Neoliberalism is a political philosophy whose advocates support free trade and open markets, economic liberalization, , privatization, deregulation, and increasing the role of the private sector in modern society while decreasing the size of the public sector . Neoliberals share a strong suspicion of any form of intense and combined power, and they see the state exactly as the epitome of such power. Without thorough checks, state interventions in the economy cause harm as they restrain economic inventiveness, protect and expand inefficiencies, and interfere with individual freedoms. Yet, unlike classical liberals, neoliberals do not support essentially reducing state power to the bare minimum of simply upholding the law and adjudicating among quarreling parties. Today’s neoliberals think that state power should be deployed (to provide forms of social insurance, increase human capital, mitigate the volatility of markets) so long as state power is held at bay, and for all time in the direction of bolstering rather than hampering market forces . More than a blind trust in markets, neoliberals share a deep distrust of economic interference by the state. For them, state failures are more frequent and insidious than market failures.
Neoliberals do not believe in blind faith in markets rather neoliberals share a deep distrust of economic interference by the state. For neoliberals, failures of states are more frequent and dangerous as compared to market failures. Neoliberals observe state participation as neither omniscient nor free of political bias. These flaws make states ill-suited to decide
For neoliberals, the major economic problems of present are — lack of competitiveness, inflation and unsustainable macroeconomic environments, financial crises, , inefficient public spending, poverty, and corruption—result from state interventions that deform incentives and bring unsustainable economic activities. If, according to Berman, the three main ideologies of the 20th century— fascism social democracy, and Marxism—share the similar mantra, that it is “the state’s right and duty to control capitalism,” then we can also said that neoliberalism is definitely a school that challenges all three ideologies. In economics, neoliberalism stands instead for disbanding or easing policies such as trade restrictions, price controls, and state subsidies to economic activities, particularly unprofitable ones. Neoliberalism must not be understood to be the economic liking of business firms. More likely, neoliberalism splits the business sector. Companies which are in position to compete at home and globally be likely to welcome neoliberalism; those that are uncompetitive and depend on protectionism tend to oppose neoliberalism. Neoliberals think that in majority of the statist economies, the latter type of firms is the norm, so it makes little sense to suggest that firms in developing countries welcome market forces as a majority.
Neoliberals believe that during 20th century, the economic and policy world, particularly in Latin America, focused extra on market failures to the neglect of state failures. And in a way, they are correct. Neoliberalism remains insignificant in the area until the late 1970s and reigned supreme for less than two decades. The rest of the time, non-neoliberal ideas have dominated. Between the 1930s and 1970s, people considered Neoliberalism as extreme and irrelevant, and as a result of which their influence in policy circles in Latin America was secondary as compared to the rival ideologies such as protectionism, Keynesianism, socialism, populism, and even Marxism. During this time, policy in Latin America’s largest economies (most of South America and Mexico) was characterized by inward-oriented statism or import-substitution industrialization (ISI). Based on dependency theory, which posited that there is a long-term decline in the value of commodity exports relative to manufactures, and the structuralism theory, which posited that local demand was inadequate to boost manufacturing, ISI was predicated on the idea that by offering subsidies to local manufacturers, restricting trade, , and defending labor, states could encourage home-grown industries. Typical ISI policies included: expansion in the number and scope of state-owned enterprises, labor codes that protected labor from firing, high tariffs, subsidized credits to local industry, especially in utilities, price controls, buy-national laws, , regulation of competition to protect nascent industries. In multiple was, these ISI policies contravened market economics.
A chain of developments at the point of ideas and world politics coalesce in the 1970s and 1980s to push neoliberal ideas to expand ground in Latin America. 1st the field of growth was revolutionized in the 1970s by advances in theories of state capturing and bargaining. Scholars were able to establish empirically that states turn out to be captured easily by organized constituencies, producers’ groups, or both. For either self-serving reasons, electoral or states were shown to use directive to furnish pressure groups, eventually converting them into the main drivers of policy. Anne Krueger especially showed how rent-granting, once it starts, becomes hard to control, encouraging the majority of new groups to jockey for power and ultimately overwhelming states with pressures. Once a state embarks on the path of protectionism, it induces non-winners to seek equal forms of protection, leading to a rising spiral of rent-seeking and rent-granting. In 1974 and 1976, respectively, two most important proponents of neoliberalism, Milton Friedman and Friedrich von Hayek won Nobel prizes in economics, further boost the renaissance of neoliberal ideas. In Latin America, the 1980s also saw the rise of technopols—a new class of U.S.-trained Latin American economists who became disappointed with statism, often after having been strong statists themselves. These technopols came back home to make careers within state agencies, parties, or think-tanks, from where they became national advocates for pro-market ideas.
Neoliberalism was further boosted by the fall down of most Latin American economies subsequent the onset of the debt crisis in 1982. Latin America entered a process of high inflation, contraction, or hyperinflation, exchange rate instability, capital flight, , and underinvestment that last the entire decade and in some cases into the early 1990s. Since Latin America was the area of the world to have implemented ISI the deepest, the collapse of its economy proved too many that the model was misguided to begin with. For neoliberals, these outcomes (statism and economic collapse in the 1980s) were causally connected. In addition, the command economies of communist nations were also collapsing (the Soviet bloc) or changing in the direction of market reforms with positive results (China), further boosting the global trend away from statist economics.
Due to creditor incentives and price pressures majority of the governments in the region found themselves announcing neoliberal reforms by the late 1980s, in some cases such as ), Argentina (with its strict monetary policy, and the convertibility law), Mexico (with drastic trade opening to the United States, Ecuador (with its strict dollarization), NAFTA, Peru (with its massive privatization program), Colombia (with its sweeping banking liberalization), and Venezuela (with its profound decentralization reforms) going farther than the World Bank and the IMF were advocating.
In short, we can say that neoliberalism gained ascendance due to multiple factors, all coalescing at the end of 1980s: theoretical refinement, comparative studies, Nobel prizes, economic crises, model cases, smart packaging, rising technopols, and plenty of international sticks and carrots.
Neoliberalism benefited little section of peoples in the Latin America. As a result of the neoliberalism, rich got tax cuts in their profits, every one got service cuts, middle class got good job opportunities, working condition were improved, companies increased the salaries of the employees. The majority of the companies, which benefited were foreign as their products were more competitive to the other home companies. Consumers were also benefited as prices of the products decreased die to competition. As the new companies entered in the foreign market, consumers got more choices to buy same products from different brands.
Neoliberalism also had bad effects on some section of people and countries. The growth rates of Latin America which had been higher than other developing nations, dropped by over 60 percent after they embraced IMF-sponsored neo-liberalism in the 1980’s, and have now ground to a halt. Thus wage earners – rather than asset owners – have faced a persistent 30-year downward pressure on their standard of living. It comes as no surprise to learn that the golden age for the wage worker, expressed as a percentage share of GDP, was between 1945 and 1973, and not under economic liberalization. The neoliberal experiment has failed to combat extreme poverty, has exacerbated global inequality, and is hampering international aid and development efforts. Neoliberal ideology embodies an outdated, selfish model of economy. It has been formulated by the old imperial powers and adopted by economically dominant nations. Given the state of the global trade and finance structures, wealthy countries can maintain their economic advantage by pressurizing developing countries to adopt neo-liberal policies – even though they themselves do not. Understandably, many commentators have described this process as economic colonialism.
http://www.peri.umass.edu/fileadmin/pdf/financial/fin_dumenil.pdfhttp://www.stwr.org/globalization/neoliberalism-and-economic-globalization.htmlhttp://www.plataformademocratica.org/Publicacoes/22447_Cached.pdfProfit over people: neoliberalism and the global order By Noam Chomsky
Neoliberalism: A Very Short Introduction By Manfred B. Steger, Ravi K. Roy
http://www2.warwick.ac.uk/fac/soc/sociology/rsw/research_centres/theory/conf/rg/harvey_a_brief_history_of_neoliberalism.pdfhttp://lasa-2.univ.pitt.edu/larr/prot/fulltext/vol39no3/walton.pdf
