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“”When Friedman writes, "Bear with me," it's serious. This is a man who thinks nothing of plunging readers into an essay comparing occupied Iraq to a rental car (without a steering wheel) or the Ukraine crisis to a hockey game (without a referee)...For two decades, whenever anyone has waged war or committed acts of mass murder anywhere on earth, Friedman appeared in the Times within a few weeks offering to cure the problem with modems and cheeseburgers.
|—Matt Taibbi on Thomas Friedman|
"Neoliberalism" refers to two different, but related, threads of political discourse. One is an ideology of domestic governance, and the other is a theory of international relations. It also refers to an extremely deregulated economy — this definition is most frequently used outside of the United States. A completely pointless, somewhat interesting and purely coincidental similarity between the latter two forms of neoliberalism is that they were each pioneered by dudes named Friedman.
Neoliberalism was originally created by Alexander Rüstow in 1938 as a third way between laissez faire capitalism and socialism. Neoliberalism laid the foundation of Ordoliberalism.
International Relations Neoliberalism
In the academic field of International relations, neoliberalism refers to a school most closely associated with Harvard and Princeton. The neoliberal school of IR arose in the 1970s as a response to the hegemony of the "realism" school.
In IR, "liberalism" refers to the orientation of Woodrow Wilson and other people who hoped to reshape the world through the use of war and international organizations. The goal of the early liberals was democratization and an end to war. Neoliberals took these same goals but rejected the unscientific applications that had come before. Instead, neoliberals decided to apply rigorous mathematical and scientific techniques.
Most neoliberal analyses relied heavily on rational choice and game theoretic models borrowed extensively from neoclassical supply-side economics. (The main thing tying both domestic neoliberalism and international neoliberalism is the heavy reliance on axiomatic economics.) Neoliberals today believe that by tying states together in institutions, it can decrease the signal noise that prevents communication between them and can increase the costs associated with provocation and aggression.
The best formulation of neoliberal hopes can be found in the "democratic peace" theory. According to this no two mature democracies have ever fought a war against each other. Therefore, promoting liberal democracy around the world will have the side-effect of decreasing war. Since a vibrant middle class has long been recognized as a necessary condition for liberal democracy, neoliberals have focused on helping nations choose policies that would promote the creation of middle classes and democracy.
Criticism of neoliberalism often comes from history, politics, economics, and political economy. Realists often claim that because neoliberals ignore power they are fooling themselves as to what usually causes war and struggle. They do however acknowledge that neoliberal claims and predictions can be seen to have come true in some cases. Constructivists claim that neoliberals are ignoring the structure behind the norms they espouse, pointing to China as an example of a country that can follow the trade advice of the neoliberals without following their economic or political advice by privatising its SOEs or democratizing.
“”There's no such thing as good money or bad money. There's just money.
|—Charles "Lucky" Luciano, economist|
Neoliberalism also refers to "free market" economics, though not in the 19th-century sense of an economy which was free from wasteful "economic rent" such as literal property rents, monopoly privileges, and financial speculation but rather in a new and Orwellian sense of an economy in which rich people are free to maximise economic rents and the concept of economic rent itself is denied ('no good or bad money', regardless of whether it comes from cheaply vaccinating children or trafficking heroin, etc). After the fall of the Soviet bloc, the new definition was embraced by ex-communists and ex-social democrats alike.
Economist Milton Friedman is seen as a neoliberal but it is also sometimes coupled with brutal authoritarianism. Former Chilean dictator Augusto Pinochet is an example of the kind of monster who would literally kill for the free market. Other proponents include (or have included) Tony Blair, Bill Clinton and Colombian President Alvaro Uribe.
The word liberal in Neoliberalism refers to the liberalization or easing of labor and trade laws meant to reduce regulations which are seen as counterproductive. Formerly, it was considered a good idea for "shock therapy" after a state came out of a command economy, but the results have been less than encouraging.[note 2]
Neoliberalism portrays political decisions like free trade and economic globalization as inevitable forces of nature, like the weather, rather than the work of human agency. George Monbiot writes that "So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power."
The Neocons, for the most part, reject most neoliberal policies, as neoconservatism is much less reliant on economics and thus advocates for economically illiterate policies like cutting taxes while claiming that it won't change revenue and rejecting government intervention in the economy.
In the United States
In its use in United States domestic politics, the term seems to have been created by Michael Kinsley of the traditionally liberal magazine, The New Republic. In its original meaning, neoliberalism is the idea that, while traditional liberalism had many flaws, the government could still work to help ordinary people. Neoliberalism also attempted to do away with the narrow interest politics that were seen to damage the Democratic Party, by instead creating a vision of how to run the country that was internally consistent and could vie with the laissez-faire capitalist model that many in the Republican Party espoused.
The most important value in neoliberal planning was empiricism. Outcomes needed to be measurable, and measured, to make sure that ideology was not blinding the policy makers. This emphasis on results over other factors led to the creation of the term "technocratic" to describe this approach.
Under the Bill Clinton administration, many neoliberals were given a chance to put their ideas into practice. What this meant was a focus on education, balanced budgets, and assistance to non-profits, alongside a restructuring of those government bureaucracies that did work. Moreover, many economists were brought in for their technical expertise. There were many successes, and overall real incomes grew at a faster rate than any time in recent history, at all levels.
However, there are some criticisms of neoliberalism. One of the most common, even espoused by some prominent neoliberals like Robert Rubin, was that it was too concerned with raising incomes and less with overall income equality; that is, that neoliberal policies increase income unequally. Many traditional liberals worry that the increasing gap between the lower class and the mega-rich is undermining democracy as we know it. This reflects the prediction of James Madison, the 'Father of the Constitution', that "We are free today substantially but the day will come when our Republic will be an impossibility. It will be an impossibility because wealth will be concentrated in the hands of a few." He then goes on to say that we must then rely on the "best elements in society" to readjust the laws of the country to the changed conditions.
The other major criticism of domestic neoliberals is their support for free trade. Many people on all sides of the political spectrum (in every country) worry about the effects of free trade on everything from wages to sovereignty, but so far empirical evidence for its deleterious effects is nonexistent.
The Adam Smith Institute has branded itself as neoliberal. Prominent domestic neoliberals in the United States include Michael Kinsley, Michael Bloomberg and Bill Clinton.
- George Monbiot, Neoliberalism – the ideology at the root of all our problems. The Guardian, Apr. 15, 2016
- In fact, Friedman's Lexus and the Olive Tree is a good summation of neoliberal thought, if a bit overly simplistic.
- In particular, the attempts in Russia to introduce this kind of shock therapy, without corresponding cleanup of the government officials, led to the creation of the "new Russian" oligarchs, the very kind of parasites neoliberalism was supposed to do away with. Heckofajob, guys!
- Taibbi, "Cab apps and baby camels are this week's cure for Islamic terror", Rolling Stone.
- George Monbiot, Neoliberalism – the ideology at the root of all our problems, The Guardian, Apr. 15, 2016.