Neoliberalism as Economic Concept


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Neoliberalism is an approach to economics and social studies in which control of economic factors is shifted from the public sector to the private sector. Neoliberalism as an economic ideology is spreading throughout the world via international financial institutions and transnational corporate hegemony. Drawing upon principles of neoclassical economics, neoliberalism suggested that governments needed to reduce deficit spending, limit subsidies, reform tax law to broaden the tax base, remove fixed exchange rates, open up markets to trade by limiting protectionism, privatize state-run businesses, allow private property and back deregulation.
This dominant program, often labelled neoliberalism or Washington consensus," enjoys the sponsorship of the major power the United States as well as of the Bretton Woods organizations and of the leading academic experts.
David Harvey’s definition
 In the recent „critical‟ literature, David Harvey stand out as being one of the few who tries, in his A Brief History of Neoliberalism, to give the concept a wide-ranging definition, which in part harks back to the analyses submitted by Cros, Nawroth and ver Eecke (Harvey 2005). In our view, his definition does shed a ray of light on the issue of what kind of phenomenon neoliberalism is:
 “Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defence, police and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets. Furthermore, if markets do not exist (in areas such as land, water, education, health care, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture. State interventions in markets (once created) must be kept to a bare minimum because, according to the theory, the state cannot possibly possess enough information to second-guess market signals (prices) and because powerful interest groups will inevitably distort and bias state interventions (particularly in democracies) for their own benefit” (Harvey 2005:2).
 Harvey‟s suggested definition of neoliberalism is, it might be said, well suited to accommodate his overall analysis, which includes the firmly held belief that the world has experienced “an emphatic turn towards neoliberalism in political-economic practices and thinking since the 1970s” (ibid.). Harvey proposes with his definition to view neoliberalism, not as the rejuvenation of liberalism in general, but as a distinctive economic theory which in recent times has replaced a more mild-mannered „embedded liberalism‟, i.e. Keynesian approaches to macroeconomic governance inspired by modern liberalism. It is apparent that Harvey sees neoliberalism not as a continuation of liberalism „proper‟, but as something which lives independently of mainstream liberal values and policies. In fact, it seems that some neoliberals are not liberals in any meaningful sense at all, as Harvey seats anti-liberal autocrats such as Deng Xiaoping and Augusto Pinochet among the political vanguard of neoliberalism.
Nevertheless, there seems to be neoliberals with a liberal identity as well, and among these, political theorists and economists such as Hayek and Friedman figure prominently alongside nominally conservative politicians such as Reagan and Thatcher in Harvey‟s view of our recent history, as being largely responsible for all things neoliberal. With his definition, which incorporates everything from Thatcherism to „socialism with Chinese characteristics‟, Harvey emphasises, rightly so, that neoliberalism is „a theory of political economic practices‟ rather than a „complete‟ political ideology. In fact it does not seem to be any sort of clear-cut connection or even a correlation between a favourable assessment of neoliberal economic practices and a commitment to liberalism „proper‟.
Understanding
The concept suggests its own definition: „Neoliberalism‟ is a revival of „liberalism‟. This definition suggests that liberalism, as a political ideology, has been absent from political discussions and policy-making for a period of time, only to emerge in more recent times in a reincarnated form. It suggests, in other words, that liberalism has undergone a process of initial growth, intermediary decline, and finally a recent rejuvenation. Alternatively, neoliberalism might be perceived of as a distinct ideology, descending from, but not identical to liberalism „proper‟. Under this interpretation, neoliberalism would share some historical roots and some of the basic vocabulary with liberalism in general. This interpretation places neoliberalism in the same category as American „neoconservatism‟, which is an ideology or „political persuasion‟ somewhat similar to and yet markedly different from much conventional conservative thought, and often hardly recognisable as a genuinely conservative ideology (Kristol 1983; Wolfson 2004, Fukuyama 2006).
Neoliberalism is, as we see it, a loosely demarcated set of political beliefs which most prominently and prototypically include the conviction that the only legitimate purpose of the state is to safeguard individual, especially commercial, liberty, as well as strong private property rights (cf. especially Mises 1962; Nozick 1974; Hayek 1979). This conviction usually issues, in turn, in a belief that the state ought to be minimal or at least drastically reduced in strength and size, and that any transgression by the state beyond its sole legitimate purpose is unacceptable (ibid.). These beliefs could apply to the international level as well, where a system of free markets and free trade ought to be implemented as well; the only acceptable reason for regulating international trade is to safeguard the same kind of commercial liberty and the same kinds of strong property rights which ought to be realised on a national level (Norberg 2001; Friedman 2006).
Neoliberalism generally also includes the belief that freely adopted market mechanisms is the optimal way of organising all exchanges of goods and services (Friedman 1962; 1980; Norberg 2001). Free markets and free trade will, it is believed, set free the creative potential and the entrepreneurial spirit which is built into the spontaneous order of 15 any human society, and thereby lead to more individual liberty and well-being, and a more efficient allocation of resources (Hayek 1973; Rothbard [1962/1970] 2004).
Neoliberalism could also include a perspective on moral virtue: the good and virtuous person is one who is able to access the relevant markets and function as a competent actor in these markets. He or she is willing to accept the risks associated with participating in free markets, and to adapt to rapid changes arising from such participation (Friedman 1980). Individuals are also seen as being solely responsible for the consequences of the choices and decisions they freely make: instances of inequality and glaring social injustice are morally acceptable, at least to the degree in which they could be seen as the result of freely made decisions (Nozick 1974; Hayek 1976). If a person demands that the state should regulate the market or make reparations to the unfortunate who has been caught at the losing end of a freely initiated market transaction, this is viewed as an indication that the person in question is morally depraved and underdeveloped, and scarcely different from a proponent of a totalitarian state (Mises 1962).
Thus understood and defined, neoliberalism becomes a loose set of ideas of how the relationship between the state and its external environment ought to be organised, and not a complete political philosophy or ideology (Blomgren 1997; Malnes 1998).
 In fact, it is not understood as a theory about how political processes ought to be organised at all. Neoliberalism is for instance silent on the issue of whether or not there ought to be democracy and free exchanges of political ideas. This means, as Harvey (2005) indicates, that policies inspired by neoliberalism could be implemented under the auspices of autocrats as well as within liberal democracies. In fact, neoliberals merely claim, in effect, that as much as possible ought to be left to the market or other processes which individuals freely choose to take part in, and consequently that as little as possible ought to be subjected to genuinely political processes.
Proponents of neoliberalism are therefore often in the ‘critical literature’ portrayed as sceptics of democracy: if the democratic process slows down neoliberal reforms, or threatens individual and commercial liberty, which it sometimes does, then democracy ought to be sidestepped and replaced by the rule of experts or legal instruments designed for that purpose. The practical implementation of neoliberal policies will, therefore, lead to a relocation of power from political to economic processes, from the state to markets and individuals, and finally from the legislature and executives authorities to the judiciary.
 


Monday, 27th Jul 2015, 10:07:26 AM

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