Rameshwar's IAS

Concept of Neoliberalism

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The policy framework and ideology of neoliberalism emphasize the importance of free market competition. Neoliberalism is most frequently associated with laissez-faire economics, despite the fact that the defining characteristics of neoliberal thought and practice are subject to intense debate. Neoliberalism, in particular, is frequently described in terms of its belief that human progress can be achieved through sustained economic growth, its confidence in free markets as the most efficient resource allocation, its emphasis on minimal state intervention in economic and social affairs, and its commitment to capital and trade freedom.

Neoliberalism is distinct from modern liberalism, despite the terms being similar. The 19th-century ideology of classical liberalism, which advocated economic laissez-faire and individual freedom (or liberty) against excessive government power, serves as the ideological foundation for both. This form of liberalism is frequently associated with the economist Adam Smith. In his 1776 work The Wealth of Nations, Smith argued that markets are governed by an "invisible hand" and ought to be subjected to as little government intervention as possible. However, liberalism morphed over time into a number of distinct (and frequently antagonistic) traditions. The social-liberal tradition, which focused on obstacles to individual freedom such as poverty and inequality, disease, discrimination, and ignorance that had been created or exacerbated by unrestricted capitalism and could only be resolved through direct state intervention, is where modern liberalism emerged. Workers' compensation programs, public funding for schools and hospitals, and regulations governing working hours and conditions were among the first of these measures in the late 19th century. By the middle of the 20th century, they had expanded to include the entire array of social services and benefits that make up the so-called welfare state.

However, economic stagnation and rising public debt in the 1970s prompted some economists to call for a return to classical liberalism, which became known as neoliberalism in its revived form. The British economist Friedrich von Hayek, who was born in Austria, and the American economist Milton Friedman, who opposed government fiscal policy as a means of influencing the business cycle (see also monetarism), laid the intellectual groundwork for that revival. Both of these economists argued that interventionist measures aimed at the redistribution of wealth eventually lead to totalitarianism. The major conservative political parties in Britain and the United States, came to power during the lengthy reigns of British Prime Minister Margaret Thatcher (1979–90) and U.S. President Reagan, Ronald (1981–89).

The official abandonment of the British Labour Party's commitment to the "common ownership of the means of production" in 1995 and the cautiously pragmatic policies of the Labour Party and the U.S. Democratic Party in the 1990s demonstrate the growing influence of neoliberal ideology and policies. Neoliberals advocated free-trade policies and the free movement of international capital as national economies became increasingly interdependent in the new era of economic globalization. The emergence of libertarianism as a political force, as evidenced by the growing prominence of the Libertarian Party in the United States and the establishment of a variety of think tanks in various nations that sought to promote the libertarian ideal of markets and sharply limited governments, was the most obvious sign of the new significance of neoliberalism. Some economists and political leaders began calling for increased government regulation of the financial and banking industries in response to the financial crisis and Great Recession in western Europe and the United States that began in 2007.

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