What is Neoliberalism?

The term ‘neoliberalism’ is used to describe a set of policies and ideological positions that have been extremely influential in shaping the global political economy since the late 1970s. This era was first launched by the administrations of Ronald Reagan in the USA and Margaret Thatcher in the UK, although many other nations have contributed to it in one way or another.

The ideology sustaining neoliberalism largely stems from the ‘Chicago School,’ which is a group of economists working in and around the University of Chicago. The basis of neoliberalism is a belief in the benefits of free trade, competition and reducing the ability and willingness of the state to intervene in market operations.

As markets are perceived to be good and efficient mechanisms for distributing resources and governments the opposite, then neoliberalism has been associated with moving processes and decisions away from the government sector and into the private sector. This is most obviously seen in privatization but is also evident in the widespread hiring of private sector-based consultants to advise governments and international non-governmental organisations and also in the use of private sector bodies to enact state goals – for example, the use of Blackwater and similar companies to conduct military and logistical operations in Iraq in support of the American government’s war effort.

Neoliberalism is associated with globalisation, although globalisation is a separate set of processes. Certain western countries have used the ideology of neoliberalism as the means for promoting various objectives that they wish to achieve through the process of globalisation. This includes enhancing access to markets in developing countries, reducing the levels of support that developing country governments are able to provide for their own industries and spreading the free market across the world.

The means of achieving these goals has often fallen on the Bretton Woods Institutions – that is, the World Bank and the International Monetary Fund (IMF), which were formed as a result of a conference held by representatives of the allies towards the end of the Second World War at Bretton Woods. The informal pact among developed country governments to use the Bretton Woods institutions to enforce neoliberal policies in the developing world is called the Washington Consensus.

Since the ideology underpinning the neoliberal position is very strongly held by some people (and there is, more importantly, an enormous amount of money and power at stake), the results of neoliberal policies are strongly and often fiercely contested. Proponents claim that wealth and freedom have been increased; opponents claim that wealth for the wealthy has increased, inequalities have become intensified and the weak have been forced into poverty and misery. In seeking to determine which of these positions is true, it should be remembered that neoliberalism is an ideology like many others and should be treated as such.