Neoliberalism (Economic Theory) – Definition

Cite this article as:"Neoliberalism (Economic Theory) – Definition," in The Business Professor, updated December 14, 2018, last accessed October 19, 2020,


Neoliberalism Definition

Neoliberalism is an ideology and policy model that advocates for the free market economy and argues in favor of transferring the power of controlling the economy from public sector to private sector. The ideology is based on the basic principles of neoclassical economics that recommends limiting the government subsidies, reforming tax regulations to increase the tax base, decreasing deficit spending, opening up market and capital, and limiting protectionism.

A Little More on What is Neoliberalism Economic Theory

Neoliberalism promotes privatization, austerity, deregulation, free trade and reduced government spending. It aims at limiting the state inference in the economy and increasing the control of the private sector over it. The proponents of the neoliberalism believe a sustained economic growth will result in achieving human progress. They argue that the free market is the most efficient way of resource allocation.

The term neoliberalism has been used by different scholars since the beginning of the 20th century explaining different situations. The current meaning of the term gained popularity during the 1970s and 1980s as different scholars and critics started using this to describe the free market economic policy. Although, today the advocates of the free market policy restrain themselves from using the term.

The term was first used during the 1930s by the European liberal scholars describing a middle way between the two conflicting ideas of the classical liberalism and socialist planning. In the following decades, the term lost its popularity among the scholars and policymakers. Especially, during the 1960s the term was seldom used. In the 1980s the Chilean economic reform introduced by Augusto Pinochet brought back the term in public and academic discourse. During that time the term was being used negatively by the critics to argue against the free market policy. The scholars associated it with laissez-faire economic liberalism. The names of Friedrich Hayek and Milton Friedman got associated with the term neoliberalism. The term was most popular among the Spanish scholars and later received by English speaking scholars. However, the term is not commonly used in the United States.

The policy of neoliberalism has been debated by scholars, policymakers and politicians all over the world. The term was most extensively used for describing the economic policies introduced by Margaret Thatcher in the United Kingdom and by Ronald Reagan in the United States. Many critics argue the implementation of the neoliberal economic policies led to the economic crisis of 2008.

Liberalism and neoliberalism are two distinct ideas although they share some similarities. Both of these have their roots in 19th century’s classical liberalism which argued for the laissez-faire economics. While liberalism is more of a political theory advocating for the liberty of the people, neoliberalism is an economic policy focused on free market theory.

The neoliberalism has attracted vehement criticism from many quarters. Many see it as anti-democratic leading to exploitation and social injustice. They argue that neoliberalism limits the power of trade union as the worker’s unions are perceived as the hindrance to the performance by the proponents of this policy. They believe the labor rights are in danger in a neoliberal economy. The neoliberalism breaks the public enterprises, sells the state-owned asset and creates the dominance of the market. May critics are of the view that under this system poor become poorer and rich become richer. They say this policy may lead to criminalizing the poverty.

References for Neo-Liberalism

Academic Research on Neo-liberalism

Neo-liberalism and the End of Liberal Democracy, Brown, W. (2003). Theory & Event, 7(1). This paper explains the correlation between the End of Liberal Democracy and the Neo-liberalism and the differences between them. The processes by which they are both applied were also discussed in this study.

Creating difference: Neoliberalism, neo-conservatism and the politics of educational reform, Apple, M. W. (2004). Educational policy, 18(1), 12-44. According to this paper, questions regarding the recent educational reform efforts which are now seen as underway in several countries were studied. According to from the research gotten from these nations, the result gotten was used to attest to some of the secret differential effects of two important and connected strategies which are the neo-liberal and the neo-liberal inspired market proposal, a middle class managerial inspired regulatory proposal which includes the national testing and national circular, and the neo-conservative. This paper, however, explains how several different interests with different social and educational beliefs compete for authority in the social field of power surrounding the educational policy.

What is’¬†neoliberalism‘?, Martinez, E., & Garcia, A. (1998). Third World Resurgence, 7-8. This paper explains the definition of neo-liberalism and the various characteristics of neo-liberalism.

Neo-liberalism, Gamble, A. (2001). Capital & Class, 25(3), 127-134. According to this academic research paper, Neo-liberalism was explained as a complete entity. The general characteristics, pros and cons as well as the assumptions were all explained in this research paper.

Dissolving the public realm? The logic and limits of neo-liberalism, Clarke, J. (2004). Journal of social policy, 33(1), 27-48. This research paper focuses on the uniqueness in the fortunes of the public sector during the last twenty years. This paper, however, gives the problem of how one thinks about neo-liberalism and globalization as forces behind these changes. This paper also studies how different part of this public sector (also known as public services, public interest and as a collective identity) has been controlled by a process called dissolution. According to this paper, studying these processes only indicates that they have been successfully applied to the status of the economy.

The penalisation of poverty and the rise of neoliberalism, Wacquant, L. (2001). European Journal on Criminal Policy and Research, 9(4), 401-412. This paper extends and explains the result of the analyses submitted by an economist which suggests that the generalized increase of carceral population in an urban/developed society is due to the fact that the increase in the use of the penal system is termed an instrument which helps in managing social insecurities and also helps to house the social disorderliness found at the bottom of the class structure by the neo-liberal policies of the social-welfare retrenchment and the economic deregulation.

Neo-liberalism and marketisation: The implications for higher education, Lynch, K. (2006). European educational research journal, 5(1), 1-17. This paper explains that with the rise of the recent change in the New Right neo-liberal agenda, an idea to reduce the cost of education and other public services such as transport, care services and housing services etc. was paramount. Also an attempt to privatize most public services so as to force citizens to buy them at market value rather than be provided by the state government was also inevitable according to the explanation drawn in this study, hence, this paper presents both a challenge to academics to join forces as public gurus and the neo-liberal model of a market economy in other to develop a counter-attack/defence in other to change the presentation of neo-liberalism for higher education.

Living with/in and without neoliberalism, Clarke, J. (2008). Focaal, 2008(51), 135-147. In this research paper, various concerns about the whole idea of neo-liberalism which suggest that it has been greatly stretched than for it to be productive as an important analytical tool in an economy was discussed. One of the challenges facing neo-liberalism is promiscuity (correlation with several theoretical assumptions), omnipotence (this is the main reason for the wide variety of the political, social and economic changes) and omnipresence (treated as a global phenomenon). Although, this paper explains the exact ways in which neo-liberalism can be considered and concludes that the concept of neo-liberalism has been overstressed and should be retired.

Skills and the limits of neoliberalism: the enterprise of the future as a place of learning, Streeck, W. (1989). Work, employment and society, 3(1), 89-104. According to this paper, the limits and skills of neo-liberalism were studied and the enterprise of the nearest future of this concept is regarded as a place of learning in this research paper.

Neo-liberalism and the national economy, Hindess, B. (1998). Governing Australia: Studies in contemporary rationalities of government, 210-226. This paper explains the similarities and interaction between the national economy and neo-liberalism. The ways in which neo-liberalism has affected the national economy both positively and negatively were also widely explained in this research paper.

Constitutionalising capital: EMU and disciplinary neoliberalism, Gill, S. (2001). In Social forces in the making of the New Europe (pp. 47-69). Palgrave Macmillan, London. This paper explains various policy alternatives developed to explain the concept of neo-liberalism. The aim of this paper, however, is to conceptualize the concept of the growing relationship between the private and public neo-liberal governance in the global political economy and the European Union. Also, this paper traces the connected power structures and their relations as a result of the terms of their normative and material dimensions.

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