Neoliberalism – What is it, origin, characteristics, criticism, liberalism

We explain what neoliberalism is, its origin, characteristics and why it is criticized. Also, differences with liberalism.

neoliberalism margaret thatcher ronald reagan
The governments of Ronald Reagan and Margaret Thatcher were neoliberal.

What is neoliberalism?

Neoliberalism (also called new liberalism or technocratic liberalism), it is a political ideology and a socio-economic model based on the free market competence as the foundation of any capitalist economy. It proposes policies of laissez-faire (“To let it be done”, in French), that is, of minimal intervention of the State.

It is generally understood as a resurgence of the precepts of classical liberalism (or first liberalism) emerged between the seventeenth and eighteenth centuries. Its reasoning or basic philosophy is the belief in sustained economic growth, as the adequate method for the progress of humanity.

However, throughout history there have been different interpretations of this term, because its associated practices have changed significantly. To cite an example, in the 1930s, this term was associated with a model of conduction of the economy by a strong State, something we know today as the Social Market Economy.

But since the end of the 20th century, this is no longer the case. In fact, the governments of President Ronald Reagan (1911-2004) in the United States (1981 to 1989) and Prime Minister Margaret Thatcher (1925-2013) in the United Kingdom (1979 to 1990) are considered the most representative. of the neoliberalism of that time. In both cases, privatizations and the opening of markets were the norm.

Similarly, the economists Milton Friedman (1912-2006) and Friedrich Hayek (1899-1992) are considered the main theoretical exponents of neoliberalism. However, it often debates what exactly are the theoretical and practical definitions of neoliberalism, as it has many defenders and adversaries today.

See also: Capitalism

Characteristics of neoliberalism

Despite the difficulties that exist in defining it with certainty, neoliberalism at the beginning of the 21st century is usually associated with:

  • Propose the reduction of public spending and reduction of the State, as well as the least possible interference of the latter in the affairs of the economy, leaving the conduct of the economy to private actors and the free market.
  • It is associated with restrictive fiscal and monetary policies, market deregulation and privatization of public companies.
  • The application of austerity policies as a mechanism for economic recovery in developing countries or countries in deep crisis, which often results in much social unrest and increased poverty, as capital is redirected from the consumer to the companies.
  • Defends certain precepts of the old classical liberalism, but through very different political guidelines, determined by much later ideas.
  • Its ideological enemies are the progressive and socialist sectors.

Origin of neoliberalism

neoliberalism pinochet
The economy of the Pinochet dictatorship was guided by the Chicago neoliberals.

The term “neoliberalism” was coined by the German sociologist and economist Alexander Rüstow (1885-1963) at the Walter Lipmann Colloquium in 1938.

Rüstow used this term to group the interventionist economic practices of the insurgent tendencies of the 20th century such as fascism, communism, nationalism and socialism, which in his opinion formed a doctrine separate from classical liberalism, enemy of the laissez-faire.

Nevertheless, in the 1960s the term ceased to be associated with the now called Social Market Economy, and began to designate economic systems guided by the free market, that is, the ideas of economists like Friedman, von Mises, and Hayek.

Perhaps due to this confusion, the term stopped being used for decades. It resurfaced in its current meaning in the 1980s, associated with the deep economic reforms of the dictatorial regime of Augusto Pinochet (1915-2006) in Chile, guided and supervised by the Chicago School economists, known as Chicago Boys. From this association is born, in part, the bad reputation of neoliberalism.

Thus, from a moderate capitalist position, the term came to designate a more radical position and committed to liberal capitalism. The arrival of neoliberalism in the late 20th century ended decades of Keynesian systems in place since 1930.

He got very uneven results, and laid the foundation for the global economy to come, but at immense social cost, particularly in developing countries, such as those of Latin America.

Criticism of neoliberalism

Neoliberalism, in its most recent meaning, is harsh and widely criticized from progressive and leftist sectors.

It is accused of having been a particularly cruel system towards vulnerable sectors of society between the 1980s and 1990s, as transfers money and power to large corporations, especially transnationals. For it, subjects citizens to austerity measures and impoverishment, with the promise of a better future.

Secondly, his affiliation with ultra-conservative regimes, and with policies that favored the wealthy sectors of society, they associated it with the economic right and the destruction of the much praised welfare state that reigned in the West after World War II.

Liberalism and neoliberalism

Adam smith
Adam Smith postulated liberal economic ideas in the 18th century.

As we have seen before, liberalism and neoliberalism are not synonymous, although the second revives or updates some ideas associated with the first. Their differences, however, can be summarized as:

Classical liberalismNeoliberalism
Originating between the seventeenth and eighteenth centuries, it represented the desire of the bourgeois classes to get rid of monarchical absolutism and live in a society with greater economic and individual freedoms.It emerged in 1930 as a term for 20th century doctrines opposed to economic liberalism, and in 1980 it was resignified for a new model of corporatist liberalism.
He defended free enterprise, civil and democratic liberties, and republicanism, against the conservative aristocratic classes.Initially he defended a model of State intervention and market regulation, but later it came to mean the opposite: the extreme application of the laissez-faire and the handing over of markets to private actors, as well as the shrinking of the State, contrary to the Keynesian policies applied since 1930 in the West.
Its main exhibitors were John Locke, Immanuel Kant, Adam Smith, Montesquieu, among others.It is associated with the thought of Ludwig von Mises, Frederick von Hayek and Milton Friedman.

Mexican neoliberalism

In Mexico, the import substitution model, “inward” development and the mixed economy prevailed for more than three decades, with relative success in economic growth.

Nevertheless, neoliberalism made its entrance during the presidency of Miguel de la Madrid (from 1982 to 1988), as a strategy to alleviate the excesses of the predecessor government, which had nationalized the banks three months before leaving power, in an attempt to alleviate the consequences of two six-year terms of excessive public spending.

Thus, neoliberalism arrived in Mexico at one of its most difficult moments of the 20th century, amid brutal inflationary growth, massive informalization of employment (20% between 1983 and 1985) and drastic falls in production, which resulted in in the 3100% devaluation of the Mexican peso.

From the beginning, the neoliberal strategy consisted of reducing the public sector: the State went from having participation in 45 economic branches to only 22, from 1,155 public companies to 412, all in the same presidential term. This economic philosophy was inherited by the following presidents, Calos Salinas Gortari (from 1988 to 1994) and Ernesto Zedillo (from 1994 to 2000), who deepened it.

Thus, constitutional reforms were carried out that allowed the reprivatization of the bank, reforms to the electoral law and the law of worship. A new profile of farm ownership made room for private capital National and international. The latter was due to the logic that only these sectors could invest in the modernization of Mexican agriculture and its productivity.

Similarly, the North American Free Trade Agreement (NAFTA) was signed in 1994 between Mexico, the United States and Canada, incorporating the country into the global market together with two powerful partners, but in a notorious situation of commercial inferiority.

The neoliberal governments of Vicente Fox (from 2000 to 2006) and Felipe Calderón Hinojosa (from 2006 to 2012) continued to open the country to transnational investment. Extensive energy, educational and health privatization policies continued, as the economic crisis demanded more and more capital for investment.

All this involved the loss of numerous benefits and social protections of the Mexican people. This in a climate of economic stagnation, with only 2.4% of accumulated growth in both presidential periods.

The economic and social crisis, during the presidency of Enrique Peña Nieto (from 2012 to 2018), was faced through a pact with the traditional parties to carry out profound reforms in the energy, financial, educational, finance and telecommunications sectors.

Finally, the rise of Andrés Manuel López Obrador to the presidency of Mexico (from 2018 to 2024), bearer of a nationalist, leftist and popular rhetoric, ended the long run of neoliberal governments in Mexico.