THE CONTEMPORARY

WORLD
SECOND SEMESTER
A.Y. 2023-2024
NEOLIBERALISM
The high point of global
Keynesianism came in the mid
1940s to the early 1970s. During
this period, governments poured
money into their economies.
As demand increased, so did the prices
of these goods. Western and Asian
countries like Japan, accepted this rise in
prices because it was accompanied by
economic growth and reduce
unemployment.
Keynesian economists
believed that all this was a
necessary trade-off for
economic development.
In the early 1970s, the prices of oil
sharply, and affected the Western
economies that were reliant on oil.
The markets crashed in 1973-174. A
phenomenon called “stagflation”
happened.
STAGFLATION – a decline in
economic growth and
employment (stagnation), and
sharp increase in prices
(inflation).
Economists such as Friedrich Hayek and
Milton Friedman argued that the
governments’ practice of pouring money into
their economies had caused inflation by
increasing demand for goods without
necessarily increasing supply.
A new form of economic thinking was
emerged labeled as NEOLIBERALISM.

NEOLIBERALISM – refers to market-

oriented reform policies such as eliminating
price controls, lowering trade barriers, and
reducing state influence in the economy.
They made codified policies
called Washington Consensus. Its
advocates pushed for minimal
government spending to reduce
government debt.
 THE GLOBAL FINANCIAL
CRISIS AND THE CHALLENGE
TO NEOLIBERALISM
Neoliberalism came under significant
strain during the global financial crisis of
2007-2008. The crisis can be traced back
to the 1980s when the US systematically
removed various banking and investment
restrictions.
This dangerous cycle reached a
tipping point in September 2008,
when major investment banks like
Lehman Brothers collapsed. As a
result, national banks failed to
refinance their loans.
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