Reviewed by Sep 30, 2020| Updated on
Neoliberalism philosophy and model of this policy emphasizes the importance of competition in the free market. Although there is considerable debate about the defining features of neoliberal theory and action, it is most commonly associated with the ideology of laissez-faire (abstention by governments from interfering in the working of the free market).
In particular, in terms of its belief in sustained economic growth, neoliberalism is often described as a means of achieving human progress, its faith in free markets as the most effective allocation of resources, its insistence on minimal state interference in economic and social relations, and its dedication to free trade and finance.
Neoliberalism is distinct from modern liberalism, although the words are identical. Both have their political origins in the 19th-century classical liberalism, which promoted economic laissez-faire and individual freedom against oppressive governmental power.
This form of liberalism is often identified with economist, Adam Smith, who argued that markets are regulated by an "invisible hand" in The Wealth of Nations (1776) and should, therefore, be subject to minimal government intervention. Yet, over time, liberalism evolved into many different ideologies.
Modern liberalism emerged from the social-liberal tradition, which concentrated on impediments to individual freedom, including poverty and inequality, illness, prejudice, and ignorance which were created by unrestricted capitalism. It could only be mitigated through direct state intervention.
These initiatives began in the late 19th century with pay programs for staff, public funding for schools and hospitals, and restrictions on working hours and conditions, and gradually, by the mid-20th century, included the full range of social services and benefits that define the so-called welfare state.
Starting in 2007, the financial crisis and the Great Recession in the US and Western Europe prompted some analysts and political leaders to resist the insistence of the neoliberals on maximally free markets and instead to advocate for greater government control of the financial and banking industries.