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Neoliberalism

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Neoliberalism is a term referring to a reemergence and redefinition of classical liberalism, coined 1938 at the Colloque Walter Lippmann by the German sociologist and economist Alexander Rüstow.[1] The label is used pejoratively by numerous critics and opponents, and according to one study, "the concept itself has become an imprecise exhortation in much of the literature, often describing any tendency deemed to be undesirable".[2] Neo-liberals advocate policies such as free markets, and free trade.[citation needed]

In the United States, neoliberalism has also been used to refer to a political movement in which some members of the American left (such as Michael Kinsley, Robert Kaus, Mickey Kaus, and Randall Rothenberg) endorsed some free market positions, such as anti-unionism, free market economics, and welfare reform.[3] This term should not be confused with new liberalism, which is used in the United States.

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[edit] Policy implications

Broadly speaking, neoliberalism seeks to transfer part of the control of the economy from state to the private sector,[4] to bring a more efficient government and to improve economic indicators for a nation. The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's[5] "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:

[edit] History

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[edit] Earlier systems

Arguments that stress the economic benefits of unfettered markets, in line with neoliberalism, first began to appear with Adam Smith's (1776) Wealth of Nations and David Hume's writings on commerce. These writings were directed against the Mercantilist ideas that had been dominant during the previous centuries, and served to guide the policies of governments throughout much of the 19th century.

Nevertheless, statist ideas slowly began to regain a following amongst the intellectuals that had rejected them during the early Enlightenment. State interventionism increased towards the end of the 19th century; in the United States the Progressive Era saw an accelerated movement to re-institutionalize government controls over the economy.

With an intellectual and political foundation in place, the onset of the Great Depression and the rapid industrialization of the Soviet Union led to increased support for government economic control as a means of securing rapid industrialization.[6]

[edit] Embedded liberalism

The term embedded liberalism refers to the economic system which dominated worldwide from the end of World War II to the 1970s. (Harvey 2005) argues that at the end of World War II, the primary objective was to develop an economic plan that would not lead to a repeat of the Great Depression during the 1930s. Harvey notes that under this new system free trade was regulated "under a system of fixed exchange rates anchored by the US dollar's convertibility into gold at a fixed price. Fixed exchange rates were incompatible with free flows of capital."[7] Harvey argues that embedded liberalism led to the surge of economic prosperity which came to define the 1950s and 1960s.

Across much of the world, the work of John Maynard Keynes, which sought to formulate the means by which governments could stabilize and fine-tune free markets, became a highly-influential ideology. Within the developing world, several developments – among them decolonization, a desire for national independence and the destruction of the pre-war global economy[8], and the view that countries could not effectively industrialize under free market systems (e.g., the Prebisch-Singer hypothesis) – encouraged economic policies that were influenced by communist, socialist and import substitution precepts.

The period of government interventionism in the 1950s and 1960s was characterized by exceptional economic prosperity, as economic growth was generally high, inflation was contained[9], and economic distribution was comparatively equalized.[10] This era is known as les Trente Glorieuses ("The Glorious Thirty [years]") or "Golden Age", a reference to many countries having experienced particularly high levels of prosperity between (roughly) World War II and 1973.

[edit] Collapse of embedded liberalism

David Harvey notes that the system of embedded liberalism began to crack beginning towards the end of the 1960s.[11] The 1970s were defined by an increased accumulation of capital, unemployment, inflation (or stagflation as it was dubbed), and a variety of fiscal crises.[11] He notes that "the embedded liberalism that had delivered high rates of growth to at least the advanced capitalist countries after 1945 was clearly exhausted and no longer working."[11] A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated "social democracy and central planning on the one hand" and those "concerned with liberating corporate and business power and re-establishing market freedoms on the other.[12] Harvey notes that by 1980, the latter group had emerged as the leader, advocating and creating a global economic system that would become known as neoliberalism.[12]

Some argue that the strains which occurred were located in the international financial system,[13][14] and culminated in the dissolution of the Bretton Woods system, which some argue had set the stage for the Stagflation crisis that would, to some extent, discredit Keynesianism in the English-speaking world. In addition, some argue that the postwar economic system was premised on a society that excluded women and minorities from economic opportunities, and the political and economic integration given to these groups strained the postwar system.[15]

[edit] Post-1970s economic liberalism

[edit] Chicago School

The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of University of Chicago, some of whom have constructed and popularized its principles.

The school emphasizes non-intervention from government and rejects regulation in laissez-faire free markets as inefficient. It is associated with neoclassical price theory and libertarianism and the rejection of Keynesianism in favor of monetarism until the 1980s, when it turned to rational expectations. The school has impacted the field of finance by the development of the efficient market hypothesis. In terms of methodology the stress is on "positive economics" – that is, empirically based studies using statistics to prove theory.

Approximately 70% of the professors in the economics department have been considered part of the school of thought. The University of Chicago department, widely considered one of the world’s foremost economics departments, has fielded more Nobel Prize winners and John Bates Clark medalists in economics than any other university.

Those who attend to the Chicago School prefer some form of competition law, school vouchers, a central bank, intellectual property and prefer Milton Friedman's negative income tax as a replacement to the existing welfare system, arguing that it is simpler and has fewer of the "perverse incentives" of "government handouts".

According to the 2008 Index of Economic Freedom and The Economic Freedom of the World, issued by the Heritage Foundation and the Fraser Institute respectively, seven countries with the most free economies in the former index are currently the following: Hong Kong, Singapore, Ireland, Australia, United States, New Zealand and Canada (all of them former constituents of the British Empire). Hong Kong is ranked number one for 14 consecutive years in the Index which attempts to measure "the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself." Because of this, Milton Friedman described Hong Kong as laissez-faire state and he credits that policy for the rapid move from poverty to prosperity in 50 years.[16] Much of this growth came under British colonial control prior to the 1997 resumption of sovereignty by the People's Republic of China.

[edit] United Kingdom

Margaret Thatcher and Ronald Reagan were pioneers in a new age of liberalism.

Margaret Thatcher became Prime Minister with a mandate to reverse the UK's economic decline. Thatcher's political and economic philosophy emphasised reduced state intervention, more free markets, and more entrepreneurialism. She once slammed a copy of Friedrich Hayek's The Constitution of Liberty down on a table during a Shadow Cabinet meeting, saying, "This is what we believe." Thinkers closely associated with Thatcherism include Keith Joseph, Enoch Powell, Friedrich Hayek and Milton Friedman. She was the first female ever elected and served as British Prime Minister from 1979 to 1990.

Thatcher's political and economic philosophy emphasised reduced state intervention, free markets, and entrepreneurialism. She vowed to end what she felt was excessive government interference in the economy, and did this through privatizing nationally-owned enterprises selling public housing to tenants.[17] After the James Callaghan Government had concluded that the Keynesian approach to demand-side management failed, Thatcher felt that the economy was not self-righting and that new fiscal judgements had to be made to concentrate on inflation.[18] She began her economic reforms by increasing interest rates to slow the growth of the money supply and thus lower inflation.[19] In accordance with her less-government intervention views, she introduced budget cuts[20] and reduced expenditures on social services such as health care, education, and housing.[17] She also placed limits on the printing of money and legal restrictions on trade unions.[17]

In January 1982, the inflation rate had dropped to 8.6% from earlier highs of 18%. By 1983, overall economic growth was stronger and inflation and mortgage rates were at their lowest levels since 1970.[21] The term "Thatcherism" came to refer to her policies as well as aspects of her ethical outlook and personal style, including moral absolutism, nationalism, interest in the individual, and an uncompromising approach to achieving political goals.[17]

After the 1983 election, the Conservative majority expanded, Thatcher continued to enact her economic policies.[20] The UK government sold most of the large national utilities.[20] The policy of privatisation, while anathema to many on the Left, was a main component of Thatcherism.

Since Thatcher resigned as British Prime Minister in 1990, UK economic growth was on average higher than the other large EU economies (,i.e. Germany, France and Italy). Additionally, since the beginning of the 2000s, the UK has also possessed lower unemployment, by comparison with the other big EU economies. Such an enhancement in relative macroeconomic performance is perhaps another reason for the apparent "Blatcherite" economic consensus, which has been present in modern UK politics for a number of years.

In 2001, Peter Mandelson, a Member of Parliament belonging to the British Labour Party closely associated with Tony Blair, famously declared that "we are all Thatcherites now."[22]

In reference to contemporary British political culture, it could be said that a "post-Thatcherite consensus" exists, especially in regards to economic policy. In the 1980s, the now defunct Social Democratic Party adhered to a "tough and tender" approach in which Thatcherite reforms were coupled with extra welfare provision. Neil Kinnock, leader of the Labour Party from 1983-1992, initiated Labour's rightward shift across the political spectrum by largely concurring with the economic policies of the Thatcher governments. The New Labour governments of Tony Blair have been described as "neo-Thatcherite" by some, since many of their economic policies mimic those of Thatcher.[23]

Most of the major British political parties today accept the anti-trade union legislation, privatisations and general free market approach to government that Thatcher's governments installed. No major political party in the UK, at present, is committed to reversing the Thatcher governments reforms of the economy. Such a convergence of policy is one reason that the British electorate perceive few apparent differences in policy between the major political parties.[citation needed]

Moreover, the UK's comparative macroeconomic performance has improved since the implementation of Thatcherite economic policies.

[edit] Scandinavia

Carl Bildt's government liberalized Sweden.

Scandinavian countries have embraced many neoliberal policies.[24]

In Sweden, Carl Bildt's government program was one of liberalizing and reforming the Swedish economy as well as making Sweden a member of the European Union. It initiated the negotiations for Sweden's accession to the European Union. Carl Bildt signed the accession treaty at the European Union summit of Corfu, Greece on June 23, 1994. Economic reforms were enacted, including voucher schools, liberalized markets for telecommunications and energy as well as the privatization of publicly owned companies, privatization of health care, contributing to liberalizing the Swedish economy. Privatization of state owned companies and deregulation on business were also carried out by the following social democratic governments.

Anders Fogh Rasmussen, The Prime Minister of Denmark.

On the Economic Freedom of the World, Iceland had the 53rd freest economy in 1975 and it was one of the poorest countries in Europe. In 2004, it had the 9th freest economy and it was one of the richest. [25] In 2007, Iceland was ranked as the most developed country in the world by the United Nations' Human Development Index.[26]

Anders Fogh Rasmussen, the Prime Minister of Denmark and the leader of Venstre, has written books advocating minimal state. Denmark is a European leader on economic freedom indices. Denmark has ranked as the world's 11th most free economy, of 162 countries, in an index created by the Wall Street Journal and Heritage Foundation, the Index of Economic Freedom 2008.

[edit] United States

The Administration of Ronald Reagan governed from 1981 to 1989, and made a range of decisions that served to liberalize the American economy. These policies are often described as Reaganomics, and are often associated with supply-side economics (the notion that policies should appeal to producers, in order to lower prices, and therefore make products more affordable, rather than consumers, in order to cultivate economic prosperity).

During Reagan's tenure, the economy recovered and grew during Reagan's remaining years in office at an annual rate of 3.4% per year.[27] Unemployment dropped and inflation significantly decreased.[28]

[edit] Hong Kong

Hong Kong has leaned to more laissez-faire policies than other countries, creating one of the most successful economic stories in history.

Hong Kong has been ranked as the world's freest economy in the Index of Economic Freedom for 14 consecutive years, since the inception of the index in 1995[29][30]. It also places first in the Economic Freedom of the World Report.

This policy has often been cited as an example of the benefits of laissez-faire capitalism.[citation needed]

A 1994 World Bank report stated that Hong Kong's GDP per capita grew in real terms at an annual rate of 6.5% from 1965 to 1989. This consistent growth percentage over a span of almost 25 years has been described as remarkable for any economic analysis[31].By 1990 Hong Kong's per capita income officially surpassed that of the ruling United Kingdom[32].

[edit] Chile

The Miracle of Chile is a term coined by Milton Friedman to describe dictator Augusto Pinochet's support for liberal economic reforms in Chile carried out by the "Chicago Boys." Implemented economic model had three main objectives: economic liberalization, privatization of state owned companies, and stabilization of inflation. These market-oriented economic policies were continued and strengthened after Pinochet stepped down.[33] At the time, Milton Friedman stated that the Chilean experiment was "comparable to the economic miracle of post-war Germany."[34]

Successive governments have continued and expanded neoliberal policies in Chile.

According to the 2007 Index of Economic Freedom, Chile is the world's 11th "most free" economy today. Chile is ranked 3rd out of 29 countries in the Americas and has been a "regional leader" for over a decade. Chile had GDP growth of 6.1% in 2004, and has averaged a 4.0% annual increase in GDP over the last five years for which data is available. [2]

Currently, Chile is one of South America's most stable and prosperous nations.[35] Within the greater Latin American context it leads in terms of competitiveness, quality of life, political stability, globalization, economic freedom, low perception of corruption and comparatively low poverty rates.[36] It also ranks high regionally in freedom of the press, human development and democratic development. Its status as the region's richest country in terms of gross domestic product per capita (at market prices[37] and purchasing power parity[38]) is countered by its high level of income inequality, as measured by the Gini index.[39]

The experience of Chile in the 1970s and 1980s, and especially the export of the Chilean pension model by former Labor Minister Jose Pinera, has influenced the policies of the Communist Party of China and has been invoked as a model by economic reformers in other countries, such as Boris Yeltsin in Russia and almost all Eastern European post-Communist societies[40].

[edit] Canada

In Canada, these policies are often associated with Brian Mulroney, Mike Harris, Ralph Klein, Gordon Campbell and Stephen Harper.

Ralph Klein, known for supporting the development of Alberta's vast oils and natural gas reserves, is credited with reinvesting large amounts of Provincial Government oil revenue gained through taxation back into the Provincial economy while reducing the Provincial Government's role in the direct development and sale of fossil fuels. His detractors argue that his particular brand of neoliberalism has allowed for the exploitation of Alberta's voluminous and monetarily valuable supplies of fossil fuels through political bullying as a majority leader while ignoring the poor performance of other sectors of the economy (reducing economic diversity), and to seemingly deliberately cause irreparable damage of, and devaluation to the value and integrity of the local environment. His efforts to privatize Canada's Universal Health Care System in Alberta have been strongly opposed on all points of contention.

[edit] Australia

In Australia, these policies were originally associated with the centre-left Australian Labor Party, under the Hawke/Keating governments led by Prime Minister Bob Hawke and his Treasurer and later also PM Paul Keating from 1983 to 1996. The centre-right Liberal Party of Australia became neoliberal (see New Right) during this time whilst in opposition.

[edit] Japan

Junichiro Koizumi, a maverick and highly popular Japanese leader who fought for privatization.

The largest privatization in history was Japan Post. It was the nation's largest employer and one third of all Japanese government employees worked for Japan Post. Japan Post was often said to be the largest holder of personal savings in the world. The Prime Minister Junichiro Koizumi wanted to privatize it because it was thought to be an inefficient and a source for corruption.

In September 2003, Koizumi's cabinet proposed splitting Japan Post into four separate companies: a bank, an insurance company, a postal service company, and a fourth company to handle the post offices as retail storefronts of the other three. After privatization was rejected by upper house, Koizumi scheduled nationwide elections to be held on September 11, 2005. He declared the election to be a referendum on postal privatization. Koizumi subsequently won this election, gaining the necessary supermajority and a mandate for reform, and in October 2005, the bill was passed to privatize Japan Post in 2007.[41]

[edit] New Zealand

The term Rogernomics, a portmanteau of "Roger" and "economics", was created by analogy with Reaganomics to describe the economic policies followed by New Zealand Finance Minister Roger Douglas from his appointment in 1984.

The policies included cutting agricultural subsidies and trade barriers, privatising public assets and the control of inflation through measures rooted in monetarism, and were regarded in some quarters of Douglas's New Zealand Labour Party as a betrayal of traditional Labour ideals. The Labour Party subsequently retreated from pure Rogernomics, which became a core doctrine of ACT. The Labor Party leader planned to create a 15% flat tax in New Zealand, and to privatise schools, roads and hospitals, which was moderated by the Labour cabinet at the time,[42] although the resultant reforms were still generally considered radical in a global context. After Douglas left the Labour party, he went on to co-found ACT in 1993, which regards itself as the new liberal party of New Zealand.

Since 1984, government subsidies including those for agriculture have been eliminated; import regulations have been liberalised; exchange rates have been freely floated; controls on interest rates, wages, and prices have been removed; and marginal rates of taxation reduced. Tight monetary policy and major efforts to reduce the government budget deficit brought the inflation rate down from an annual rate of more than 18% in 1987. The Deregulation of government-owned enterprises in the 1980s and 1990s reduced government's role in the economy and permitted the retirement of some public debt, but simultaneously massively increased the necessity for greater welfare spending and has led to considerably higher rates of unemployment than were standard in New Zealand in earlier decades. However, unemployment in New Zealand lowered again by 2006-2007, hovering around 3.5% to 4%.

Deregulation created a very business-friendly regulatory framework. A survey 2008 study ranked it 99.9% in "Business freedom", and 80% overall in "Economic freedom", noting amongst other things that it only takes 12 days to establish a business in New Zealand on average, compared with a worldwide average of 43 days. Other indicators measured were property rights, labour market conditions, government controls and corruption, the last being considered "next to non-existent" in the Heritage Foundation and Wall Street Journal study.[43]

In its Doing Business 2008 survey, the World Bank (which in that year rated New Zealand as the second-most business-friendly country worldwide), gave New Zealand rank 13 out of 178 in the business-friendliness of its hiring laws.[44]

New Zealanders have a high level of life satisfaction as measured by international surveys; this is despite lower GDP per-head levels than many other OECD countries. The country was ranked 20th on the 2006 Human Development Index and 15th in The Economist's 2005 worldwide quality-of-life index.[45] The country was further ranked 1st in life satisfaction and 5th in overall prosperity in the 2007 Legatum Institute prosperity index.[46][47] In addition, the 2007 Mercer Quality of Living Survey ranked Auckland 5th place and Wellington 12th place in the world on its list.[48]

[edit] South Africa

South Africa’s GDP has grown since the beginning of the new government system in 1994, which ended the rule of apartheid in South Africa. A cause of this rise in GDP has been the implementation of neoliberal policies inside South Africa to direct the South African market to a freer market. Another result of these free market policies have caused a decline in employment that started after the new government in 1994, which caused an incline in South Africa's poverty level.[citation needed] As a result inequality still exists today that was once under apartheid.[citation needed]

[edit] 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, and 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.

[edit] Reach and effects

Neoliberal movements ultimately changed the world's economies in many ways, but some analysts argue that the extent to which the world has liberalized may often be overstated. Some of the past thirty years' changes are clear and unambiguous, like[49]:

  • Growth in international trade and cross-border capital flows
  • Elimination of trade barriers
  • Cutbacks in defense spending, although it is unclear whether these reductions are associated with neoliberalism or the peace dividend that was supposed to accrue at the end of the Cold War
  • Cutbacks in public sector employment
  • The privatization of previously public-owned enterprises
  • The transfer of the share of countries' economic wealth to the top economic percentiles of the population.[50]

Other changes are not so apparent, and are debated in the literature[49]:

  • Reduction in the size of governments. Governments do not appear to have shrunk wholesale. With the exception of exceptionally high-spending governments, government expenditures (as a percentage of GDP) appears to have stayed the same since 1980. Most of the cuts to government spending appear to have been a temporary phenomenon that took place during the 1990s.
  • Social welfare spending. Many governments have generally spent more on health, education, social security, welfare and/or housing. However, populations have increased and populations have aged in affluent countries. As well, some of these services (such as health care and education in the U.S.) are also very inefficiently organized.

[edit] Supporting economic liberalism

[edit] Living standards

Proponents of neoliberalism argue that:

  • Higher economic freedom has a strong correlation with higher living standards.[citation needed]
  • Higher economic freedom leads to increased investment, technology transfer, innovation and a responsiveness to consumer demand;[citation needed]
  • Many developing countries' governments had mismanaged or exploited their economic dominance during over the mid-century[citation needed]
  • Many government attempts to micro-manage their economies using things like tariffs, public investment, etc. were often misdirected, poorly timed, poorly implemented and bore undesirable, unanticipated consequences; the claim by many neoliberals is that a government is incapable of managing a social system as huge as a national economy;[citation needed]
  • Government-owned enterprises and public entitlements were losing a lot of citizens' money.[citation needed]
  • During the 1970s, state-controlled economies proved unresponsive to economic shocks, and much of the world endured a sustained, high-inflation recession until markets were liberalized (though proponents still note that liberalization itself is only one of several factors in the recent return to prosperity; other factors include technological developments and the end of the Cold War).[citation needed]

[edit] Happiness

Higher economic freedom, as measured by both the Heritage and the Fraser indices, may suggest a higher self-reported happiness for some people.[51]

[edit] Peace

There is some correlation between higher economic freedom and peace. According to a report by the pro-free market think tank the Cato Institute, economic freedom is around 54 times more effective than democracy (as measured by Democracy Score) in diminishing violent conflict.[52]

[edit] Political freedom

There is growing empirical evidence that economic and political freedoms are linked.[53] [54]

In Capitalism and Freedom (1962), Friedman developed the argument that economic freedom, while itself an extremely important component of total freedom, is also a necessary condition for political freedom. He commented that centralized control of economic activities was always accompanied with political repression.

In his view, voluntary character of all transactions in a free market economy and wide diversity that it permits are fundamental threats to repressive political leaders and greatly diminish power to coerce. Through elimination of centralized control of economic activities, economic power is separated from political power, and the one can serve as counterbalance to the other. Friedman feels that competitive capitalism is especially important to minority groups, since impersonal market forces protect people from discrimination in their economic activities for reasons unrelated to their productivity.[55]

In The Road to Serfdom, Hayek argued that "Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."[56]

It could also be realistically theorized that a less influential government, weakened by the over-empowerment of the economy, would result in the formation of coercive market elements that could not be easily controlled even as they cause harm to the economy, citizens and the environment. Rationalized by the idea of the corporation as a individual with all the rights normally associated to the average citizen, in essence the corporation is allowed to become an above average equal to the citizens of the nation (as it has great power in the economic sphere as well as equal civil rights in jurisprudence reality), within the scope of this rationalization the state is seen as infringing on the rights of the entity in the same way personal rights can be recognized as having been violated by state limitations to the freedoms given to every person.

[edit] State-centric approach

The state-centric approach to neoliberalism is not critical, but it concurs with the critical approach that neoliberal ideas are really just laissez-faire liberal prescriptions that overthrew Keynesianism. State-centric theorists hold that neoliberalism is "the attempt to reduce the role of the state in the market through tax cuts, decreases in social spending, deregulation, and privatization."[57] However, the state-centric approach argues that state actors were the political entrepreneurs who formulated neoliberalism – rather than, as critics of neoliberalism would claim, capitalist political organizations, and economists and economic departments, think tanks, and politicians all supported by class-conscious capitalists. State-centric theorists argue that neoliberalism spread because it fit the voters' preferences best; they disagree in this with the critical approach, which maintains that neoliberal framing and policies were propagated by well-heeled, highly organized political machines that insisted to the public, "There is no alternative". State-centric sociologist Monica Prasad (2006) further argues that neoliberalism became dominant where the (federal) tax structure was progressive, where industrial policy was "adversarial" to business, and where welfare was associated with the poor. She asserts this was the case in the U.S. and U.K., relative to France and Germany. However, in France and Germany, taxation by the national government was regressive, industrial policy favored business, and the welfare state was widely recognized to benefit the middle class; consequently neoliberalism was not as favored by either business or the middle classes in these two countries as it was in the U.S. and the U.K. in particular. Prasad's analysis suggests that neoliberalism has been a corrective to policies that favored the working class over capitalist interests, and it was championed by autonomous state actors. However, most political sociologists would agree that only strained methodological choices would allow U.S. policy especially to be portrayed as favoring the working class over capitalist interests, even in the New Deal; state autonomy theses are generally very vulnerable to more class-sensitive historical research, especially in the case of the U.S.; and methodological choices, such as the omission of social democratic countries from her analysis, contribute heavily to Prasad's conclusions.

[edit] Opposition to economic liberalism

  • Anti-sovereignty: globalization and liberalization is argued by leftist and nationalist critics to have subverted nations' ability for self-determination;
  • Exploitation: critics of neoliberal policies consider capitalistic economics to be exploitive;
  • Environmental costs: more transportation, more industrial production occurs in unregulated markets;
  • Increase in corporate power: some anti-corporate organizations believe neoliberalism, in difference to liberalism, changes economic and government policies to increase the power of corporations and large business and a shift to benefit the upper classes over the lower classes.[58]

[edit] Anglo-American

"The standard neoliberal policy package includes cutting back on taxes and government social spending; eliminating tariffs and other barriers to free trade; reducing regulations of labor markets, financial markets, and the environment; and focusing macroeconomic policies on controlling inflation rather than stimulating the growth of jobs," reports economist Robert Pollin (2003).[59] Arising out of a rejection of the class compromises embedded in previous liberal political-economic policies, including Keynesian and Active Labour Market Policies (ALMPs), neoliberal theory, institutions, policies, and practices are not regarded as politically neutral by their opponents. Their criticisms of neoliberalism are often historical materialist, bringing economic inequality into sharper focus.

Economists remind us that free markets are theoretically efficient, not that they are considered fair by all people,[60] and this distinction is a foundation of the critique of neoliberalism. Opponents critique neoliberalism's alleged effects on wages, working class institutions, inequality, social mobility, working class well-being, health, the environment, and democracy.

[edit] Opposition and critics

Notable opponents to neoliberalism in theory or practice include economists Joseph Stiglitz, Amartya Sen, and Robert Pollin,[61] linguist Noam Chomsky,[62] geographer David Harvey,[63] and the anti-globalization movement in general, including groups such as ATTAC. Critics of neoliberalism and its inequality-enhancing policies argue that not only is neoliberalism's critique of socialism (as unfreedom) wrong, but neoliberalism cannot deliver the liberty that is supposed to be one of its strong points. Daniel Brook's "The Trap" (2007), Robert Frank's "Falling Behind" (2007), Robert Chernomas and Ian Hudson's "Social Murder" (2007), and Richard G. Wilkinson's "The Impact of Inequality" (2005) claims high inequality is spurred by neoliberal policies and produces profound political, social, economic, political, health, and environmental constraints and problems. The economists and policy analysts at the Canadian Centre for Policy Alternatives (CCPA) offer inequality-reducing social democratic policy alternatives to neoliberal policies. In addition, a significant opposition to neoliberalism has grown in Latin America, a region that has been seen only limited implementation of neoliberal policies. Prominent Latin American opponents include the Zapatista Army of National Liberation rebellion, and the governments of Venezuela, Bolivia and Cuba.

Some critics view neoliberalism as both an economic and political project aimed at reconfiguring class relations in societies. They allege that many "core countries" middle class and "labor aristocracy" families have become constrained by the cascading costs created by the conspicuous consumption of goods and services encouraged in the system, as a result many are losing allotments of time once used for personal development, recreation, family, community, and citizenship as a result of lower wages and inflation coupled with a decrease in the amount of or opportunity for advanced formal education and/or training. Moreover, they claim workers have been so heavily disciplined by capital and the capitalist state that, as Alan Greenspan said, they are "traumatized" and unable to politically moderate capitalist aggression.[64] Daniel Brook's "The Trap: Selling Out to Stay Afloat in Winner-Take-All America" (2007) describes the anti-democratic effect of decreased middle class welfare.[65] The massive U.S. military-industrial complex adds an extra layer of repression to working class "traumatization," according to (Harvey 2005), making resistance and inequality-reducing policy innovation seem unfeasible to most workers. A "traumatized" working class allows the capitalist class absolute reign, which Harvey claims – citing the economic crises of 1873 and the 1920s – to be disastrous for economies around the globe, states, and working class people; though, he points out, on average capitalists were not negatively impacted by these crises.[66]

Critics of neoliberalism sometimes refer to it as the "American Model," which they claim promotes low wages and high inequality.[67] According to the economists Howell and Diallo (2007), neoliberal policies have contributed to a U.S. economy in which 30% of workers earn "low wages" (less than two-thirds the median wage for full-time workers), and 35% of the labor force is "underemployed"; only 40% of the working age population in the U.S. is considered adequately employed. The Center for Economic Policy Research's (CEPR) Dean Baker (2006) has argued that the driving force behind rising inequality in the United States has been a series of deliberate, neoliberal policy choices including anti-inflationary bias, anti-unionism, and profiteering in the health industry.[68] However, countries have applied neoliberal policies at varying levels of intensity; for example, the OECD has calculated that only 6% of Swedish workers are beset with wages it considers low.[69] John Schmitt and Ben Zipperer (2006) of the CEPR have analyzed the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, concluding "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the vie