HISTORICAL BACKGROUND OF NEOLIBERAL POLICY

Since the 1970s, global development theory and practice have been dominated by
neoliberalism as an approach to development on a global scale. It arose primarily to promote
growth, establish free markets, replace Keynesianism, which proved to be ineffective, and do
away with government interference in the economy, which led to subpar economic
performance in many nations. IFIs like the World Bank (WB) and International Monetary
Fund (IMF), which may be regarded the major organizations promoting neoliberalism,
fostered the spread of neoliberal methods around the world. By the 1980s, the IMF's
responsibilities went beyond monitoring and maintaining the stabilization of international
finance to helping states recover from economic flaws or financial instability. The WB's
mission changed throughout time as well; initially, it was primarily focused on giving nations
that had been devastated by World War II the money they needed for reconstruction.
Following this, further organizations were included in the WB group, such the International
Development Associations (IDA) and International Financial Corporation (IFC), to broaden
WB efforts to include aiding poor nations. The 1973 oil crisis that OPEC countries caused by
raising the price of oil resulted in surpluses for their financial resources, which in turn held
the money in private banks in industrialized nations. These banks began to provide loans to
underdeveloped nations that were affected by the rise in oil prices, but the recipients did not
repay the principal or the interest. As a result, the IMF intervened to assist in solving The
IMF introduced so-called conditionality for securing loans at this time because of the
economic crises in developing nations. The execution of the "Structural Adjustment
Programs," which are primarily built in accordance with the "Washington Consensus
Agenda," was linked to this conditionality. One could argue that the widespread adoption of
"Washington Consensus" economic reforms in developing nations during the 1980s and
1990s with the assistance of the IMF and WB, which required adoption of "Washington
Consensus" reforms as a requirement for borrowing money, is to blame for the prevalence of
neoliberals. The Washington Consensus consists of ten reform policies, including: "fiscal
discipline, public expenditure priorities, privatization, Deregulation, foreign direct
investment, tax reforms, exchange rate, interest rate, trade liberalization and property right.
The 1930s Great Depression, which resulted in a sharp decline in global economic
production, massive unemployment, and pervasive poverty, was largely considered as an
economic liberalism failure. According to Burgin Angus & Solow Robert M. (2012) A group
of 25 liberal intellectuals, including some well-known academics and journalists like Walter
Lippmann, Friedrich Hayek, Ludwig von Mises, Wilhelm Röpke, Alexander Rüstow, and
Louis Rougier, organized the Walter Lippmann Colloquium, which was named in
Lippmann's honor to mark the release of the French edition of Lippmann's pro-market book
An Inquiry into the Principles of the Good Society. Hartwich (2009 pp. 18–19), states that
when they came together in Paris in August 1938, they urged for the creation of a new liberal
agenda, with "neoliberalism" being one moniker that was bandied around. Additionally, they
decided to transform the Colloquium into the Centre International d'Études pour la
Rénovation du Libéralisme, a permanent think tank with a Paris address.There were
significant differences over the right function of the state, despite the fact that most liberals
felt that the status quo liberalism that promoted laissez-faire capitalism had failed. A group of
"true (third way) neoliberals" led by Rüstow and Lippmann argued for robust government
regulation of the economy, while an older generation of liberals led by Mises and Hayek
insisted that the only proper function of the state was to remove obstacles to entry into the
market. Mises attacked the opposing group, lamenting that the orthodox liberalism they
practiced was to blame for the Great Depression, while Rüstow said that Hayek and Mises
were holdovers from the liberalism that created it.
Deep divisions developed over the right function of the state, despite the fact that most people
thought that the laissez-faire economy promoted by the status quo liberals had failed. While a
group of "true (third way) neoliberals" led by Rüstow and Lippmann argued for robust
government regulation of the economy, an older generation of liberals led by Mises and
Hayek insisted that the state's only proper function was to remove obstacles to entry into the
market. Mises attacked the opposing side, saying that the ordoliberalism they promoted was
actually "ordo-interventionism," while Rüstow said that Hayek and Mises were holdovers
from the liberalism that led to the Great Depression. (Hartwich, 2009 pp. 19–20). The
Colloquium, which was divided in opinion and underfunded, was mostly ineffective.
Similarly, initiatives to further neoliberal concepts, including Wilhelm Röpke's attempt to
start a magazine of neoliberal views failed. The Colloquium, which was divided in opinion
and underfunded, was mostly ineffective. Similarly, initiatives to further neoliberal concepts,
including Wilhelm Röpke's attempt to start a magazine of neoliberal views, mainly failed.
Jackson Ben (2010) noted that the Colloquium's efforts were tragically overshadowed by the
start of World War II and mostly forgotten. Nevertheless, the Colloquium was the birthplace
of the fledgling neoliberal movement and acted as a forerunner to the Mont Pelerin Society,
which was founded by many of the Colloquium attendees after the war and was far more
successful.
 With the creation of the Mont Pelerin Society in 1947, which had Friedrich Hayek,
Milton Friedman, Karl Popper, George Stigler, and Ludwig von Mises among its first
members, neoliberalism started gaining prominence. It evolved into a "kind of international
'who's who' of the classical liberal and neo-liberal intellectuals" and had yearly meetings.
Mirowski & Plehwe (2009) notes that While approximately half of the attendees at the initial
meeting in 1947 were Americans, by 1951 it was mostly Europeans. As Europeans held the
leadership positions, Europe would continue to be the hub of the community. The society
(Mont Pelerin) was founded at a time when central planning was becoming more prevalent
globally and neoliberals had few opportunities to influence decision-makers. Milton
Friedman called the society a "rallying point" for neoliberals, bringing together disparate
proponents of liberalism and capitalism. They shared the conviction that collectivist
movements threatened individual freedom in the developed world, which they stated in their
declaration of aims:
‘The foundational principles of society are in jeopardy. The basic elements of human
dignity and freedom have already vanished over vast portions of the Earth's surface. In other
places, they are always in danger due to the evolution of contemporary political trends.
Extensions of arbitrary authority gradually erode the standing of the individual and the
voluntary group. Even Western Man's most prized possession, freedom of thought and
expression, is in danger due to the spread of ideologies that, while claiming the right to
tolerance when they are in the minority, actually seek to gain control over society in order to
stifle and eradicate all viewpoints other than their own. The organization asserts that these
changes have been aided by the expansion of ideologies that cast doubt on the value of the
rule of law and a historical perspective that rejects any ultimate moral norms. It also asserts
that the decline in support for private property and the free market has fueled them. [This
group's] only goal is to promote discussion among individuals who share certain ideals and
broad conceptions in order to contribute to the upkeep and advancement of a free society’.
The word néo-libéralisme, which already existed in French, was first used in English
in 1898 by French economist Charles Gide to express the economic principles of Italian
economist Maffeo Pantaleoni. Later, the phrase was adopted by others, notably Milton
Friedman, a classical liberal economist, who wrote about "Neo-Liberalism and its Prospects"
in 1951. Neoliberalism was among the labels suggested and finally adopted to characterize a
certain set of economic principles in 1938 at the Colloque Walter Lippmann. Neoliberalism
was described as involving "the priority of the price mechanism, free enterprise, the system
of competition, and a strong and impartial state" by the colloquium. Louis Rougier and
Friedrich Hayek believed that the competitiveness of neoliberalism would create an elite
hierarchy of powerful individuals who would take control of society in place of the current
representative democracy, which now acts on favor of the public.
A contemporary economic policy with state intervention was what it meant to be
neoliberal. Neoliberal state interventionism and the laissez-faire school of classical liberals,
led by Ludwig von Mises, came into conflict. The social market economy and its leading
economists, including Walter Eucken, Wilhelm Röpke, Alexander Rüstow, and Alfred
Müller-Armack, were referred to as "neoliberalism" by the majority of academics in the
1950s and 1960s interpreted the term "neoliberalism" to refer to the social market economy
and its leading economists, including Walter Eucken, Wilhelm Röpke, Alexander Rüstow,
and Alfred Müller-Armack. Although Hayek had intellectual links to the German neoliberals,
his name was only seldom associated with neoliberalism during this time due to his more pro-
free market position. Opposition researchers adopted the phrase to designate the economic
changes carried out there and their proponents (the Chicago Boys) during the military
government in Chile (1973–1990). Once this new interpretation had been established among
researchers who spoke Spanish, it spread to the study of political economics in English.
Neoliberalism has become largely used as a term to imply a laissez-faire market
fundamentalism virtually identical to that of classical liberalism - rather than the ideas of
those who attended the 1938 colloquium. There is debate regarding the term's exact meaning
as a result, as well as its applicability as a descriptor in the social sciences, particularly in
light of the recent proliferation of many market economies, Boaz & Morse (2009).
SOCIO ECONOMIC CONSEQUENCIES OF NEOLIBERAL POLICY
A political and economic theory known as neoliberalism places a strong emphasis on
deregulation, free trade, globalization, and reduced government spending. It has to do with
laissez-faire economics, a school of thought that advocates for little to no government
intervention in people's and society's economic problems. Neoliberalism and libertarianism
are occasionally mistaken for one another. Neoliberals, as opposed to libertarians, often
support greater government involvement in the economy and society. For instance, whereas
libertarians frequently oppose progressive taxation in favor of policies like a flat tax rate for
all taxpayers, neoliberals frequently support it.Neoliberals frequently support policies like
bailouts of important sectors, which are detested by libertarians.Neoliberal policies may be
viewed as conservative and at odds with many people's political beliefs, but it's important to
remember that bipartisan support existed for a number of US neoliberal initiatives, including
free trade agreements, the deregulation of the banking, transportation, and utility sectors, and
the reduction of the top marginal tax rate and the capital gains tax..

THE PROS AND CONS OF NEOLIBERAL POLICY:

PROS:
 ECONOMIC GROWTH AND EFFICIENCY: Neoliberal policies place a strong
emphasis on free markets and competition, which can promote economic growth.
Market-oriented reforms and lessening government intrusion, according to supporters,
can boost economic output and efficiency. Neoliberal reforms, in the opinion of
economists John B. Taylor and John C. Williams, have significantly boosted economies
and raised living standards in a number of nations (Taylor & Williams, 2011).
 GLOBALIZATION AND FREE TRADE: Neoliberal Policy promotes cross-border
transfer of products, services, and capital through free trade and globalization.
Supporters contend that free trade enables nations to specialize in their comparative
advantages, resulting in increased efficiency and reduced consumer prices. Increased
trade openness has favorably influenced creativity and productivity, according to
research by economists Pablo Fajgelbaum and Amit K. Khandelwal (Fajgelbaum &
Khandelwal, 2016).
 TECHNOLOGICAL INNOVATION AND ENTREPRENEURSHIP: By fostering
an atmosphere that is supportive of economic expansion and investment, neoliberal
policies can promote technical innovation and entrepreneurship. Reduced rules and
 entry barriers, according to supporters, promote competition and foster innovation.
According to research by economist Stephen Haber 2014, neoliberal policies like
deregulation and lowered trade barriers have made a substantial contribution to
fostering innovation in countries.
CONS:
 INCOME INEQUALITY AND SOCIAL DISPARITIES: Neoliberal approaches,
according to critics, might aggravate social and wealth gaps. The income gap may
expand as a result of cuts to social expenditure and labor safeguards combined with tax
breaks for the wealthiest. Neoliberal policies, according to researchers Lucas Chancel
and Thomas Piketty, have increased economic inequality in numerous nations (Chancel
& Piketty, 2017).
 SOCIAL AND ENVIRONMENTAL EXTERNALITIES: Neoliberal policies
frequently put the economy first while ignoring social and environmental issues. Critics
claim that this limited concentration might result in negative externalities including
social costs and environmental deterioration. According to research by economist
Joseph Stiglitz, measures that address externalities and advance sustainable
development are essential (Stiglitz, 2010).
 FINANCIAL INSTABILITY AND ECONOMIC CRISES: Financial deregulation
in particular has been cited as a cause of neoliberal policies' contribution to economic
crises. The financial industry's regulatory easing is criticized for perhaps encouraging
excessive risk-taking and speculative behavior. Neoliberal policies are frequently
blamed for the global financial crisis of 2008, which was brought on by subprime
mortgage lending and banking sector deregulation (Krippner, 2012).
Neoliberal Policy, in sum, has both advantages and disadvantages. These policies, according
to their proponents, encourage economic expansion, productivity, and globalization. On the
other side, detractors voice worries about financial instability, social inequities,
environmental externalities, and income inequality. It is significant to remember that the
effects of neoliberal policies might change depending on the execution and particular
environment. In order to solve the issues and maximize the advantages of neoliberal policies,
a balanced strategy that takes both economic and social considerations into account is
essential.
IMPLICATIONS OF NEOLIBERAL POLICIES:
The implications of neoliberal policies can be far-reaching and have both positive and
negative consequences. These implications can be observed across various sectors, including
the economy, society, and governance..
 Economic Implications: Neoliberal policies emphasize free markets, deregulation, and
privatization. These policies can lead to increased economic growth, efficiency, and
innovation (Taylor & Williams, 2011; Fajgelbaum & Khandelwal, 2016). However,
they can also contribute to income inequality and social disparities. Reduced
government intervention and social spending may result in limited safety nets,
potentially leaving vulnerable populations without adequate support (Chancel &
Piketty, 2017).
 Labor Market Implications: Neoliberal policies often prioritize flexibility and
deregulation in labor markets. While this can create opportunities for entrepreneurship
and job creation, it may also result in precarious employment, wage stagnation, and
reduced workers' rights. The erosion of labor protections can lead to increased income
insecurity and a decline in workers' bargaining power (Glyn, 2005).
 Social Implications: Neoliberal policies can have significant social implications.
Reductions in public spending on social services, such as education, healthcare, and
welfare, can limit access and quality of essential services, particularly for marginalized
populations. This can contribute to social inequalities and hinder social mobility
(Stiglitz, 2010).
 Governance Implications: Neoliberal policies often advocate for reduced government
intervention and the promotion of market-oriented reforms. While this can enhance
economic efficiency, it may also lead to a decline in the capacity of the state to regulate
and provide public goods. The role of the government in addressing social and
environmental issues may be diminished, potentially resulting in negative externalities
(Harvey, 2005).
 Environmental Implications: Neoliberal policies' focus on economic growth and
market forces may not adequately address environmental concerns. Critics argue that
the pursuit of profit may lead to environmental degradation and resource exploitation,
without sufficient regulation or consideration of sustainability (Kallis, Kerschner, &
Martínez-Alier, 2012). Balancing economic growth with environmental preservation is
crucial for sustainable development.
It is pertinent to note that the implications of neoliberal policies can vary across nations and
regions, depending on their specific contexts and implementations. Furthermore, the
consequences can be influenced by factors such as social, political, and historical contexts.
The implementation of neoliberal policies often involves two key components: deregulation
and privatization. Deregulation refers to the reduction or removal of government regulations
and controls on economic activities, while privatization involves transferring ownership and
control of public assets to private entities. Let's discuss the effects of neoliberal policy on
deregulation and privatization, supported by relevant in-text citations and references.

EFFECT OF NEOLIBERAL POLICY ON DEREGULATION:

 Economic Efficiency: Proponents argue that deregulation promotes economic
efficiency by eliminating unnecessary barriers and restrictions, allowing market forces
to determine prices, allocate resources, and encourage competition (Vickers & Yarrow,
1988). This can lead to increased productivity and innovation.
 Consumer Choice and Lower Prices: Deregulation can enhance consumer choice by
introducing competition in previously regulated industries. Supporters contend that
increased competition can lead to lower prices and improved quality of goods and
services (Joskow, 2005). For example, deregulation in the telecommunications industry
has been associated with increased competition, lower prices, and expanded services
(Fink, Mattoo, & Neagu, 2005).
 Risk of Market Failures: Critics argue that deregulation can lead to market failures,
such as monopolistic practices, information asymmetry, and inadequate consumer
protections. These failures can result in reduced competition, price manipulation, and
potential harm to consumers (Stiglitz, 2010). The financial crisis of 2008, partially
attributed to deregulation in the financial sector, serves as an example of the risks
associated with excessive deregulation (Krippner, 2012).

EFFECT OF NEOLIBERAL POLICY ON PRIVATIZATION:

 Efficiency and Cost Reduction: Proponents argue that privatization can improve the
efficiency of public services and reduce costs by introducing market competition and
incentivizing profit-driven performance (Shirley, 1999). They claim that private
ownership can lead to better resource allocation and management.
 Quality and Innovation: Privatization is often associated with claims of improved
service quality and innovation. Advocates contend that private ownership creates
incentives for investment, technological advancements, and improved customer
satisfaction (Megginson, 2005).
 Social Equity and Access: Critics raise concerns that privatization can exacerbate
social inequalities and limit access to essential services. Private companies may
prioritize profitable areas or neglect underserved regions and populations, potentially
leaving vulnerable groups without adequate services (McDonald, 2002).
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