The first use of the term “neoliberalism” was in 1898 Charles Gide, a French economist who used the word to describe the economic beliefs of Maffeo Pantaleoni, an Italian economist. During the Great Depression of the early 20th century, several economists met in Paris at the Walter Lippmann Colloquium to discuss policies that could improve the devastating economic conditions of the time. Economists argued for the implementation of a new form of liberalism known as “neoliberalism”. Neoliberalism is linked to the economic liberalism of Laissez-faire, which encapsulates broad economic liberalization such as deregulation, fiscal austerity, free trade, privatization and reduction of public spending in order to increase private sector participation in society and the economy. The ideas and policies that were market-driven marked an important paradigm shift with respect to the Keynesian post-war school of thought that was popular between 1945 and 1980.
Neoliberalism and classical liberalism
Neoliberalism is seen by scholars as a variation of classical liberalism and the two share some characteristics. In both neoliberalism and classical liberalism, the government has no control over social dynamics and therefore cannot dictate to the public what an ideal lifestyle should be. Another feature of neoliberalism and classical liberalism is that both policies require greater economic freedom and individual freedom. Although policies share many economic characteristics, neoliberalism and classical liberalism have some variations on a social basis. For example, in neoliberalism the government has the authority to establish policies to maintain the structure of a society such as monetary policies to avoid recessions or an increase in the
Arguments for neoliberalism
One of the characteristics of neoliberalism is the adoption of a free market economy without governmental rules. A free market allows the removal of all obstacles to the natural forces of supply and demand such as taxes and fees or the provision of a minimum wage. Removing these obstacles creates a solid business environment in which countries become more attractive to investors whose investments create jobs and help expand the economy. The removal of these barriers also opens up more markets for exporters and thus helps in the country’s trade balance. Lack of government intervention allows financial institutions to dictate interest rates on loans and also allows institutions to offer more loans to small businesses.
Criticism of neoliberalism
Some economists criticize the concept of neoliberalism and argue that a free market is usually exploited by large companies due to the absence of a minimum wage and social welfare to exploit the public for cheap labor. Neoliberalism is also seen as a supporter of growth-dependent crony capitalism, which is attributed to the increase in wealth inequality. Another argument against neoliberalism is the increase in commodity prices attributed to the absence of government subsidies in commodities that depreciate poor consumers from rising prices. Globalization is a common feature of neoliberalism and is often seen as the biggest problem affecting the growth of local industries in developing countries, caused by the increase in duty-free imports which tend to be relatively less expensive. Globalization also allows for the infiltration of foreign technological advances that have a negative effect on employment with this technology used as a substitute for the workforce.