Neoliberalism: What It Means, and Whether the Accusation Holds
An accessible guide to neoliberalism: the four senses of the word, what Hayek and Friedman actually argued, how the doctrine became a policy regime, and how far the evidence supports the accusation.
In August 1938, a group of liberal intellectuals met in Paris to work out what had gone wrong with liberalism. The Great Depression had discredited the economics they had inherited, fascism and Soviet communism were both rising, and the meeting's premise was that the laissez-faire liberalism of the previous century — the doctrine that markets should be left to run themselves — had failed. Their host was the French philosopher Louis Rougier; the book at the centre of the discussion was Walter Lippmann's An Inquiry into the Principles of the Good Society, newly translated into French. The participants needed a name for the position they were trying to build. The German sociologist and economist Alexander Rüstow supplied one: neoliberalism. 1
The word has had a strange career since. It is now used mostly by the people who oppose what it names, not by the people it describes. In a study of 148 journal articles published between 1990 and 2004, the political scientists Taylor Boas and Jordan Gans-Morse found that the term was usually left undefined even by scholars who leaned on it, appeared almost only in work critical of free markets, and had come to carry so many things at once that it worked as what they called "a conceptual trash heap". 23
The version most people meet in argument — a market-first programme that is either a scandal or a cure — is not the version its inventors described. Four of the word's senses are in circulation at once, and an argument that slides between them can be sound in one and false in the next.
The word's four jobs
The term does at least four distinguishable jobs, and they do not agree with one another.
| Sense | What it names | Who means this by it |
|---|---|---|
| A doctrine | A political philosophy holding that a society's institutions should be robustly liberal and capitalist, "supplemented by a constitutionally limited democracy and a modest welfare state" — the shared position the Stanford Encyclopedia of Philosophy ascribes to Hayek, Friedman and Buchanan. 4 | Philosophers and historians of political thought |
| A policy package | More competition, through deregulation and opening domestic markets — financial ones included — to foreign competition; and a smaller state, through privatisation and limits on deficits and public debt. 5 | Economists, development institutions, financial press |
| A mode of governing | Rule by market metrics: every field treated as a market, every entity governed as a firm, and persons understood as human capital that must tend to its own value. 6 | Critical theory, sociology, social-policy research |
| An epithet | A general word of disapproval for market-friendly policy and the people who promote it. 2 | Political argument at large |
Senses one and two contradict each other about the state, which is not a small matter.
What the doctrine actually said
The colloquium's own formula would embarrass anyone who now uses the word as shorthand for letting markets alone: neoliberalism meant "the priority of the price mechanism, free enterprise, the system of competition, and a strong and impartial state". 7 The room split even then: Ludwig von Mises and Jacques Rueff held out for strict laissez-faire, while Rüstow, Lippmann and Wilhelm Röpke wanted a social liberalism that used legislation to build markets. 1 The war scattered the project, and Hayek restarted it at Mont Pelerin in Switzerland in 1947, where the founding group adopted a statement of aims that opens: "The central values of civilization are in danger." The diagnosis blamed a "decline of belief in private property and the competitive market"; the remedy was "intellectual argument". 8
What the founders argued is best read as a claim about knowledge rather than about greed. Hayek's case against central planning was that the information needed to run an economy is never gathered in one place: the "data" from which economic calculation starts, he wrote, "are never for the whole society 'given' to a single mind which could work out the implications". Prices carry what no planner can collect: when a raw material grows scarce, he observed, tens of thousands of people were made to use it more sparingly "without an order being issued, without more than perhaps a handful of people knowing the cause." 4
The movement's own conclusions were more moderate than its reputation. Milton Friedman wrote in 1951 that neoliberalism would "substitute for the nineteenth century goal of laissez-faire as a means to this end, the goal of the competitive order", which required a state to "police the system, establish conditions favorable to competition and prevent monopoly, provide a stable monetary framework, and relieve acute misery and distress". 7 Hayek set aside "the old formulae of laissez faire" as an inadequate criterion for what a free system admits, and called a minimum income for everyone "a necessary part of the Great Society". Friedman's best-known antipoverty proposal was a negative income tax — cash for people below a set income, financed by taxes on everyone else. 4
The doctrine was constructivist, which is why sense three is a different question rather than a distortion of sense one: Thomas Biebricher's summary is that neoliberalism "explicitly addresses the noneconomic preconditions of functioning markets", and Quinn Slobodian's that its authors "saw the intellectual project as finding the right state and the right law to serve the market order". 4
How the doctrine became a regime
The first large-scale test ran under a dictatorship. After the 1973 coup in Chile, the Chicago Boys — economists first sent from Chile to Chicago in 1955 — were given real influence, and through the later 1970s they privatised state enterprises, deregulated and cut trade barriers, before extending competition into labour relations, pensions, health and education in 1978. 7
That experiment is why the word is contested rather than settled. Inflation fell from over 600 per cent in 1974 to below 10 per cent on the eve of the 1982 crisis. Wages for the working class were cut and inequality widened, and Chile took the worst bust in Latin America in 1982; poverty rose from 17 per cent of the population in 1969 to 45 per cent in 1985 while education, health and housing budgets fell by more than 20 per cent on average. Friedman called the period an "economic miracle"; the geographer David Harvey called Chile "the first experiment with neoliberal state formation". 57 Hayek read the sequence as economic freedom gradually forcing the dictatorship toward democracy; the Chilean scholars Javier Martínez and Álvaro Díaz attribute the transition instead to mass rebellion. 7
The policies travelled from there. Margaret Thatcher's government cut taxes, reformed the exchange rate, deregulated and privatised from 1979; Ronald Reagan's administration cut income taxes and deregulated finance; and by the 1990s one summary could hold that "Reagan, Thatcher, Clinton, and Blair all adopted broadly similar neoliberal beliefs". 7 The movement's centre of gravity had moved too: by the 1970s, on one standard history of the period, neoliberal thought — Friedman's included — opposed nearly all state interference in the economy. 7 The name that then spread through development policy was coined by a participant rather than an opponent. John Williamson invented "the Washington Consensus" in 1989 as ten reforms he thought Washington institutions agreed Latin America needed, and later opposed how the list was used: "Little did it occur to me that fifteen years later I would be asked to write about the history of a term that had become the center of fierce ideological controversy." 9
Where the fight actually is
| Position | Its claim | What it answers |
|---|---|---|
| Recent archival histories (Slobodian, Biebricher, Whyte) | The slogan has become a research programme; the doctrine is as analysable as conservatism or socialism. 4 | The charge that the word has no content |
| Boas and Gans-Morse (2009); Rajesh Venugopal (2015) | In practice the term is undefined, used asymmetrically, and stretched across incompatible referents. 34 | The claim that the word is doing analytic work |
| The Stanford Encyclopedia entry | Treating neoliberalism as an ethos of market life is an inadequate description; its proponents argued about institutional design. 4 | Brown's reading of neoliberalism as a governing rationality. 6 |
| The IMF's own staff (2016) | Narrowed to two specific policies, the record is unfavourable: growth benefits hard to establish, inequality costs prominent, inequality hurting growth. 5 | The growth promise used to justify the package |
| Hickel; Gottschalk; Slobodian | The state was retasked, not withdrawn: policing and incarceration expanded as services contracted, and zones and havens were built to escape democratic oversight. 47 | The story that neoliberalism means less government |
| Nancy Fraser; Elizabeth Anderson | The damage runs past distribution: feminism co-opted into a market meritocracy, and the firm as a "private government" over the people it employs. 4 | Accounts that treat the harm as purely economic |
The empirical case is strongest where it is most specific. Ostry, Loungani and Furceri confine themselves to capital-account liberalisation (freeing money to move across borders) and fiscal consolidation — austerity — and report that since 1980 there have been about 150 episodes of surging capital inflows across more than 50 emerging market economies, roughly 20 per cent of which ended in a financial crisis. On that basis they reject "one size fits all" for austerity — while recording that expanded global trade "has rescued millions from abject poverty" and that privatisation often lowered costs. 5
The sharpest version of the worry about democracy is not about distribution at all. Brown's argument is that once every sphere is economised, democratic vocabulary loses its referent: liberty becomes market freedom, equality becomes the equal right to compete, and where there are only individual capitals and marketplaces, "the demos, the people, do not exist". 6 The encyclopedia entry accepts the empirical half of this — it cites evidence that policy responds to the richest tenth — while rejecting the claim that market society is what the doctrine was ever about. 4
Laid side by side, the camps agree on more than the quarrel suggests: everyone treats the market as an artefact. Hayek's price system is a mechanism that has to be kept working, Biebricher's neoliberals worry about the conditions markets depend on, and on the critical side the market is a tribunal that has to be installed. The division is over who directs the workshop and how much of life it reaches — which is why sense one and sense two really do contradict each other. The doctrine was a plan for using state power to make competition; the regime its name attached to is usually described by what it cut. The record decides: a dictatorship entrenched the reforms in a constitution its citizens voted to replace by 78 per cent in 2020. 7
Why the word survives
Its use is still contested from both directions. The British journalist Will Hutton has called "neoliberal" "an unthinking leftist insult" that "stifle[s] debate"; the journalist Stephen Metcalf read the IMF's 2016 assessment as putting to rest "the idea that the word is nothing more than a political slur". 7 The label has also been taken up by institutions it was aimed at — the Adam Smith Institute in London switched its self-description from libertarian to neoliberal in 2016 — and attacked from the right by national conservatives who think it dissolves the communities self-government needs. 47
Boas and Gans-Morse drew a narrower conclusion than their findings suggest: the word need not be discarded, but it has to regain a common substantive meaning. Their sharpest evidence is arithmetic. Across 1990 to 2004, "neoliberalism" appeared 49 times in 52 economics journals and 1,154 times in 89 political science, sociology and geography journals. Economists largely stopped using the word; everyone else kept going. 3
A reading frame
Five questions do most of the work on a policy, a headline or an argument.
- Which sense is in play? A claim about a doctrine, a claim about a policy package and a claim about a way of governing are three different claims. Ask which one the sentence needs, and whether the evidence offered would support that one.
- Name the measure. "Neoliberal" usually stands in for something specific: a tariff, a privatisation, a deficit rule, a decision about capital controls. The IMF assessment works because it names two policies and drops the rest.
- Ask what the state did, not how big it is. The commonest error runs in both directions here. Public services contracting while policing and incarceration expand is one arrangement, not a smaller state. 7
- Find the baseline. Chile's poverty rate rose from 17 per cent to 45 per cent in sixteen years, and its inflation fell from over 600 per cent. Both numbers belong in the sentence, or neither does. 7
- Does anyone in it call themselves that? Almost nobody does. 3 That is not by itself a reason to drop the word, but it means the word arrives from outside, and a description the described reject should carry its criteria in the open.
Used this way, the term stops being a verdict and becomes a question about design: which state an arrangement produces, who is inside it, and what it was built to protect. The 1938 colloquium asked a version of that question and named itself in the answer.
References
- 1Wikipedia, "Colloque Walter Lippmann"
en.wikipedia.org
- 2
- 3Boas and Gans-Morse (2009), full text
bpb-us-e1.wpmucdn.com
- 4Stanford Encyclopedia of Philosophy, "Neoliberalism"
plato.stanford.edu
- 5
- 6Dissent, "What Exactly Is Neoliberalism?", an interview with Wendy Brown
dissentmagazine.org
- 7Wikipedia, "Neoliberalism"
en.wikipedia.org
- 8
- 9
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