The A-Z of isms… neoliberalism.
Friedrich Hayek, a tweedy, Austrian-born economist,
had one of those light bulb moments in the mid 1930s
and switched on an ideology that unites its enemies in scorn,
but has inspired governments and entrepreneurs down the decades -
neoliberalism.
The idea was built on the classical liberalism of the 18th Century
and a defence of individual liberty..
protecting private property and the freedom of markets
from external interference -
taxes, regulations, levies -
as much as possible.
Neoliberalism argued
that the market wasn't just an absence of interference,
it could produce a philosophy or a way of thinking all of its own.
That meant looking at the world and at transactions in daily life
through the eyes of the market.
You can glimpse this, for instance,
when I say, “I’m in the market for a beer” -
showing that we’ve internalised the idea of a market for other values.
Nowadays, you probably hear the word neoliberalism
used more as a term of abuse -
hurled by opponents at economic globalisers, nasty bankers
or governments limiting spending on public works or welfare.
The word neo, or new,
has morphed into a way of signalling...
It’s the nearest thing economic terminology has to a rotten tomato.
But neoliberalism isn’t just a dirty word -
it’s an entire mindset of approaches
to the way state and market interact with our aspirations -
emphasising privatisation over state control,
as the best way to deliver public services.
The advent of neoliberalism
led to one of the great punch-ups of economists -
between Hayek and his best frenemy John Maynard Keynes.
Keynes argued that government should get involved
in increasing demand to keep productivity up,
and unemployment down.
Hayek dismissed Keynes as “knowing very little about economics”,
and he wrote a snotty book review of one of Keynes’s major works.
Despite their bickering though,
their competing ideas - Keynesianism and neoliberalism -
remain the seesaw of big thinking in practical economics.
Keynesianism won for a good while after World War Two,
but by the end of the 1970s,
public sector strikes and worries about “stagflation” -
an ugly combo of stagnation and inflation -
persuaded some mould-breakers to look back to neoliberalism
as a way to perk up flagging economies.
Ronald Reagan and Margaret Thatcher led the way in embracing the notion.
And, so did the ruthless dictator Augusto Pinochet in Chile -
which rather marked down the democratic scorecard
of neoliberalism.
The financial crash of 2007/8
created a more testing mood towards de-regulation
and neoliberalism gained a bad rep,
because it was taxpayers who had to bail out the banks.
But there’s a broader, cultural reason
neoliberalism gets it in the neck right now.
Inevitably, it leads to such fast-paced,
uncontrolled globalisation,
because it does away with barriers to trade and to financial flows.
It prizes the innovative above continuities.
So you could say it puts the corporation above the nation.
But the globalised world we inhabit -
one of start-ups, the ability to move money and borrow cheaply,
and companies operating across borders -
owes a lot to the Austrian, Friedrich Hayek,
and his light bulb moment.
Thanks for watching! :)
Don’t forget to subscribe and click the bell to receive notifications for new videos. See you again soon!