","type":"post","link":"https:\/\/www.redpepper.org.uk\/key-words\/key-words-neoliberal-economics\/","title":{"rendered":"Key words: Neoliberalism"},"content":{"rendered":"\n

Neoliberal economic theory emerged after World War II, spearheaded by Austrian economists Ludwig von Mises and Friedrich Hayek, and later by America\u2019s Milton Friedman.<\/p>\n\n\n\n

Hayek was staunchly opposed to state intervention<\/a>, whether a Soviet-style command economy or the social democratic welfare states of post-war western Europe. For him, the foundation of knowledge, whether scientific, economic, or otherwise, was the individual; the actions of self-managing entrepreneurs could not, and should not, be second-guessed by the state. Early 20th-century state intervention (nationalised industries, social welfare, strong labour unions and planning as a central task of government) had caused western nations to depart from the founding principles of liberal philosophy: individual liberties, the right to private property and a free market governed by the \u2018natural laws\u2019 of classical economics.<\/p>\n\n\n\n

As a remedy, these economists proposed a political restructuring, centred on reforms that would disentangle the state from the market<\/a>, finding the natural balance in every exchange without cumbersome government interventions. In post-Soviet eastern Europe, this ideology held an unarguable appeal to young and economically precarious dissidents, as well as to kleptocratic oligarchs with self-interest in imposing a \u2018western-style\u2019 free market.<\/p>\n\n\n\n

In practice, this entailed many now-familiar measures: privatisation of national utilities, including water, gas and railways; aggressive attempts to dismantle trade unions and submit workforces (and by extension, their wages) to the \u2018natural forces\u2019 of supply and demand; and the removal of barriers to trade between countries and establishment of international trading blocs such as the North American Free Trade Agreement (NAFTA) to facilitate the flow of capital, goods, commodities and services.<\/p>\n\n\n\n

The objective was to create a market that was truly free, global, and limitless \u2013 for capital, if not for human beings. The principles of individual liberty, rights to private property and a free market were radically reasserted, and it is this aspect that underscores the \u2018neo\u2019 [new] in neoliberalism.<\/p>\n\n\n\n

Neoliberalism\u2019s translation from theory to practice is associated with three figures. Firstly, in 1973, Chile\u2019s democratically-elected leader Salvador Allende was overthrown by a CIA-backed coup<\/a> and replaced with Augusto Pinochet, a military dictator who allowed a group of Friedman-educated economists known as the \u2018Chicago Boys\u2019 to turn Chile into a laboratory for neoliberal policy.<\/p>\n\n\n\n

Later, Ronald Reagan and Margaret Thatcher translated neoliberalism\u2019s hostility to the state into a rallying-cry against \u2018big government\u2019 interfering in people\u2019s lives. Thatcher railed against the \u2018nanny state\u2019 as she dismantled social welfare and housing, disempowered unions and privatised national industries<\/a>. Reagan bolstered the assault with rhetorical attacks: \u2018The nine most terrifying words in the English language are: \u201cI\u2019m from the Government, and I\u2019m here to help.\u201d\u2019<\/p>\n\n\n\n

The \u2018neoliberal turn\u2019 profoundly affected the ability of national governments to, well, govern. By accepting its principle of laissez-faire<\/em> (\u2018let do\u2019) and allowing ever more aspects of the state and society to be subjected to the laws of the market, governments gradually surrendered their ability to intervene meaningfully in political issues. If the laws of the market call for lower wages; if they call for a bailout of the banks and a decade of austerity after a crash; if waiving the patent protections on vaccines for a global pandemic would interfere with the profits of pharmaceutical companies, who can say any different?<\/p>\n\n\n\n

That, in a nutshell, is neoliberal economics: the ruthless submission of political and social life to the free market.<\/p>\n\n\n\n

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Further reading<\/h2>\n<\/div>\n\n\n\n
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