Neoliberalism: Ideology, Governance, and Policy

Neoliberalism can be contemplated from three different points of view.

Neoliberalism as an Ideology

First, it is an ideology. Here, the student must summarize the main ideological points and compare them with the tenets of Keynesianism to understand the economic and political changes we are living today.

Neoliberalism as a Mode of Governance

Second, it is a mode of governance, that is, it is a conception about how the role of government should be. In a few words, governments have to imitate the principles and values of free markets. The most significant consequence is that governmental technologies taken from the world of business and trade are replacing the pursuit of some ideal of the ‘public good’ which characterized the Welfare State.

Neoliberalism as a Policy Package

Third, Neoliberalism is a policy package, that is, a bundle of political measures.

The Intellectual Origins of Neoliberalism

Lastly, part three (‘The Intellectual Origins of Neoliberalism’) deals with the ideas of two of the most influential economists in later times: Hayek and Friedman.

Hayek and the Austrian School

Hayek and the so-called Austrian School of Economics returned to Classical Liberalism against Marxist Collectivism, Social Democracy, and Keynesianism. For him, the self-regulating market is a knowledge-generating engine of human freedom and ingenuity, the most efficient and just institution to solve the economic problem. In his 1944 book The Road to Serfdom, he defended a very contested (and in the long run, completely mistaken) idea: that any kind of state intervention in the market economy leads inescapably to totalitarianism.

Friedman and the Chicago School

On the other hand, Milton Friedman and the Chicago School held that state intervention generates inflation (as it happened in the early 1970s) and it has to be controlled by central banks rather than by governments. Friedman was against fiscal policy (taxation and redistribution policies implemented by Keynesians) and therefore against public services and regulations. Friedman defended ‘Shock therapies’ (e.g., Chile and Eastern Europe) applied by international institutions all over the world during the last thirty years (The Washington Consensus promoted by the IMF and the World Bank).

The Impact of Neoliberal Policies

Ronald Reagan (U.S.) and Margaret Thatcher (U.K.) were the most important advocates of neoliberal policies during the 1980s and they were guided in their political action by Friedman and Hayek respectively. The current crisis, as it was during the Great Depression, has been an outcome of the de-regulation promoted by those neoliberal policies governing the world.