5 Causes and Consequences of Neoliberalism

The causes and consequences of neoliberalism were determined by certain political, social and economic crises which, according to the different regions of the world, have evolved differently.

Neoliberalism is an ideology that promotes a change in the configuration of the capitalist economy, in which the State does not participate, leading to the privatization of public services. Followers of neoliberalism believe that this system contributes to a country’s economic and social development.

The antecedent in the history of neoliberalism is the liberal conceptions that the classics of the political economy of the English bourgeoisie had. Its first appearance was before the Second World War and continued with much more presence in the 60s and also in the 80s and 90s.

Neoliberal strategies began in Latin America in the late 1970s, as a result of the existing major economic imbalances. Other countries pioneering neoliberalism are the United States, Germany and England.

As the poor get poorer and the rich get richer, the most favored gain more and more control over money. This increase in inequality undermines the level and sustainability of growth.

Milton Friedman

With the expansion of world trade, foreign investment has made it a way to transfer technology and knowledge to developing economies.

One of its main exhibitors is Milton Friedman, who argued that the state does not need to be an active actor in the national economy, but that who should exercise control of the economy is private capital.

Whoever manages privatized and semi-privatized services in the UK increases their wealth by investing little and charging a lot.

In Mexico, Carlos Slim took control of virtually all fixed and cellular services and quickly became the richest man in the world.

 

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Causes of neoliberalism

1- The economic crisis

With the devaluation of the currency, exports are reduced and make the country’s position more competitive.

Neoliberals indicate that all variables in the economic system must be deregulated, that is, disconnected from state control. They also point to bank liberalization and deregulation.

To try to solve the economic problems in the 70s and 80s, almost all states in the capitalist world had to follow some of these measures.

Although the ones that were really forced were the underdeveloped countries. These countries have seen poverty and social inequality increase after years of applying these measures.

2- The political crisis

When governments lose their ethical authority, they simply divert people’s attention to issues that may interest them. In this way, citizens are more excited about feelings than arguments.

3- Stock market bankruptcy

The fall in the prices of the New York Stock Exchange in 1929, known as “The crack of 29”, was the biggest crisis hitherto known.

It caused the ruin of countless investors, big businessmen and small shareholders, as well as the closing of companies and banks.

This caused many citizens to remain unemployed, and the problem has spread to almost every country in the world.

The consequences were a major economic crisis that led to the principles of neoliberalism.

4- Disappearance of the welfare state

The welfare state disappears when social protection is reduced, job insecurity appears and privatization of public services occurs, such as electricity, rail and air companies, education, roads, health, etc.

5- The class struggle

Neoliberalization was considered a project for the recovery of the bourgeois class. Neoliberal politics directly attacks unions and gambling and supports classes of private traders with industrial financial and real estate interests.

 

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