Neoliberalism is a school of thought economic and political which is based on the promotion of the free market, privatization and the reduction of the role of the state in the economy.
This type of economic model It emerged in the year 1970 and gradually became a trend in global politics and economics over the following decades.
However, neoliberalism has been criticized for its negative impact in social equality, environmental sustainability and the protection of labor rights.
At present it has lost popularity, since it has been associated with unfavorable social and economic results, which is why it is the target of criticism. This is why multiple critics of this government system They have called it economic liberalism or financial capitalism.
Concept and definition of Neoliberalism
The definition of neoliberalism is based on a political model that focuses on the economy, defending the elimination of barriers to trade and investment. In this way, he also defends the privatization of companies State and the reduction of taxes and the regulation of the State in the economy.
The philosophy of the current of neoliberal thought, considers that it is to promote the idea that the free market It is the ideal model for allocating resources, as well as producing goods and services efficiently.
It is important to note that the people who support this system of government consider that economic liberalism allows competition between companies and the free flow of capital. Which leads to economic efficiency and growth.
What are the objectives of Neoliberalism?
The main objective of this political model is the liberalization of trade, investment and the reduction of public spending. It seeks to achieve this through privatization and less regulation to the private companyallowing a production with a lower cost.
By liberalizing investment, the aim is to eliminate the barriers created by taxes and tariffs, and thus facilitate the entry and exit of goods and services in international markets. so to the rreduce public spendingwhat is expected is to reduce the size of the state, significantly lowering the tax burden that taxpayers bear.
So the end of privatize and alleviate regulations is to transfer control of state companies and services to the private sector, to reduce the restrictions imposed by the state on the economy.
How was the origin of Neoliberalism? – History
It dates back to the 1930s, when, due to the Great Depression, the general mood of the population was anti-liberalThis is why a new political model was sought, since Keynesianism was losing popularity
Therefore, a group of 25 liberals, summoned by walter lipmann, who was an American journalist and intellectual, joined forces at an international meeting held in Paris. Different personalities such as Friedrich von Hayek, Walter Lippmann, Louis Rougier, Ludwig von Mises, Alexander Rüstow and Wilhelm Röpke, among others, were present at this meeting.
Lipmann, Rougier and Rüstow came to the conclusion that liberalism had already failed so it was time for the “new liberalism” to take the reins. After this, at the end of the 1940s A group of intellectuals, politicians, and economists meet in Mont Pelerin, Switzerland to form a multidisciplinary society called the Mont Pelerin Society.
This is where neoliberal economists like Friedrich Hayek and Milton Friedman championed the idea that the free market was the best way to organize the economy and avoid state intervention in it.
However, it is up to 1970 year, which begins the globalization of neoliberalism, as it becomes a more popular political-economic model. This becomes the predominant scheme in several states of the western continent, countries in which there was an evident rejection of its policies.
Since at this time many countries began to cross economic and political crisesTherefore, governments sought new solutions to face these stages. So neoliberalism gained popularity as an alternative to previous economic policies, such as socialism and Keynesianism.
What are the characteristics of Neoliberalism?
The main characteristics of neoliberalism are:
- remove regulations and free private enterpriseThis is one of the main characteristics of this political model.
- This is why the defenders of this system consider it beneficial to reduce regulations and restrictions to a minimum. Especially in relation to the guarantee of the property and security regime and advocate for a greater capital mobility and labor flexibility.
- The restrictive tax policies they imply an increase in taxes on consumption and a reduction in taxes on production, personal income and corporate profits. In addition, the elimination of special regimes and a decrease in public spending are proposed.
- The restrictive monetary policies They consist of raising interest rates or reducing the money supply in order to keep inflation close to zero and prevent currency devaluation.
- Privatize public companies, since it is argued that private agents are more productive and efficient than public ones, and that the state must be more effective, reducing its size and allowing the private sector to generate wealth. In this sense, the privatization of public companies is recommended.
What consequences did Neoliberalism leave?
Neoliberalism has had both advantages and disadvantages, on the one hand, it has led to a greater efficiency and competitiveness in the global economy. All of this is what has resulted in higher economic growth and reduced poverty in some countries.
It has also encouraged innovation and technologywhich has led to increased productivity and a better quality of life for some people.
However, despite everything, neoliberalism has also had a negative impact on multiple aspects of social, environmental and security policies. labor rights.
For example, the privatization of state-owned companies has led to the elimination of jobs and the reduction of benefits and wages for workers. In this way, another of its great disadvantages is that this system of government has allowed companies pollute and exploit natural resourceswithout considering the environmental impact they may cause.
All this has also led to a greater social inequalitysince it has benefited the companies and the individuals in charge, while generating a less favorable environment for the poorest society.
Examples of the use of neoliberalism
There is a lot of governments in latin america, which applied the neoliberal system, of which we can mention Argentina, Mexico, Chile, among others. In Argentina, in 1976, President Martínez de Hoz was one of the first to try to establish a neoliberal political model in the country.
In Mexico, for example, during the year 1988after a controversial presidential election, the economist Carlos Salinas de Gortari became the President and began to apply a neoliberal economic model in the country.
The privatization of the bank was carried out through a constitutional reform to the articles 28 and 123 which were approved in May 1990 by the Chamber of Deputies and the Senate.
During the terms of several successive presidents, of which are vincent fox, Enrique Peña Nieto, among others, continued with the privatization policy. Showing a greater interest in the privatization of the energy and education sector, despite various demonstrations against it.
On the other hand, during the 1980s, the military dictatorship imposed in Chile by Augusto Pinochet, was based on neoliberal policies. It is important to note that the dictatorship was advised by Milton Friedman, who was one of the precursors of the neoliberal political model.