Neoliberalism Definition, its Advantages and Characteristics

We explain what neoliberalism is and what its characteristics are. In addition, the advantages and disadvantages of this current.

What is neoliberalism?

Neoliberalism is an economic and political current associated with capitalism . He argues that the economy should be governed by free trade, be deregulated and privatized, that is, with less intervention from State policies .

The term was promulgated in 1938 by the German economist Alexander Rüstow and gained particular popularity from 1980 on, after leaders such as Ronald Reagan (USA), Margaret Thatcher ( England ) and economist Milton Friedman (USA). ) enunciated it in their speeches and in practice, in an attempt to reformulate classical liberalism and to emphasize the capitalist system.

Neoliberalism considers that the intervention of the market state promotes inefficiency through regulations on industries , high taxes and public services that are not subject to market competition .

The neoliberal system aims to capitalize on the actions of the State and generate greater production with less social investment. This premise falls into a dilemma because in practice it is not fair or equitable.

Origin of neoliberalism

Neoliberalism as an economic philosophy emerged in 1930 , faced with the need to rethink classical liberalism, which was not successful, and with the economic exhaustion of the capitalist model.

From theory, classical liberalism defended individual freedom , the free market , equality before the law , gender equality, capitalism, private property , democracy and the rule of law. But in practice, corruption and lack of morals did not allow this theory to be fully implemented.

The capitalist model defended the circulation of large amounts of capital at a massive level, which implied an increase in inflation and a destruction of the economy. From 1929 there were strong economic crises worldwide , such as the Great Depression.

The main defenders of neoliberalism considered that the monetary policies based on the model of John Keynes and the classical liberal current were the causes of the world crises. Based on these foundations, neoliberal conservatives ran for power again , also starting in the 1980s.

Characteristics of neoliberalism

The neoliberal system requires reducing State intervention with a lower tax burden and a lower legislative restriction on the market so that, in this way, large companies (which represent a minority capitalist group) can exercise control of businesses , industries , production and internal and external trade.

Among the main characteristics of neoliberalism are:

• Privatization . It consists in that services such as education , health, security, banking, among others, are administered by private entities instead of being regulated by the State. In other words, access to services is restricted only to those who have enough money . People who do not have access to a proper education will not be able to progress in their work and professional life. Therefore, the privatization of all services only promotes benefits for a minority and a lack of quality of life for a majority.
• The free market . It consists in that the prices of goods and services are regulated based on supply and demand , in a market free of restrictions by the State. He defends the opening of imports and control by the private sector. If this modality is not moderate and regulated, it contributes to a lower development of the country's production and only enriches those who can import and sell this merchandise at the national level. It does not promote the commercial growth of the rest of the producer sector, which becomes less and less competitive.
• The competition. It consists of promoting competitiveness in all employment relationships, both in the production system and in the supply of services, in order to obtain a greater variety of options in the market. The problem arises from the lack of regulation to establish limits on commercial actions, which can lead to unfair competition at the cost of labor exploitation, deceptive dissemination, among others.

Advantages and disadvantages of neoliberalism

The main characteristic of the neoliberal system is that only a minority of the population has access to benefits . From theory, it is proposed as an adequate proposal, but put into practice the model has shown that it did not work efficiently or fairly for the entire population , especially due to corruption.

The main advantages of the neoliberal model are:

• The free market. It promotes trade without borders and with few State restrictions to trade with different governments .
• The competition. It promotes the variety of products and services, which generates a context of continuous improvement to stand out in the market compared to the rest of the offers.

The main disadvantages of the neoliberal model are:

• Inequality. It promotes a set of economic strategies that have social impact and that generate a great class difference . For example, only those who have access to private services, such as education, will be able to achieve better professional development. Most of those who do not have access to these types of services cannot progress.
• The monopoly . It encourages power to be controlled by an elitist minority that monopolizes productivity and the supply of services. Those who do not have or cannot generate money, cannot carry out their own businesses, but they are necessary as labor for the productive system.
• The economic problems. It promotes an increase in prices without control and subject to the deliberate laws of the market in the hands of the monopolies. In addition, a decrease in wages is generated due to the great demand for work, so that labor becomes cheaper.
• Environmental problems. Promotes obtaining the highest profit in the shortest possible time. In many cases this involves not respect the processes and standards established for the care of resources and the environment , of the exploitation of non - renewable resources , the quality of life of people or responsible industrial development.

Opponents of neoliberalism

The organizations popular social, the political parties of left and currents that are based on ideas , socialists and communists are the main opponents of the neoliberal philosophy . The labor unions that see their principles and acquired rights threatened, after so many years of struggle.

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