Neoliberalism. Is it finally challenged?

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Great Britain’s vote to leave the European Union was a shock to many around the world especially those who had predicted the risks allied to  Britain leaving the European Union. It led to the downfall of David Cameron but also Brexit politicians like Michael Gove and Boris Johnson while Nigel Farage resigned despite finally achieving what was his life’s cause. US Senator and 2016 Democratic Presidential Aspirant Bernie Sanders says that he fears that it will affect international cooperation. However, his explanation after is one to look at. He says that despite the interconnected nature of the global economy, it does not work for everybody and it’s imperative an alternative is found. It is the same case with the debate over the Trans-Pacific Partnership (TPP) in the US election. The TPP is a trade agreement between 12 countries within the Pacific Ocean that does not include China. US President Barack Obama has supported it but not his successor in Donald Trump and Hillary Clinton (despite advocating for it). The Brexit Vote and opposition of the TPP shows people have had it with the concept that has dominated global economics and politics over the past three decades: Neoliberalism.

What is Neoliberalism? Neoliberalism is a political/economic ideology that supports the value of free market competition. It is highly associated with laissez-faire economic liberalism or pure capitalism. Policies like privatization, fiscal austerity, deregulation, free trade and reduction in governmental spending are all associated with Neoliberalism. The term was used by economic theorists like Ayn Rand and Friedrich Hayek. These policies were first used in the 1970s under the dictatorship of Augusto Pinochet in Chile. He became President of Chile in a coup supported by the United States and implemented many neo liberal policies with the ‘Chicago Boys’ (Chilean economists who were trained in the Department of Economics of the University of Chicago under Milton Friedman). These were successful in making the Chilean economy to grow but increased economic inequality and led to the Monetary Crisis of 1982.

The 1980s saw these policies furthered by the twin towers of  US President Ronald Reagan and UK Prime Minister Margaret Thatcher. They reduced government spending on programs, busting trade unions, tax cuts for the rich, deregulation and outsourcing of jobs. These policies have continued today even with left-leaning politicians like Bill Clinton and Tony Blair. International organizations like the International Monetary Fund (IMF), the World Bank, the European Union and the World Trade Organization (WTO) all impose these neo-liberal policies but without democratic consent. This is the same when it comes with trade deals. Criticism of the TPP is the secrecy of the deal as negotiations have happened behind closed doors with little information available to the public.

Supporters of Neoliberalism would say that these policies helped countries in the ‘global south’ to develop at a rapid rate. Over the past two decades, countries like South Africa, India, China, Brazil have become emerging markets with these policies as their economic and political influence has increased. Another is bringing people out of extreme poverty. Companies moving to developing countries gives more opportunity for those in extreme poverty to move up in making a decent living.

However, there have been a lot of critics against Neoliberalism from both the left and the right. Many believe that these policies were critical in making the Global Recession of 2008 to happen from deregulation in the financial sector under Clinton and expanded under George W. Bush. Regulations were implemented under Barack Obama but many predict that a global recession would happen again. Others say that they are unstable and provide periods of economic boom when the economy goes very well and an economic bust that lowers people’s confidence on the economy. Further criticism of neoliberalism include the shortfall in protection for workers and the environment, exploitation, further corporate power, economic inequality, mass incanceration of the poor and anti-democratic.

The Brexit Vote and the rise of Bernie Sanders and Jeremy Corbyn explains why people particularly the young are dissatisfied with the current economic and political situation that they are in as they will be the first generation to have a lesser standard of living than their parents. Recently, the IMF warned of further inequality if these policies are continued. There is a high possibility that these policies will continue under Hillary Clinton and UK Prime Minister Theresa May. With more people standing up to corporate power and greed around the world and looking for an alternative to the current situation it is fair to ask if Neoliberalism is finally challenged and under threat? My answer is Yes.

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