Neoliberalism - What is it? characteristics, principles, origin, and more

Neoliberalism - What is it? characteristics, principles, origin, and more
Posted on 10-03-2022


Set of political-economic thoughts based on classical economic theory.

What is neoliberalism?

Neoliberalism is a set of political-economic thoughts based on classical economic theory, which maintains that the mercantile society must act freely and autonomously, without any State intervention.

This theory maintains that the State should not be present in any field where it can interfere with the free development of the economy, thus defending the absolute freedom of individuals.

Neoliberalism firmly supports the theory of reinforcing the private sector over the public sector, since it considers that the latter has greater productivity, thus opposing any ideology of collectivity with respect to social resources.

Characteristics of neoliberalism

The main characteristics of neoliberalism are the following:

  • It defends that the mercantile company acts in a totally free and autonomous way.
  • It puts the private sector before the public.
  • He rejects the presence of the State in the market economy.
  • It considers that free-market events autonomously solve the social and economic problems of society.
  • He considers that international aid solves the problems derived from extreme poverty.
  • Consumption dynamics are the balance that balances market trends.
  • It encourages the State to only fulfill its fundamental functions.
  • It proposes to reduce public spending by reducing taxes.

Principles of neoliberalism

The principles of neoliberalism are:

  • A sustainable balance is the balance of payments, a requirement to generate confidence in foreign investments and therefore finance the internal economy.
  • Price stability is considered as the ideal objective to maintain the balance of the economy.
  • External opening to world economies to promote internal growth.
  • The market economy promotes the free movement of resources and productive activities.
  • The null intervention of the State in economic issues, so that distortions are not generated in the balanced balance of the market.
  • The promotion of private investment is considered the driver of economic recovery.

Origin of neoliberalism

In 1947, an organization made up of a large group of businessmen and liberal economists called the Mont Pelerin Society (MPS) was founded in Switzerland. This organization was founded by Friedrich Hayes, with the aim of preserving human rights that were threatened by the spread of ideologies.

This organization managed to expand through the faculties and academic departments. At the University of Chicago,  for example, their ideologies were spread in such a way that they did not seem like political propaganda and had great validity; thus it was that several thinkers, journalists, teachers, businessmen, among others; shared this ideology and made it known to all potential stakeholders.

Neoliberalism and liberalism

As for the differences, neoliberalism abolishes the State and maintains that it only fulfills its fundamental functions, staying out of the economy. Liberalism defends the free market and the total autonomy of individuals, promoting private companies, but without completely suppressing the State.

Among the similarities of both models we can find that:

  • Both currents come from primitive liberalism, which in turn arises from the thought of Adam Smith.
  • Both streams support free trade.
  • Both currents support the idea of ​​reducing public spending, thus promoting the private sector of the economy.
  • Both currents superimpose the private sector on the public.

Neoliberalism and capitalism

The difference between the two models lies in the fact that neoliberalism suppresses the State from the economic system, while capitalism gives rise to an intervention in the economy, although not more.

Regarding their similarities, both currents defend free trade, support private companies and defend the freedom of the individual.

examples of neoliberalism

Some examples of activities of neoliberalism are listed below:

  • The reduction of taxes in the private sector.
  • The privatization of companies that used to belong to the government.
  • The reduction of social subsidies or state aid.


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