Demystifying Neoliberalism

♠ Posted by Emmanuel in , at 3/14/2007 12:33:00 AM
David Brooks' recent column in the New York Times has set off a controversy in the blogosphere over whether, indeed, neoliberalism is "dead." It appears to me that much of the confusion arises because neoliberalism is defined in various ways. In particular, the rest of the world seems to understand the term differently from how it used in America. In this post, I will offer an explanation that may clarify the matter. To be sure, not everyone will agree with me, but I'd like to chip in my two cents' worth as it may help others grasp the term better.

Like many other things political, neoliberalism is a contested term. Our friends Stateside associate neoliberalism with Clinton's market-friendly policies involving marketization, privatization, and deregulation. In other words, these are elements of John Williamson's (in)famous "Washington Consensus." Such policies are often classified under "Rubinomics" after the former US Treasury Secretary Robert Rubin. My argument though is that while neoliberal policies may have entered the limelight during the Clinton years, it is incorrect to associate the term with leaning left on the political spectrum. Rather, the "liberal" part of the term stems from being an economic liberal (favoring lower taxation rates, fiscal prudence, free trade, etc.) rather than being a political liberal. The"new" part comes from neoliberalism being a modernized take on the liberal principles first set forth by the likes of Adam Smith and David Ricardo. Furthermore, you can think of "neoliberalism" as the project promoting "neoclassical" economics as articulated by the likes of the late Milton Friedman and others from the Chicago School.

This definition enables a better differentiation between neoliberalism and neoconservatism as well. If neoliberalism concerns being an economic liberal, then neoconservatism concerns being a political conservative--among other things, favoring traditional values and the deployment of a muscular foreign policy. As such, you can be an economic neoliberal and a political neoconservative at the same time. A case in point is President Bush. USA Today recently ran into the same trap of identifying neoliberalism with leaning left on the political spectrum as he visited Latin America:
Only in Latin America could President Bush be accused of being a neo-liberal.

"Neo-liberalism" is one of the names given to the free trade, market-oriented economic approach Bush is promoting throughout Latin America. It's a flashpoint for Venezuelan President Hugo Chavez and other U.S. critics who say free trade has only increased regional poverty.

Bush spent part of Saturday discussing trade with Uruguayan President Tabare Vazquez, seeking to "spread the benefits of investment" in both nations. The day before, in Sao Paulo, Brazil, Bush said open markets help promote initiatives to improve areas such as health care and education.

"The most effective anti-poverty program is trade," Bush said in Brazil.

The rest of the world regards neoliberalism in the terms I've just described--it concerns the propagation of economics favoring free-market principles instead of being a political liberal or conservative. Therefore, as we understand it, Bush is indeed neoliberal when he promotes the gospel of free trade, market access, foreign investment, and the rest. Yet, at the same time, he is also a neoconservative as he favors active projection of US military might to further American interests--but that is a story best saved for another post. Suffice to say, with the leader of the world's most powerful nation actively promoting neoliberalism, it cannot be called dead. While its popularity may be fading, it is by no means a goner.