The concept of ‘neoliberalism’ has, during the past twenty years or so, become widespread in political and academic debates. Several authors and journalists have even suggested that neoliberalism is “the dominant ideology shaping our world today”, and that we live in an “age of neoliberalism”. Although there is a significant debate about the features that define neoliberalism, it is commonly associated with laissez-faire economics. Neoliberalism is, as I see it, a loosely demarcated set of political beliefs which most prominently and quintessentially include the conviction that the only legitimate purpose of the state is to safeguard individuals and personal liberty, as well as strong private property rights.
Neoliberalism has its ideological roots in the classical liberalism of the 19th century, which championed economic laissez-faire and the freedom (or liberty) of individuals against the excessive power of government. That variant of liberalism is often associated with the economist Adam Smith, who argued in his book ‘The Wealth of Nations’ written in 1776 that markets are governed by an “invisible hand” and thus should be subject to minimal government interference. But liberalism evolved over time into a number of different (and often competing) traditions. For example, Modern liberalism developed from the social-liberal tradition, which focused on impediments to individual freedom—including poverty and inequality, disease, discrimination, and ignorance—that had been created or exacerbated by unfettered capitalism and could be ameliorated only through direct state intervention. Such measures began in the late 19th century with workers’ compensation schemes, the public funding of schools and hospitals, and regulations on working hours and conditions and eventually, by the mid-20th century, encompassed the broad range of social services and benefits characteristic of the so-called welfare state.
However, by the 1970s, increasing economic stagnation and public debt caused many governments to revert to classical liberalism which in its revived form came to be known as neoliberalism. The intellectual foundations of that revival were primarily the work of the Austrian-born British economist Friedrich von Hayek, who argued that interventionist measures aimed at the redistribution of wealth lead inevitably to totalitarianism. This theory of the ‘Minimum State’ has become a sort of religion for the Republican Party in America in opposition to the ‘Modern Liberalism’ of the Democrats. Over forty-eight years later, in the aftermath of the 2008 financial crash, neoliberalism has become a way of assigning responsibility for the catastrophe, not necessarily to a political party, but to an establishment that had conceded its authority to the market. For the Democrats in the US and Labour in the UK, this concession was depicted as a grotesque betrayal of fundamental principles.
In the 1990s and 2000s, it was said that Bill Clinton and Tony Blair had abandoned the left’s traditional commitments, especially to workers, in favour of a global financial elite and the self-serving policies that enriched them; and in so doing, had enabled a rise in inequality. During her tenure as Prime Minister, Margaret Thatcher oversaw numerous neoliberal reforms including tax reduction, and deregulation and privatization. These reforms were continued and supported by her successor John Major but, although opposed by the Labour Party at the time, were largely left unaltered when Labour came to power in 1997. Instead, the Labour government under Tony Blair finished off a variety of uncompleted privatisation and deregulation measures including the privatisation of the British Rail. It may appear that the support of neoliberalism has given space to a more perceptible division between the left wing and right wing, but Hayek did not think he was staking out a position on the political spectrum, or making excuses for the fatuous rich, or tinkering along the edges of microeconomics.