Neoliberalism is a current of economic and political thought that emerged in the 20th century. It is based on the defense of a capitalist system. This current tries to revive the ideas of classical liberalism.
Meaning of neoliberalism
Neoliberalism was first coined in 1938, by the German economist Alexander Rüstow. Thus, through liberalism, this economist sought to find a strategy that would allow finding new ways between liberalism and economic planning by the State.
While it is true, all be said, that Rüstow was not the first to mention the word. That is, he was the first to define it, but the concept had already been mentioned previously by Max Adler in 1922 in relation to a criticism of Ludwig von Mises
Many liberal economists have been associated with neoliberalism; including the Chicago Boys of the Chicago School. However, his term does not refer to a group of economists who oppose liberalism, so the use of the term refers to the synergy between liberalism and conservatism that certain factions of the right have. In this sense, a liberalism that emphasizes economic liberalism.
Neoliberalism, as we said before, is not a concept that, like neo-Marxism, shows itself against the liberal trend. However, it qualifies aspects that come out of the economic field, highlighting a more conservative current.
Even so, the word neoliberalism does not refer to a specific current, since a large part of the liberal cast does not recognize this concept as a new current within liberalism.
Principles of neoliberalism
Among the principles of neoliberalism, several of the liberal ideology stand out. That is to say, there is a great similarity between the neoliberal and the liberal ideology, since both present the same principles.
In this sense, the following principles of neoliberalism should be highlighted:
- Absolute freedom.
- Defense of private property.
- Full dominance of the market.
- Free market.
- Political order.
- Minimum weight of the State.
Thus, as observed, a series of principles that, in the same way, includes liberalism.
Characteristics of neoliberalism
The ideological trend of neoliberalism has the following characteristics:
- Private property: This is one of the most important characteristics of neoliberalism. It defends that most of the goods and factors of production must be privately owned.
- Role of the State: It does not propose the suppression of the State but it does reflect a great limitation of its functions.
- Free market: It defends the total freedom of the market since it affirms that it is the optimal way to optimize the allocation of resources.
- Deregulation: Advocates deregulation of markets, allowing greater freedom in them.
- Taxes: Pursues a reduction in taxes, resulting in lower public spending.
Difference between liberalism and neoliberalism
Liberalism and neoliberalism do not present notable differences. At least, yes, on the surface. However, there are a series of nuances that distinguish both concepts by their nature.
In this sense, nuances such as the conservatism that the neoliberal movement presents, as well as the emphasis that said movement places on economic liberalism, leaving aside other aspects that, in contrast, classical liberalism does contemplate, and analyze, in a more comprehensive way. .
For this reason, it is difficult to know the differences that both currents present, safeguarding those already mentioned. Forget the redundancy, the liberal movement rejects the existence of currents such as neoliberalism, because it considers that it does not defend anything that liberalism itself is no longer defending. This is why there is no agreed definition of what neoliberalism is, as well as what it refers to. Although it was Rüstow himself who coined it, the term has been perverted throughout history.
It would only be worth highlighting the great association of a first neoliberal movement with ordoliberalism. In this sense, establishing a confrontation between what, at that time, was called neoliberalism and classical liberalism.
Difference between neoliberalism and capitalism
The main difference between the two economic systems lies in the role of the state in the economy. Capitalism is the most widely used model in the countries of the world.
Capitalism defends that there must be a market economy. In it, economic freedom and private property of the factors of production must be guaranteed. The state intervenes as a regulatory entity that tries to solve market failures, guaranteeing the social welfare of citizens.
In addition, the neoliberal model is part of capitalism. Likewise, within each capitalist system, a policy oriented towards an economy endowed with greater freedom or greater state intervention can be carried out.
History and origin of neoliberalism
Neoliberalism is a current of economic, political and social thought that emerged in the 20th century. Specifically, it was the German economist Alexander Rüstow who, in 1938, coined the concept of neoliberalism.
At that time, referring to certain principles on which, being defended by liberalism, special emphasis was placed. Principles that, such as the free price system, entrepreneurship, freedom of association and contract, as well as a strong and impartial State. Thus, neoliberalism came to be associated with another series of currents such as ordoliberalism, given its defense of the social market economy.
In this way, liberalism has been associated with a series of premises, among which the defense of private freedom stands out, limiting the presence of the State. As well as other series of principles such as the subsidiarity of the State, the premises of the ordoliberal current, the monetarism of the Chicago School, as well as the Keynesian macroeconomic approach. In this sense, developing said current in opposition to liberal ideas such as the absolute "Laissez Fairé".
Neoliberalism in Latin America
Here is a summary of the emergence of neoliberalism in Latin American countries:
After a stage with the Peronist government in power, considered a political formation of the extreme left, the time of Macri arrived, and with it, the massive appearance of the neoliberal concept in the media.
Macri, despite not being a president known for defending liberal ideas, ideological distancing from his predecessors, led political analysts to label his policies as liberal or neoliberal.
In turn, the media presence of economists like Javier Milei has made the concept of neoliberalism gain more and more relevance.
In modern history, Mexico began to apply neoliberal measures after the 1982 crisis and the intervention of the International Monetary Fund in its economy. In 1994 the Free Trade Agreement (NAFTA) was signed. Which included trade conditions among its more flexible members, favoring trade between different nations.
As of this moment, a process of privatization of companies begins, reducing the number of these by approximately 80%. Along with this, the Bank of Mexico began to guarantee control of the money supply.
Examples of neoliberalism
Many examples related to neoliberalism can be explained. Any action aimed at promoting free enterprise or privatization can be associated with this economic model. Here are some examples:
- Reduction of public aid: The reduction of benefits granted to citizens can be considered a neoliberal measure.
- Tax reduction: This means a lower State budget, which will reduce its weight in the economy.
- Privatization: The privatization of certain companies or public services will promote the privatization of the factors of production.
- Deregulation: The measures that involve deregulation of the markets will promote freedom of enterprise.
In conclusion, neoliberalism is an ideological trend that defends free enterprise and less State intervention. In this way, the privatization of the factors of production and the freedom of the market are promoted.