Neoliberalism

Neoliberalism refers to a political-economic philosophy that has had major implications for government policies beginning in the 1970s – and increasingly prominent since 1980 – that de-emphasizes or rejects government intervention in the economy (that complements private initiative), focusing instead on achieving progress and even social justice by encouraging free-market methods and fewer restrictions on business operations and economic development. Supporters argue that by implementing business-friendly policies, a society can assure that its businesses grow, creating jobs and other economic benefits which improve the welfare of the entire economy. This is commonly referred to as 'trickle down economics' or 'Reaganomics.' Detractors tend to think that government intervention is necessary to create an equitable society.

Who is a neoliberal?

As with many political terms, since the word is used in different ways by different groups, different people can be classified in different ways based on it. The most restrictive definition of neoliberal is "laissez-faire, capital market driven, privatization and trade arrangements." Under this specific form, neoliberalism is a business-conservative policy aimed at enforcing stringent budget discipline on developed and developing nations by requiring, for all but the US, balanced budgets and trade flows. This is based on a specific interpretation of the Mundell-Fleming model and is most associated with the Washington Consensus. In these terms the prominent neoliberals are people such as Margaret Thatcher, Robert Barro, and Alan Greenspan.

Related Topics:
Business-conservative - Mundell-Fleming model - Washington Consensus - Margaret Thatcher - Robert Barro - Alan Greenspan

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In the broader sense, where a neoliberal is an individual who subscribes to Prof. DeLong's formulation of neoliberalism, any advocate of government restricted to supplying public goods, and globalized free trade is a neoliberal. By this broader definition Robert Rubin, Joseph Stiglitz and Amartya Sen are "neoliberals," even though all three have been highly critical of the neoliberalism of the more restrictive form, and the manner by which such institutions as the IMF and World Bank have been run in the post-Bretton Woods era.

Related Topics:
Robert Rubin - Joseph Stiglitz - Amartya Sen - IMF - World Bank

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The key argument between these two usages can be seen from Stiglitz' criticisms of the Washington Consensus: namely, by the measures that he follows, that while globalization and global trade are good, they have been conducted in a manner that seems almost designed to impoverish poorer nations. He specifically cites agricultural subsidies and barriers, for example for sugar, the average prices paid for imports and exports between developing and core nations, and the damaging effects of "hot money" as the vehicle for foreign investment. For a laissez-faire neoliberal, other than an admission that agricultural subsidies are bad, none of these constitute indictments of laissez-faire policies.

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