What is Neoliberalism?
A Basic Definition of Neoliberalism
A basic definition of Neoliberalism: Neoliberalism is an economic ideology that fuses classical liberal deregulation, with social liberal Keynesian economics, and a globalist mentality. Its not classically liberal, its not social liberal, its not conservative, its not social policy, its not economic policy, it is parallel a mash-up of all these things at once. It favors a global, integrated, capitalist economy in either a left-wing form or right-wing “neocon” form.
Neoliberalism in Summary
With the above in mind, the following can also be said about neoliberalism to provide more nuance:
- Neoliberalism is an evolution of classical liberalism (the individualist ideology of liberty) and classical liberal economics (the supply and demand classical capitalism of Adam Smith, today called “neo”classical economics).
- Neoliberalism comes from the Austrian School of economic thinkers and is exemplified by Milton Friedman (spiritual successor of Mises and Hayek) in its early form, and figures as different as George Bush and Bill Clinton in its modern form.
- Neoliberalism offers a solution to social democracy and Keynesian economics by melding these concepts together with classical liberal ideology and economics.
- Neoliberalism can be treated as a political ideology and/or a set of economic policies.
- Politically, neoliberalism can be thought of as a “middle way” or “third way” between liberalism and conservatism.
- Economically, neoliberalism favors a “middle way” between neoclassical and Keynesian economics. In this it favors mixed-market capitalism, global trade (see: “neoliberal globalization“), a moderate degree of regulation, and the use of credit and debt to fund social and other governmental programs (which are often privatized in-part or in-whole).
- Neoliberalism can be embraced by any form of liberal or conservative (or other) ideology, and often is in the modern day (which becomes obvious when you consider it is the dominate ideology in the modern west, generally embraced by all major parties). This results in different types of neoliberals who disagree on social issues and other issues of state.
- When a neoliberal is to the political left, generally favoring a more Keynesian model, they can be called neoliberal (like Clinton). When a neoliberal is to the political right, generally favoring either classical conservative austerity (like May) or regulated limited government (like Reagan), they can be called neoliberal or “neocon.”
- In general, no matter what direction a specific politician comes at neoliberalism from, the idea is to pair supply side trickle down with Keynesian trickle up and a little state planning, and then let the free-market do it’s job. This economic ideology often then colors how the politician then approaches other issues of state.
- The general idea behind neoliberalism is summed up by the quote Kennedy made famous “a rising tide lifts all boats.”
- The general problem with neoliberalism is, the aforementioned doesn’t work as well if the bottom is drowning in debt. Another problem is that if the top is lifted faster than the bottom it creates a wealth gap over time (especially as capital compounds faster than economic growth, with wages rising slower than capital gains). Another problem is the focus on capital, international trade (globalism), and thus international economics often leads to things like utilizing foreign debt and credit and foreign labor (which, while it may lift the global tide, and while it may increase the wealth of nations, doesn’t always favor the lower classes directly, but rather just favors them as an after-effect). See Criticism of Neoliberalism.
The above points, paired with the vast difference between figures like Reagan and Obama make an exact definition of neoliberalism a little complex. With that in mind we explore the concept of neoliberalism below.
Three Minute Theory: What is Neoliberalism?
TIP: Reagan won over a lot of life long Democrats, Clinton was called a Reagan Democrat. Both offered a “third way,” this third way wasn’t “radical centrism” (another synthesis of modern forms) it was “neoliberalism” (called neoconism when speaking of the right-wing version). Think about how the wealth of the U.S. has increased since the 1980s compared to the tax/income distribution in the 1940s and 1950s, think about how debt has increased during this same time, think about the pros and cons of credit, debt, privatization, and globalism. Think about climate change, think about the progressive militarism paired with private contractors and state debt. Think about student loans and mixed-market healthcare. This is the neoliberal era, these are its effects. When people say “both major U.S. parties are the same,” they generally mean, economically, as in that, they both roughly favor neoliberalism. In reality two any two politicians that one might refer to as “globalist neoliberals” can have radically different views (hence the long page explaining this).
Neoliberal vs. Neocon: As we explain below, neoliberal and neocon are essentially different names for different flavors of neoliberalism. Neoliberal is the left-wing version, Neocon is the right wing version. Both seek to replace state planning with the free-market to some degree, and both seek to mash-up the liberal and conservative position to create a “third way,” but otherwise they take vastly different positions (they disagree on what the desired effect should be, the government’s role, the amount of deregulation and taxation, and much else).
Understanding Neoliberalism and Its Close Relative Neoconism in Their Many Different Forms
With the introduction covered, the first thing to stress about neoliberalism is a loosely defined ideology that comes in a number of different left-wing and right-wing forms (any of which may take a widely different positions on a given issue).
That means that, despite the many insight above, there isn’t one simple definition to give that fits the whole of neoliberalism. This is especially true given the many ways the term is used in the modern day (often as a synonym for establishment politician or globalist by the populist left and right, where it can seem like anything a progressive or populist right-winger doesn’t like is automatically “neoliberal”).
TIP: See the image below, that is not neoliberalism. That is its antithesis, left-wing and right-wing populism.
With the above said, in all cases, neoliberalism is an ideology that takes a step back from social planning and instead seeks to find a capitalist middle ground between the different forms of liberalism, socialism, and conservatism.
Specifically, and as noted, neoliberalism accomplishes this by rooting itself in classical liberal economic free-market principles, with the aid of the state. In doing this it is creating a “middle way” and in doing that it is by its nature rather complex and only becomes more complex when it combines with other ideologies (some shifting it more toward Keynes, some more toward Smith, some toward classical conservative mercantilism on a global level, and some toward all three).
Still, at its core, it is an evolution of Adam Smith’s classical liberal economics, and its own evolution neoclassical economics, in the modern era (as an alternative to fascism, socialism, classical conservatism, etc).
It is therefore an economically minded evolution of liberalism (in the political and economic form, so liberty, individualism, and capitalism) that mashes up aspects of other ideologies including classical conservatism, socialism, social liberalism, and classical liberal economics.
Again, this mash-up creates a “third way”… that comes in a number of different flavors, the two main flavors being “Neoliberal and Neocon.”
Zizek – Neoliberalism is Myth. The claim here is “neoliberalism is a myth,” which means “economic deregulation on a global scale, in the left-wing or right-wing form, but here the deregulatory Reagan / Greenspan form specifically, sinks more ships than it lifts. See the next video for a counterpoint.
TIP: One reason it is hard to define neoliberalism is that it has essentially been the dominate ideology of all ruling powers in the West (and much of the non-West) for at least the past 25 – 30 years (if not longer; one could argue neoliberalism is simply an extension of western liberal economics in the 21st century). Every leader of the U.K. and America since at least the 1980s has essentially been some type of neoliberal or “neocon.” That is, they favored economic liberalism and free-trade, but on a global scale and with state backing, while maintaining some semblance of the welfare state (generally by privatizing public programs to some degree). In many ways it is a mash-up of every ideology that came before, a private market solution to state planning in every respect (a mash-up of state socialist, liberal, and monarchist)… it is everything but populist really.
Capitalism and Neoliberalism Have Made the World Better: Q&A with Johan Norberg. An argument for neoliberalism.
The Planks of Neoliberalism
Neoliberalism favors planks like: limited government welfare with private market involvement, limited taxation (or at least flatter taxes than a progressives might favor), deficit reduction (or increased debt depending on what flavor of neoliberalism we are talking about), a mix of free-trade / protectionism (again which depends on what flavor of neoliberalism; can be very globalist, or can favor a nationalist nativist position on trade, either way, it wants trade to happen), deregulation, private property, capitalist based society, deregulated financial products, and a privatization of government programs in general.
In other words, instead of high taxes, lots of regulations, and central planning, it seeks to “let the private market handle it” (often without fully relinquishing state power… and thus it can end up looking a lot like classical conservative VOC state-backed monopoly mercantilist ideology in some instances).
For example of what we mean above, instead of free public school, we get government backed student loans. Instead of free public housing, we get government backed sub-prime lending. Instead of the military using only state entities, we get a large array of private contractors and a military industrial complex. Etc.
Globalization and Neoliberalism.
The Origin of Neoliberalism
The term neoliberalism was rumored to be coined at a meeting in Paris in 1938 attend by Ludwig von Mises and Friedrich Hayek (economists of the Austrian school of economics who inspired Milton Friedman).
The idea behind it was to offer a classical liberal solution to New Deal social democracy, fascism, communism, and the other socially minded ideologies of the time. The term was then popularized by Friedman, and the idea behind it was described in works like his essay “The Methodology of Positive Economics.”
Friedman, with his calls for individualism, deregulation, and alternatives to the welfare state like a UBI (Universal Basic Income) described himself as a “neoliberal,” and this gives a hint at the terms roots as referring to a new kind of liberal, not when who went toward social liberalism like the liberals did from the mid 1800s to the mid 1900s, but one who evolved classical Adam Smith liberalism into a 20th century form, with the hindsight of Keynes.
TIP: If you reject Marx and Mussolini, but can’t pick between Smith and Keynes, you just might be a neoliberal. The problem of course is there are countless ways to mash-up Smith and Keynes, especially when classical conservatism is mashed in… and thus we get a thousand flavors of trickle up and trickle down policy slapped on-top of the neoliberal label.
Economic Schools of Thought: Crash Course Economics #14.
The Evolution of Neoliberalism
To rephrase the above, modern Neoliberalism as a term starts with Milton Friedman, but the general concept behind it stretches back as far as liberalism itself (see an essay on the birth of liberalism).
Friedman saw himself as a liberal, a classical liberal specifically, and he sought to evolve classical liberal economics in a new age.
In this respect neoliberalism is as an evolution of Adam Smith’s classical liberal economics (mashed up with a little Mises, as this is Friedman after-all).
However, over time, the term was subsequently used in a number of ways to generally describe a wide range of socially left and socially right political ideologies that embrace deregulation and the private market.
Today, the term has been obscured even more by being applied to everyone from Reagan to Clinton, to Merkel, to Tatcher, to Reagan, to Trump, to Clinton, to Obama, to May… which is super confusing and results in lots of lackluster usages of the term and disconnected definitions.
With that said, the common thread in all this is the same thread that ties the dominate ideologies of the west together in general, that is, its roots are in classical liberal economic capitalism with an individualist spirit.
For the rest of this page we’ll try to clarify the different forms of neoliberalism.
The Details of Neoliberalism and Neoconism in the Modern Day
For me, the simplest way to understand neoliberalism is like this:
- Neoliberalism is an evolution of classical liberalism focused on mashing up classical liberal “neoclassical” economics with Keynesian economics.
- A good slogan for neoliberalism is “a rising tide lifts all boats.” The idea here is that if the nation sees economic prosperity, by embracing classical liberal economic free-market principles that focus on the private market over the state, the people will too.
- The left tries to mash this up with a sort of FDR inspired Keynesianism, the right tries to mash this up with a sort of Gilded Age philosophy. This results in at the very least a right-wing version (neoconism) and a left-wing version (neoliberalism).
- When neoliberalism is generally spoken of, left or right, it is called neoliberalism. With that said, the correct term for a neoliberal right-winger, especially when one is comparing sparse figures with little in common like Reagan and Obama, is “neocon” or “neoconservative.”
- The “neo” part eludes to being “a new form,” and it speaks to “neo”-classical economics, but it is often treated as meaning “faux” (as in “not really a liberal,” a bit of a classical austerity focused conservatism actually).
- Neoliberalism is a “third way” or “middle way” between classical and social liberalism and conservatism. It is not fully free-market and it is not fully central-planning; it is a middle-ground.
- In modern times, the term neoliberal is often used to describe any politician who is capitalist, globalist, or establishment (thus its original meaning has been somewhat corrupted).
TIP: Noam Chomsky and Ron Paul are not Neoliberals in the modern sense (although Paul certainly invokes thoughts of the Austrian school and one would suspect Chomsky cast a vote for Obama despite his criticism), and each speaks “liberally” about neoliberalism’s ills. Like other ideologies we might mention, neoliberalism has been made famous by its critics.
Noam Chomsky: Neoliberalism Is Destroying Our Democracy
NOTES: Because the term can mean so many things, it helps to treat it like a qualifier. Like Obama is a left-of-center social liberal neoliberal who tended to be progressive on social issues, and Reagan was a center-right socially conservative neocon who tended to be classically conservative to some extent but otherwise favored individualism and took a socially conservative neoclassical small government position on economics and state power. By offering qualifiers and speaking “in terms of,” we avoid some of the confusion inherent with describing political ideologies. The west was founded on liberalism, so its no surprise today we find may different flavors of new forms of liberalism. Unfortunately, in America we call left-wingers “liberals” and thus it can be confusing to the uninitiated to describe all ruling powers as “liberals” (as for example this could lead to a right-winger assuming the world is run by left-wingers… it isn’t, it is run by politically left and right liberals who agree on capitalism and little else (hence the endless political head-butting).
PRO TIP: If you want a rising tide to lift all boats, then the sea level must rise slowly. If you just dump a bunch of water in too quickly, then only those really fancy expensive ships will float. The other little ships will just be crushed under the inflow of water. This is a good metaphor for the dangers of neoliberalism. You can’t crush the workers under debt and low wages… fascism and socialism arose as a rejection of liberalism in its old form, the idea that history won’t repeat under neoliberalism is incredibly naive (to say the least… I mean, just look at the populist uprisings of 2016 and the movement of national populism and deconstruction of the neoliberal state!).
The Four Main Types of Neoliberalism and Neoconism
Because neoliberalism evolved over time to describe such a wide array of characters, I would define no less than four flavors of neoliberalism these being:
- Classical Liberal Neoliberalism: Almost like a libertarian, but still pushes for social policies like a UBI (it is trying to find a middle-ground, it is not going fully staunch Mises classical liberal). Milton Friedman’s ideology in its pure form, most don’t actually favor this form (and instead mix in more right-wing or left-wing planks). In trade, classical liberal neoliberals focus on free-trade.
- Social Liberal Neoliberalism: Obama and the Clintons are social liberal neoliberals, as is much of the Democratic party. If they have to choose between Smith and Keynes, they choose Keynes. If they have to choose between Single Payer and the ACA, they obviously choose the ACA. If they have to choose between free public college and state backed student loans, they choose student loans. Bernie Sanders might just barely fall in this category and Obama is to the left of this category. Tony Blair is on the opposite side of this, he is essentially a neocon, but could be considered a neoliberal. Macron and Merkel are probably closer to this category than not. In trade, social liberal neoliberals tend to be focused on globalization.
- Classical Conservative “Neoliberalism” (Neoconism): Theresa May, Bush, Reagan, and Margret Tatcher essentially fall in this category (although a figure like Reagan could certainly be filed under Social Conservative Necon as well). This is the version of neoliberal who sides with the social conservatives, but is mainly just focused on austerity measures. Their deregulation isn’t a clever way to stimulate the market and redistribute the wealth (lifting all boats with the rising tide), it really is just a way to ensure “the wealth of nations.” It is the right-wing version of neoliberal. In trade, classical conservative neocons tend to be protectionist.
- Social Conservative “Neoliberalism” (Neoconism): Trump is sort of this (he is certainly partly a populist; but not in every way to say the least), Mike Pence is definitely this, and to some extent Reagan was this. It is a version of neoliberal that is focused on socially conservative policy. Where a classically conservative neocon is focused on the rising tide, and if it lifts all boats so be it, the social conservative version is focused on socially right social issues like restricting immigration and ensuring “traditional values” by way of deregulation without a full shift to small government. It tends to favor nativist protectionism in trade, while still favoring economic deregulation in general.
Who isn’t neoliberal? The populist left and right, and of course communists, pure socialists, pure libertarians, and fascists are not neoliberals. They may share planks with the mixed-third-way neoliberalism, but they generally reject the mixed approach of neoliberalism (each for its own reasons). That said, neoliberalism is the dominate ideology, and thus the populist right and left end up working with neoliberals and neocons (especially in America and the U.K.) out of necessity…. but anyway, that is as it should be. See “what is a coalition in a democratic and republican form of government.”
TIP: Take the image below and insert the terms “neoliberal” and “neocon” and you have yourself a left-right chart for neoliberalism. Any political ideology can essentially can have a neoliberal wing, as long as they embrace economic deregulation, world trade, and privatization.
OPINION: Neoliberalism gets a very bad reputation in some circles (in the populist left and right circles specifically), but when you consider its been the dominate ideology in the west for some time right now, it isn’t exactly fair to treat it like it doesn’t have merit. The modern advances of society have happened under the watch of the neoliberals (just like advances happened under both left and right social and classical liberals in the past). In this respect, its important to understand neoliberalism in its many forms rather than treat it as a establishment globalist boogyman on-top which one can magically pin the world’s problems.
Naomi Klein on Global Neoliberalism
Neoliberalism In Conclusion
In other words:
- Neoliberalism is an evolution of liberalism that comes in a number of left and right forms and speaks to both political and economic ideology.
- The left-wing version of neoliberalism comes in a classical and social form.
- The right-wing version of neoliberalism is called neoconism and comes in a classical and social form.
- Neoliberalism/neoconism always has aspects of left-wing and right-wing ideology baked in (because it is both an evolution of liberalism and a “third way” between the modern forms of liberalism and conservatism at once in any form). Thus, it is always somewhat elitist in effect, and therefore neoliberalism are almost never the same as populists and purists.
Thus, Ron Paul is not a neoliberal (as he fully believes in the classical liberal position; although one could argue this makes him closer to Friedman than most of the others mentioned), and there are probably better examples of Neoliberals than Bernie Sanders, Boris Johnson, Jeremy Corbyn, and to some extent Donald Trump (as none are really for economic deregulation paired with federal power first and foremost).
With that said, this broad sweeping net of a term probably catches more boats than neoliberalism sinks or lifts in a day (joke), and thus it works best as a comparative term (not a joke). In this sense:
Any ideology that favors the a classical liberal solution to social democracy, especially if it seeks privatization, deregulation, mixed-markets (but not fully free-markets), credit, debt, and global trade as a way to lift all boats, whether it looks like Friedman, Reagan, Clinton, Bush, or May, is neoliberal (or neocon).
Meanwhile, the purists who want state planning (in the left-wing or right-wing form) or a for a fully free-market, would really be considered neoliberal in the modern sense (so ironically, Mises would essentially not be a modern neoliberal despite being instrumental in the coining of the term, Friedman would but just barely, but Greenspan, Reagan, and both Bushes, just like Clinton, Obama, and Yellen, certainly would).
Tony Benn – 10 min History Lesson for Neoliberals.
TIP: The reason we want to use the terms neocon and neoliberal is that we have to have some way to denote the vast differences between figures like Reagan and Clinton, never mind Merkel, Tatcher, Reagan, Trump, Clinton, Obama, May… With that said, even those terms alone don’t cut it, which is why I divided into four camps above (social and classical liberal and conservative). With that said, the general point here is that the term “neoliberal” isn’t enough to describe an ideology, unless you are specifically focused on talking about an economic policy that mixes state power with deregulation as an alternative to social planning.
- What is Neoliberalism?
- What is Neoliberalism? Dag Einar Thorsen and Amund Lie Department of Political Science University of Oslo