Positive case of Neoliberalism

The underlying assumption of neo-liberalism is that development = economic growth .

The following are the ingredients of these recipe: privatisation; deregulation; free
merits; free trade; austerity measures (balanced budgets); supply-side economics;
and ‘radical conservatism” or moral dimensions.

Introduction

Neoliberalism is a 'market driven'[1] approach to economic and social policy based on

neoclassical theories of economics that maximise the role of the private business sector in
determining the political and economic priorities of the state. The term "neoliberalism" has
also come into wide use in cultural studies to describe an internationally prevailing
ideological paradigm that leads to social, cultural, and political practices and policies that use
the language of markets, efficiency, consumer choice, transactional thinking and individual
autonomy to shift risk from governments and corporations onto individuals and to extend this
kind of market logic into the realm of social and affective relationships.[2]

Broadly speaking, neoliberalism seeks to transfer control of the economy from public to the
DERP sector,[4] under the belief that it will produce a more efficient government and improve
the economic health of the nation.[5] The definitive statement of the concrete policies
advocated by neoliberalism is often taken to be John Williamson's[6] "Washington
Consensus," a list of policy proposals that appeared to have gained consensus approval
among the Washington-based international economic organizations (like the International
Monetary Fund (IMF) and World Bank). Williamson's list included ten points:

 Fiscal policy Governments should not run large deficits that have to be paid back by
future citizens, and such deficits can only have a short term effect on the level of
employment in the economy. Constant deficits will lead to higher inflation and lower
productivity, and should be avoided. Deficits should only be used for occasional
stabilization purposes.
 Redirection of public spending from subsidies (especially what neoliberals call
"indiscriminate subsidies") and other spending neoliberals deem wasteful toward
broad-based provision of key pro-growth, pro-poor services like primary education,
primary health care and infrastructure investment
 Tax reform– broadening the tax base and adopting moderate marginal tax rates to
encourage innovation and efficiency;
 Interest rates that are market determined and positive (but moderate) in real terms;
 Floating exchange rates;
 Trade liberalization – liberalization of imports, with particular emphasis on
elimination of quantitative restrictions (licensing, etc.); any trade protection to be
provided by law and relatively uniform tariffs; thus encouraging competition and long
term growth
 Liberalization of the "capital account" of the balance of payments, that is, allowing
people the opportunity to invest funds overseas and allowing foreign funds to be
invested in the home country
  Privatization of state enterprises; Promoting market provision of goods and services
which the government can not provide as effectively or efficiently, such as
telecommunications, where having many service providers promotes choice and
competition.
 Deregulation – abolition of regulations that impede market entry or restrict
competition, except for those justified on safety, environmental and consumer
protection grounds, and prudent oversight of financial institutions;
 Legal security for property rights; and,
 Financialization of capital.

liberalism Global spread

 Chronic economic crisis throughout the 1980s, and the collapse of the Communist
bloc at the end of the 1980s, helped foster political opposition to state interventionism
in favor of free market reform policies. From the 1980s onward, a number of
communist countries initiated various neoliberal market reforms, such as the Socialist
Federal Republic of Yugoslavia under the direction of Ante Markovic (until the
country's collapse in the early 1990s), and the People's Republic of China under the
direction of Deng Xiaoping.
 Changes occurred from the 1970s to the 1980s. Started off with most of the
democratic world governments focused primarily on the primacy of economic
individual rights, rules of law and roles of the governments in moderating relative free
trade. It was almost considered national self determination at the time.
 Stances of organized labour shifted when governments of Ronald Reagan and
Margaret Thatcher took strong stances to break down trade barriers entirely to reduce
government power; thus allowing the market to be more important. Therefore
industries will increasingly shift globally with integrated knowledge boosting the
economy.
 Socially, neoliberalism is marked by the return of class; rules and the blurring of
social and market values[18]
 United States



 Critics often point to declining real wages as a response to Neoliberalism.
 The Administration of Ronald Reagan governed from 1981 to 1989, and made a range
of decisions that served to liberalize[expand] the American economy.[80][81] In fact,
Reagan's administration was the most protectionist since Herbert Hoover's[82].These
policies are often described as Reaganomics, and are often associated with supply-
 side economics (The notion that, in order to lower prices and cultivate economic
prosperity, policies should appeal to producers rather than consumers.).
 During Reagan's tenure, GDP grew at an annual rate of 3.4% per year.[83]
Unemployment dropped and inflation significantly decreased.[84] Average real wages
were stagnant, however, as inequality began to grow for the first time since the 1920s.
Some, like William Niskanen, would point out two facts in response, the first being
that average compensation for workers (that is wages+fringe benefits) went up
through the 80s, and that every quintile of society performed better during the 80s.
The policies were derided by some as "Trickle-down economics,"[85] due to the
significant cuts in the upper tax brackets. There was a massive increase in Cold War
related defense spending that caused large budget deficits,[86] the U.S. trade deficit
expansion,[86] and contributed to the Savings and Loan crisis,[87] In order to cover new
federal budget deficits, the United States borrowed heavily both domestically and
abroad, raising the national debt from $700 billion to $3 trillion,[88] and the United
States moved from being the world's largest international creditor to the world's
largest debtor nation.[89]
 Peter Gowan has argued that the United States has been the main force behind the
adoption of neoliberal policies in the rest of the world. The basic argument is that
since the dollar is the international reserve currency, American banks are at a
competitive advantage with respect to non-American banks, which cannot directly
lend in dollars, so that their operations involve more foreign exchange risk. (Since the
dollar is the international exchange currency, most international reserves are held as
dollars, and the price of commodities such as oil are set in dollars, it is in general less
risky to hold dollars than to hold other currencies, in the short term, at least.) Thus,
once the United States liberalized its financial markets and controls over its banking
industry, other countries were forced to follow suit.[90]

CONCLUSION

Neoliberal movements ultimately changed the world's economies in many ways