AZM SCHOOL - TRIPOLI CITIZEN TO LEAD

COURSE: ECONOMICS CLASS: GRADE 12 ES

TEACHER: SONIA EL EIT YEAR: 2023\2024

Chapter 6
SECTION 2 : NEO Liberalism
As classical liberalism, neoliberalism also respects private freedoms
but the state is “welfare”, that means a state that intervenes to prevent
Dumping & Monopoly. The Government uses progressive taxation to
finance its budget and ensure redistribution.

Principles of Neoliberalism:

1- Private property :
It is a sacred and natural right but the state can nationalize some
companies (in monopoly) or expropriate land to realize public project,
or requisition empty houses to house the displaced.
2- Free private initiative
Source of creativity and innovation, it should be encouraged, but self-
interest sometimes contradicts the public interest if the money is used
for currency or land speculation which generates inflation and a
declining purchasing power.( especially of the national currency and
fixed income).
The state has to intervene by raising the tax on speculative gains or
orienting investments to sectors or regions prioritized by economic
policy. The State can use tax incentives and subsidized loans.
3- Legitimacy of profit
Neoliberalism denies the non-taxation of profits, income and capital. It
suggested that moderate taxation of the latter will have no adverse
effect on investment, but rather ensures equality and social justice,
and consequently the social peace that stimulates investment and
drains capital.
4- Freedom of prices and competition
- Neoliberalism liberalizes prices when the market is competitive.
- The state suspends or blocks this freedom if competition is lacking.
5- Freedom of external exchanges ( import & export)
- Practicing protectionist policies, even minimal, constitutes a guarantee
for investments and protect infant industries.
- Open borders is done only when domestic companies become
competitive.
- Protectionist measures used are :
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 AZM SCHOOL - TRIPOLI CITIZEN TO LEAD
COURSE: ECONOMICS CLASS: GRADE 12 ES
TEACHER: SONIA EL EIT YEAR: 2023\2024

a) The increase in customs duties on imports.

b) Quota ( limited quantity of imports)
c) The draconian quality standards imposed on foreign
products.
d) The devaluation of the exchange rate of the national
currency.

6- Freedom of Exchange
Neoliberalism adopts deterrent measures to counter speculation.
- It adopts an official exchange rate of the national currency.
- It prohibits banks to pay deposits of residents in foreign currency.
- It prohibits residents to open bank accounts in foreign currency.
- Neo liberal countries will reestablish the freedom of exchange if
speculation is curbed and exchange stability is restored.
7- The free movement of capital.
- Neoliberalism restricts this freedom in case of crisis by setting a ceiling
to the amount that residents can transfer abroad.
- When there is a back to normal, the neo-liberals remove the
restrictions.
8- Fiscal policy
- Direct taxation is an element of the economic policy: element of
incentives or disincentives. The State will decrease it for companies &
households whose investment decisions comply with the priorities of
economic policy and vice versa.
- In the context of social policy: the State reduces social disparities.
- In the context of financial policy: taxes finance public spending and
mop up the market excess liquidity to fight against inflation.
9- Role of the State
- The state intervenes in social and economic affairs; it does not always
account for the market law to solve economic & social problems and
restore the market equilibrium.
- The State is called “the welfare State”.

Advantages and disadvantages of Neoliberalism:

1- Advantages
- Control price fluctuations.
- The fight against monopoly, dumping & inflation
- Monetary stability
- Reducing social inequalities
- The investment orientation.

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 AZM SCHOOL - TRIPOLI CITIZEN TO LEAD
COURSE: ECONOMICS CLASS: GRADE 12 ES
TEACHER: SONIA EL EIT YEAR: 2023\2024

- Reconciling social demands & economic imperatives.

- The treasury funding.
- The drainage of Capital.

2- Disadvantages :
- The failure of the state due to poor management of public enterprises,
which leads to the need for privatization.
- The financial waste.
- Higher taxes.
- The emergence of socially excluded
- Discouragement of investment.

Exercises:
1- What regime reconciles economic imperatives and social
requirements?
2- Compare the liberal regime and the neoliberal one, regarding :
- The Free private initiative
- Taxation
- The Freedom of prices
- The Freedom of Exchange
3- Explain the slogan highlighted by the classical liberalism:
“Let do let go”. (laisser faire, laisser passer)
4- Give 2 measures used by the welfare state to protect local
production.
5- Give a measure used by the “welfare state” to prevent speculation.
6- Explain how the classical liberal regime can increase social
disparities.
7- A given country decided to adopt the principle of absolute freedom
of individual initiative.
- Explain, using a sequence, the positive effect of this principle on the
economic situation.
- Mention a negative economic consequence of this principle.

(7) Creativity & innovation →↗productivity →competitiveness →↗ demand on

consumption on goods and services →↗ investment →↗production →↗economic growth

Negative economic consequence = monetary, financial and real estate

speculation + monopoly.