Neoliberalism: What is It?

The expression ‘neoliberalism‘ is often used both in public discourse and academia. Many definitions of this concept have been given, but yet its true meaning is not entirely clear, and people use the term with the most various intents. This piece aims a shedding light on the term neoliberalism, by reviewing how it has been defined by scholars and highlighting its main features. The historical circumstances in which neoliberalism gained traction and became hegemonic will only be touched to clarify its understanding. Thus, the article will focus on neoliberalism as an object of study and will attempt at guiding the reader through the many conceptualisations that have been made. The article will be divided as follows. In the first part, the intellectual origins of neoliberalism will be addressed. Secondly, some major academic interpretations will be explored.

Where does it come from?

It is not uncommon to hear that neoliberalism made its debut in the 1970s as a result of the oil shock of 1973 and achieved its zenith with the joint presidencies of Margaret Thatcher (1979 - 1990) in the UK and Ronald Reagan (1981 - 1989) in the USA. Those two politicians are indeed symbols of neoliberal policymaking for their radical approach to economic policies in their respective countries. They did engage in the deep remoulding of their respective economies, and in a sense, they effectively managed to guide their nations out of a tremendous economic crisis. Nevertheless, neoliberalism as a strand of economic thought remounts back to the 1930s and has remained a marginal branch of economics for 40 years, while the hegemonic paradigm was Keynesianism (Slobodian, 2018). The origins of neoliberalism are to be found in the thinking of a group of like-minded intellectuals from the two sides of the Atlantic actively engaging in the production of academic knowledge from the late 1920s. The origins can be found in the so-called Freiburg School, which conceived ordo liberalism — a radical view of classic liberalism that postulates the need for the institutional enforcement of the market and gave neoliberals the theoretical base upon which they developed their own economic doctrine (Slobodian, 2018). The main hub of neoliberal thinking developed after the Freiburg School was the Geneva School, of which famous scholars such as Hayek and Von Mises were part. The geographical characterisation is because most people belonging to it held academic positions in the Swiss city. They reshaped the ordoliberal concept of the market that should be protected by the state, by internationalising the issue; the market should be put rescued from the political power of nation-states that seek to regulate the economy. This, according to them had to be done by fostering international economic governance that could able to isolate the market — that deploys transnationally — from national politics that by definition deploys nationally (Slobodian, 2018). On the other side of the Atlantic, the Chicago school was the most known hub of neoliberal thinking, with the presence of Milton Friedman. Such a school had outstanding importance for the propagation of neoliberalism in the American continent, and the so-called Chicago boys would become the economic ideologists and advisors of some of the bloodiest dictatorships in Latin America Pinochet’s in Chile, for example.

Image 1: Unknown (n.d). Margaret Thatcher and Ronald Reagan [Photograph].

This cluster of academics was for several years at the margins of economic scholarship, for they postulated strongly unorthodox ideas vis-à-vis mainstream economics of the time dominated by Keynesian, interventionist, and state-centric views. For them, World War I (1914 - 1918) and the subsequent crisis of 1929 had been fundamental ruptures in the world’s economic history. The former exposed the contradictions and inherent conflictive nature of a world market regulated by states, and that led to the tragedy of the war. In other words, the war unveiled the contradiction of the classical liberal world order, in which the achievement of a fully developed and integrated world market was not followed by efficient world governance, leading to economic conflicts among countries, quickly escalating into military conflicts (Slobodian, 2018). The crisis of 1929 represented, for them, further proof of the inadequacy of the liberal world order, precipitating chaos due to the difficulties to recover from World War I and coping with the US’ isolationism, as a consequence of what they perceived as an unjust pot-World War I peace settlement (Slobodian, 2018). A third — and decisive for the future of neoliberal economic thinking — rupture was represented by the crisis of the 1970s, that notably exposed the contradictions of the Keynesian model of accumulation due to low productivity and high inflation (Harvey, 2005). Such a conjecture had a major impact on neoliberal scholarship for, in response to the crisis, neoliberal ideas slowly abandoned their residual role, and made their appearance at the centre of scholarly and political debate (Harvey, 2005). It was in fact, in the late 1960s and early 1970s when capital, in response to the crisis of profitability, started to adopt neoliberalism as its ideological remedy to curb the effects of stagflation — the combinations of inflation and stagnation — and recuperate high rates of profitability (Harvey, 2021).

Image 2: Unknown (n.d). Friedrich Hayek [Photograph].

Insofar, the intellectual origins of neoliberalism have been briefly explored. However, the true meaning of neoliberalism is debated in academia. Depending on the aspect one might want to stress the definition of neoliberalism might change, hence the purpose of the next section is to present some of these views.

Some alternative views

Neoliberalism has been the object of widespread academic investigation. However, it was not until the late 1990s and early 2000s that it was established as a coherent and independent body of academic knowledge. Some had observed a shift that took place in the 1970s, but it was inserted in the wider strand of the duality between modernity and postmodernity (Harvey, 1989).

Neoliberalism has been explored vastly from a varied range of standpoints. David Harvey, from the Marxist point of view, claimed neoliberalism to be the result of one inherent contradiction of capitalist accumulation. He argues that capitalism has in itself some structural contradiction, one of them being between production and realisation (Harvey, 2014). In other words, capitalist accumulation faces the dilemma between increasing productivity — meaning reducing costs of the inputs, and thus, of labour and wages — and increasing market demand for the goods being produced — meaning the maintenance of a relatively high level of wages, as workers are also consumers. During the Keynesian model of accumulation, the creation of demand was prioritized, hence wages grew consistently, as much as the strength of trade unions, which led to a decrease in profit rates (Harvey, 2005). According to Harvey (2005), neoliberalism was an attempt of escaping such a contradiction. First and foremost, neoliberalism was an offensive of capital against labour; labour was way too organised and strong to let profitability grow again, and thus its strength had to be redimensioned. This was done through several means: internationalisation of the economy, flexibilisation of labour, union busting, end-of-state assistance to the lowest social layers, and economisation of society. All these created a society in which the labour force found itself competing with workers all over the world. Furthermore, the poorest layers of the working class and the unemployed lost the financial support of the state, whereas the organized working class was treated with hostility by the state itself — an example of which is Thatcherism and its crusade against miners (Harvey, 2005). Therefore, for Harvey (Harvey, 2005), neoliberalism is the expression of the contradictions of capitalism, and a widespread offensive of labour against capital.

Image 3: Kal (1987). The iron lady [Illustration].

In a similar fashion, but ye with significant differences, Slobodian (2018) conceptualises neoliberalism as a widespread transformation in the institutional structure — both at the national and international level — that protects markets against the political dimension of nation-states. Readapting Polanyi’s (1994) concept of embeddedness, Slobodian (2018) postulates that neoliberalism goes beyond the Polanyian conception of a disembedded market. Analysing classic liberalism, in fact, the Hungarian sociologist observed that markets were progressively disembedded from society, in other words, they were not serving the purposes of society but rather they were self-referential. Slobodian (2018) argues that Polanyi’s vision was respondent to the world economy of the late 19th and early 20th century. However, neoliberalism, despite being a revival of those liberal ideas, went further in terms of the relationship between the market and statal policy making. Not only did neoliberalism imply the economy from society and the state, but the latter was penetrated by market logic. The role of institutions here is crucial; instead of retracting from the economy, states have engaged under neoliberalism in what Slobodian (2018) defines as the encasement of the market. Such a term implies both a compenetration between institutions and the market, and the protection of the former over the latter. In accordance with the conception of the neoliberal state provided by Genschel and Seelkopf (2015), the market is protected by the development of institutions at the international level, with the compliance and participation of nation-states, which aim of avoiding national politics to influence the “natural” development of the market forces. Therefore, neoliberalism is primarily a movement that aims at changing institutions — being they national or international — to the advantage of those that are more benefited from an unconstrained free market. It can be appreciated here how this view differs from Harvey’s: the focus towards institutions rather than economic policy per se, and the international dimension of neoliberal institution-making is stressed and emphasised as the most relevant aspect of such an economic strand of thought. The structural component is less present in Slobodian (2018) than in Harvey (2005), although the former also stresses the fact that the encasement of the markets favours decisively capital over other components of society.

Image 4: Unknown (n.d). Free trade at last [Illustration].

A different take on neoliberalism can be appreciated by looking at Stiglitz (2002). In his view, and as opposed to Harvey (2005), neoliberalism is the degeneration of the previous system based on Keynesianism. Even though he is deeply critical of neoliberalism — arguing that it is highly detrimental to most of the social indicators and to democracy itself — Stiglitz does not identify structural contradiction leading to neoliberalism. Instead, he argues that neoliberals must be modified through social and statal regulation, in other words, neoliberalism is presented as deviance from capitalism, rather than a chronic illness. Neoliberalism for Stiglitz (2002) was in a sense authoritarian, for in the economic field it imposed an untainted orthodoxy that lasted for decades. However, he argues that such orthodoxy can — and must — be broken, in order to return to a model of the market that is rationally oriented by the state.

Image 5: Unknown (n.d). The threat of neoliberalism [Illustration].

Conclusions

Neoliberalism has a long history. However, it only imposed itself as a relevant economic paradigm in the late 1970s. Its ideological roots are clearly to be found in classic liberalism and ordo-liberalism, which were developed by neoliberals into an innovative doctrine. However, neoliberalism is not understood uniformly. Three views have been presented from Harvey’s point of view, rooted in Marxism, neoliberalism is inherently connected with structural contradictions of the capitalist mode of accumulation. It is, in fact, the offensive of capital against labour, enacted to get away with the contradiction between production and realisation. According to Slobodian instead, neoliberalism has a lot to do with institutions — being them national or international- that provide for the encasement of the market — and thus its protection from democratic policymaking. For Stiglitz neoliberalism is a deviation from capitalism and can be “cured” through statal and international legislation. Those are just three of the most influential views on neoliberalism, an object of study that provokes high engagement by scholars. Further scholarly efforts are well needed in order to make sense in the deepest way of this phenomenon and its late and current developments.

Bibliographical References

Genschel, P., & Seelkopf, L. (2015). The competition state. In S. H. Leibfried. The Oxford Handbook of Transformations of the State (pp. 237 - 252). USA: Oxford University Press.

Harvey, D. (1989). La crisi della modernità. Milano: Il saggiatore.

Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press.

Harvey, D. (2014). Seventeen contradictions and the end of capitalism. London: Profile Books Ltd.

Harvey, D. (2021). Cronache anticapitaliste. Guida alla lotta di classe per il XXI secolo. Milano: Feltrinelli.

Polanyi, K. (1994). The Great Transformation. Boston: Beacon Press.

Slobodian, Q. (2018). Globalists. Milano: Meltemi.

Stiglitz, J. (2002). Globalization and its discontents. W.W. Norton & Company.

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