GOV3217

Modern Political Ideologies

Lecture 6
Neoliberalism

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 All course materials, including anything accessible
on Moodle, should not be circulated without the
instructor’s permission.

 All materials are solely for academic purposes.

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1. Review of the previous lecture

2. The history and idea of neoliberalism

3. Core values of neoliberalism

4. Critiques of neoliberalism

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 The term ‘socialist’ derives from the Latin sociare, meaning
to combine or to share (Heywood, 2021, p. 75).

 Socialism, as an ideology, has traditionally been defined by

its opposition to capitalism and the attempt to provide a
more humane and socially worthwhile alternative.

 Socialism prefers cooperation to competition.

 Socialism arose as a reaction against the social and

economic conditions generated in Europe by the growth of
industrial capitalism.
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 Although there are many different versions of
socialism, some values are essential to most
versions of socialism:

▪ Community
▪ Cooperation
▪ Equality
▪ Class perspective
▪ Common ownership
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 Recalling the socialist critique of liberal democracy
and capitalism….

 A classical version of the socialist critique of liberal

democracy and capitalism is formulated by Marx.

 The critique questions the possibility of realizing

liberal democratic ideals within the economic
framework of capitalism (such as equal influence in
the democratic process, free and fair competitive
elections, and so on).
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 Capitalism is an economic system based on private
ownership of the means of production. Self-interested
individuals compete with each other & are differentially
rewarded according to how successful they are in ongoing
market transactions (Fiss, 1992, p. 908).

 Power = the ability of an actor to achieve his or her objectives

in the face of opposition. A has power over B if A can change
B’s behaviour – e.g. by making an action seem more or less
attractive (Barry, 2002, p. 161).

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 The classical Marxist critique of liberal democracy:

1. Capitalism generates significant inequalities in wealth,

ownership and status.

2. These are translated into vast differences in power, such

that the ‘freedoms’ of ordinary citizens in liberal
democracy are merely formal.

3. The democratic process thus reflects the interests and

power of capitalists over and above those of ordinary
citizens.
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 “While it may appear that citizens’
basic rights and liberties are effectively
equal—all have the right to vote, to run
for political office and to engage in
party politics, and so on—social and
economic inequalities in background
institutions are ordinarily so large that
those with greater wealth and position
usually control political life and enact
legislation and social policies that
advance their interests” (Rawls, 2001,
p. 148).
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 Neoliberalism is a political ideology that
emphasizes the role of the free market in restraining
political institutions. Its central idea is organizing
the society through the free market.

 Neoliberalism could be understood as a selective

revival of classical liberalism, in the sense that the
former emphasizes the latter’s articulation of the
relationships between market and freedom, while
neglecting classical liberalism’s other dimensions.
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 “It is widely believed that politics and economics are separate and
largely unconnected; that individual freedom is a political problem
and material welfare an economic problem; and that any kind of
political arrangements can be combined with any kind of economic
arrangements. … such a view is a delusion, that there is an intimate
connection between economics and politics, that only certain
combinations of political and economic arrangements are possible”
(Friedman, 2002, pp. 7-8).

 Neoliberalism can also be understood as a political ideology that

attempts to re-theorize the relations between politics and
economics. The ideology holds that individual liberties envisioned in
a democratic society can only be guaranteed through an extensive
free market.
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 Two particularly influential
thinkers of the neoliberal
ideology were Friedrich Hayek
and Milton Friedman.

 Hayek was known for his work

on the epistemology of the
free market, and Friedman
was known for his monetary
theory.
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 What is neoliberalism?

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 In order to understand the history of
neoliberalism, two historical factors were
crucial, the first is the “Keynesian model” and
the second is the cold war.

 The failure of the Keynesian model since the

70s and the growing tensions during the cold
war had both contributed to the growing
influence of the neoliberal ideology.
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 John Maynard Keynes (1883-1946)

 The central idea of the Keynesian

model is that active government
policy could be used to adjust
aggregate demand to stabilize the
economy and achieve full
employment.

 Increasing government
expenditure to adjust market
demand is one of the key policy
tools in Keynesianism.
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 Under the Keynesian model: “the state should focus
on full employment, economic growth, and the
welfare of its citizens, and that state power should
be freely deployed, alongside of or, if necessary,
intervening in or even substituting for market
processes to achieve these ends” (Harvey, 2005, p.
10).

 Thus, the Keynesian model depicts a state-market

relationship that is closer to modern liberals.
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 “The neoliberal label signalled their adherence to those free market
principles of neoclassical economics that had emerged in the second half
of the nineteenth century (thanks to the work of Alfred Marshall, William
Stanley Jevons, and Leon Walras) to displace the classical theories of
Adam Smith, David Ricardo, and, of course, Karl Marx.”

 “Yet they also held to Adam Smith’s view that the hidden hand of the
market was the best device for mobilizing even the basest of human
instincts such as gluttony, greed, and the desire for wealth and power for
the benefit of all.”

 “Neoliberal doctrine was therefore deeply opposed to state

interventionist theories, such as those of John Maynard Keynes, which
rose to prominence in the 1930s in response to the Great Depression”
(Harvey, 2005, pp. 20-21).
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 During the cold war,
neoliberalism had also been
deployed as a doctrine to justify
free market and capitalism…

▪ Margaret Thatcher (Prime Minister of the

United Kingdom from 1979 to 1990 and
Leader of the Conservative Party from 1975
to 1990).

▪ Ronald Reagan (40th president of the United

States from 1981 to 1989).
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 Thatcher (1987):

“I think we have gone through a period when too many children

and people have been given to understand ‘I have a problem, it
is the Government’s job to cope with it!’ or ‘I have a problem, I
will go and get a grant to cope with it!’ ‘I am homeless, the
Government must house me!’ and so they are casting their
problems on society and who is society? There is no such thing!
There are individual men and women and there are families and
no government can do anything except through people and
people look to themselves first.”

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 The core values of neoliberalism are not very
different from that of classical liberalism. Their main
difference, however, lies at the extent to which they
believe that a free market is a necessary condition
for achieving these values.

▪ Mutual benefits
▪ Individual liberty
▪ Free market

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Mutual Benefits

 Neoliberalism emphasizes the power of the free

market to coordinate cooperation to an
extensive degree through incentivizing
transactions based on mutual benefits.

 One of the classical examples is Milton

Friedman’s “Lesson of the Pencil”. Despite the
fact that a pencil is affordable to everyone,
making a pencil isn’t a simple story…

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Mutual Benefits (cont’d)

 The central idea here is that people would cooperate if

cooperation results in mutual benefits.

 Market is a sphere of cooperation through mutual benefits,

and a society in which most cooperation is done through the
market is a society of mutual benefits.

 Neoliberals therefore argue that the market, instead of the

state, should be the central coordinating mechanism, and
the role of the state is to ensure the functioning conditions of
the market.
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Individual Liberty

 “The assumption that individual freedoms

are guaranteed by freedom of the market
and of trade is a cardinal feature of
neoliberal thinking” (Harvey, 2005, p. 7).

 “As liberals, we take freedom of the

individual, or perhaps the family, as our
ultimate goal in judging social
arrangements. Freedom as a value in this
sense has to do with the interrelations
among people; it has no meaning
whatsoever to a Robinson Crusoe on an
isolated island .” (Friedman, 2002, p. 12).

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Individual Liberty (cont’d)

 Notice that one of the core reasons why neoliberals value the
market is that they believe that the market is a sphere of
freedom, not coercion. The classical example that they often
rely upon is: when do transactions occur?

 Similar to classical liberals, neoliberals also emphasize the

central role of consent in guaranteeing individual liberty. But
instead of focusing on what political institutions would be
able to acquire all individuals’ explicit or tacit consent,
neoliberals focus on the sphere in which people’s
coordination must be based on explicit consent.
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Free Market

 “The liberal conceives of men as imperfect beings. He regards the

problem of social organization to be as much a negative problem of
preventing "bad" people from doing harm as of enabling "good" people
to do good; and, of course, "bad" and "good“ people may be the same
people, depending on who is judging them. The basic problem of social
organization is how to co-ordinate the economic activities of large
numbers of people” (Friedman, 2002, p. 12)

 What are the similarities and differences between the liberal and
neoliberal views of human nature and political organization?

 Reducing political relationships into economic relationships.

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Free Market (cont’d)

 “Fundamentally, there are only two ways of co-ordinating the economic

activities of millions. One is central direction involving the use of coercion
…. The other is voluntary co-operation of individuals - the technique of
the marketplace.” (Friedman, 2002, p. 13).

 “Consequently, if economic power is joined to political power,

concentration seems almost inevitable. On the other hand, if economic
power is kept in separate hands from political power, it can serve as a
check and a counter to political power”. (Friedman, 2002, p. 16)

 Neoliberals see the relations between the state and the market as
competing with one another. The larger the market, the smaller the
state; the smaller the market, the larger the state.
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Free Market (cont’d)

 Privatization of public services, tax

cut, and retrenchment of welfare
schemes are usual policy measures
pursued by neoliberals.

 One of the major arguments for

these measures is that they reflect
the respect for and protection of
individual liberty by enlarging the
scope of the free market.
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 “The freedoms it embodies reflect the interests of private
property owners, businesses, multinational corporations,
and financial capital” (Harvey 2005, p. 7).

 Do economic liberties necessarily increase political liberties?

 How do neoliberals deal with economic inequalities resulting

from the free market? Does the economically disadvantaged
enjoy the freedom that neoliberals envisioned?

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 According to neoliberals, what is the role of
the market in a political society?

 According to neoliberals, how can the market

guarantee individual freedom?

 How does neoliberalism conceptualize

freedom?

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