NEOLIBERALISM AND ITS DISCONTENTS

The high point of global Keynesianism came in the mid-1940’s to the early 1970’s. During this period
gov’t poured money into their economies, allowing people to purchase more goods and, in this
process, increase demand for this products. As demands increased, so did the price of goods.

Western and some Asian Econimies like japan accepted this rise in price because, it was accompanied
by general economic growth and reduced unemployment. As the price increase, the more money
would the company earn and they can hire more workers.

- There is an phenomenon called stagflation, in which a decline in economic growth and

employment.
- Economist such as Friedrich Hayek and Milton Friedman argued that the gov’t practice of
pouring money in their economies had cause inflation by increasing demands for goods without
necessarily increasing supply. They also argued that the intervention of gov’t in economy distort
the proper functioning of property.
- Friedman used the economic turmoil to challenge the consensus around Keynes’s ideas. A new
form of economic thinking that critics labeled neoliberalism was emerged.
- From 1980’s, onward neoliberalism became codified strategy of the United states Treasury
Department, The Worl Bank, The IMF and the Worl trade Organizatio—a new organization
found in1995 to continue the tariff reduction under GATT. The policies they forwarded came to
called Washington Consensus.
WASHINGTON CONSENSUS
- Dominated global economic policies from 1980s until the early 2000s.
- it advocates pushed for minimal gov’t spending to resuce gov’t debt.

US taek advantage of “cheap housing loans”. Amercan began to building houses that were beyond
their financial capacity. To lighten the risk of these loan, banks that were lendinghouseowner’s
money pooled these mortgage payment and sold them as “ mortgagte-backup securiyies”.