NEOLIBERALISM AND ITS DISCONTENT
(Adam Smith) Classical Liberalism- focuses on the individual freedom.
Mont Pelerin Society
1. Friedrich Hayek - focus the political consequences of government intervention. How the government allocate
resources
2. Milton Friedman-
Neoliberalism (New Freedom) a political and economic ideology that promotes free markets, deregulation, privatization,
and reduced government intervention in the economy.
It emerged in the late 20th century as a response to Keynesian economics, advocating for policies that emphasize
individual entrepreneurship, competition, and the efficiency of the private sector over state control.
Discontent refers to a feeling of dissatisfaction, unhappiness, or frustration with a situation or condition. It occurs when
people are unhappy or displeased with something, often because they feel that their needs or expectations are not being
met.
For example, in the context of neoliberalism:
People might feel discontent with the rising economic inequality, unfair labor conditions, or declining public
services because they feel that the benefits of neoliberal policies are not reaching everyone, especially the poor
or marginalized country.
"Neoliberalism and Its Discontents" refers to the criticisms, challenges, and negative consequences that have arisen due
to neoliberal policies.
The phrase is inspired by Sigmund Freud’s Civilization and Its Discontents and is often used to describe the dissatisfaction
and backlash against neoliberalism in economic, social, and political contexts.
"Neoliberalism and Its Discontents" refers to the problems and backlash caused by neoliberal policies. While neoliberalism
promotes free markets, privatization, and less government intervention, it has also led to widening inequality, job
insecurity, weakened public services, corporate dominance, environmental damage, and financial crises. Many people,
from workers to academics and activists, criticize how it benefits the wealthy while making life harder for the poor and
middle class. This frustration has led to protests, political movements, and calls for alternative economic systems.
Example of "Neoliberalism and Its Discontents"
1. The 2008 Global Financial Crisis
Neoliberal Policy: Banks were deregulated, allowing them to take high risks in the housing market.
Discontent: When the housing bubble burst, millions lost their homes, jobs, and savings, while big banks were bailed
out by governments. This led to mass protests like the Occupy Wall Street movement, which criticized economic
inequality and corporate greed.
2. Labor Conditions in the Gig Economy
Neoliberal Policy: The rise of online platforms like Grab, Lalamove, and Foodpanda has created job opportunities,
but workers are treated as independent contractors rather than employees with benefits.
Discontent: Many workers in the gig economy are underpaid and lack social security benefits like healthcare, sick
leave, and retirement. This has led to widespread discontent among drivers and delivery workers, who protest
for higher wages, better working conditions, and proper recognition as regular employees.
The high point of global Keynesianism came in the mid-1940s to the early 1970s.
During this period, government poured money into their economies, allowing people to purchase more goods and,
in the process, increase demand for these products. As demand increased, so did the prices of these goods.
Western and some Asian countries like Japan accepted this rise in prices because it was accompanied by general
economic growth and reduced unemployment.
The theory went that, as prices increased, company would earn more, and would have money to hire workers.
However, in the early 1970s the prices of oil rose sharply as a result of the OPEC imposition of an embargo in
response to the decision of the US and other countries to resupply the Israeli military with the needed arms during
the Yom Kippur War.
(The Yom Kippur War, also known as the October War or the Ramadan War, was a major conflict fought in the
Middle East from October 6 to October 25, 1973. It was fought between a coalition of Arab states, led by Egypt
and Syria, and Israel. The war is named after Yom Kippur, the Jewish Day of Atonement, which began on the day
the war started.)
Arab countries also used the embargo to stabilize their economies and growth.
The “oil embargo” affected the Western economies that were reliant on oil. To make matters worse, US stock
markets crashed in 1973-1974 after the US stopped linking the dollar to gold, effectively ending the Bretton Woods
system.
(An oil embargo is a ban or restriction placed on the export or import of oil, usually by one or more countries
against another country or group of countries. It is often used as a political tool to exert pressure, typically to force
a nation to change its policies or actions.)
It resulted into a phenomenon called stagflation, in which a decline in economic growth and employment
(stagnation) takes place alongside a sharp increase in prices (inflation).
Economist such as Hayek and Friedman argued that the governments’ practice of pouring money into their
economies had caused inflation by increasing demand for goods without necessarily increasing supply.
Friedman used the economic turmoil to challenge the consensus around Keynes’s ideas. What emerged was a new
form of economic thinking labeled as neoliberalism. It became the codified strategy of the US Treasury Dept.,
World Bank, IMF and WTO and the policies they forwarded came to be called the Washington Consensus.
a set of economic policy recommendations for
developing countries, and Latin America in
particular, that became popular during the 1980s.
The Washington Consensus refers to a set of economic policy recommendations for developing countries, which were
promoted in the late 20th century by international financial institutions such as the International Monetary Fund (IMF),
the World Bank, and the U.S. Treasury Department. These recommendations emphasized free-market reforms and
structural adjustments aimed at fostering economic growth and stability.
Origins of the Washington Consensus
The term was coined in 1989 by economist John Williamson, who identified these policies as the key reforms
recommended to Latin American countries, particularly after the debt crisis of the 1980s. The goal was to promote
economic stability, growth, and integration into the global market.
The Washington Consensus dominated global economic policies from 1980 until the early 2000.
Its advocates pushed for minimal government spending to reduce government debt and called for the privatization
of government –controlled services like water, power, communications, and transport, believing that the free
market can produce the best results.
They pressured government of developing countries to reduce tariffs and open up their economies, arguing that
it is the quickest way to progress, but conceded that along the way certain industries would be affected and die,
but they considered this “shock therapy” necessary for long term growth.
Despite the initial success of neoliberal politicians like Thatcher and Reagan (justifies it by comparing national
economies to household budgets), the defects of the Washington Consensus became immediately palpable. An
example is that of post-communist Russia.
After communism collapsed in the 1990s, the IMF called for the immediate privatization of government industries
assuming that from such move it would free these industries from corrupt bureaucrats and pass them to the more
dynamic and independent investors.
What happened, however, was that only individuals and groups who had accumulated wealth under the previous
communist order had the money to purchase these industries. This practice has entrenched an oligarchy that still
dominates the Russian economy to this very day.
The Washington Consensus played a significant role in shaping economic policies in developing countries during the late
20th century, particularly in Latin America. While it promoted market-oriented reforms, its effectiveness and fairness have
been widely debated, especially as many countries experienced social and economic challenges despite adopting these
policies.
