Neoliberalism and market supremacy are largely interchangeable terms, meaning an economic policy that is set by what people choose to buy
The term ‘neoliberalism’ has been overused, sometimes as a synonym for capitalism. Kean Birch’s article, Neoliberalism: The Whys and Wherefores … and Future Directions, contextualised and defined the term:
“neoliberalism is usually associated with a number of influential thinkers, politicians, and policymakers from the last century, including Friedrich Hayek, Milton Friedman, James Buchanan, Margaret Thatcher, Ronald Reagan, and Alan Greenspan. These neoliberals claim that the market is the most efficient and moral institution for organizing human life, meaning that it should replace all other institutions (e.g. family, state, community, and society) as the main mechanism for creating, promoting, and maintaining social order – in particular, it should replace socialism and collectivist planning”.
This book uses the above definition. There is also a body of literature on the subject, including a Handbook of neoliberalism. It is an individualist set of values, which assumes that freedom from institutional constraints will benefit everybody.
Under neoliberalism, market forces reign supreme over any other consideration of what best serves the common good. It asserts that economic growth is maximised by having free markets in goods and services (3.3.2), labour (3.3.3) and finance (3.3.4). It advocates minimum regulation (3.3.1), and it supports globalisation (3.4.2) and free trade (3.5.4). Michael Sandel though, in his book What Money Can't Buy, pointed out that markets are not the best way of taking political decisions about things that affect people's lives.
Neoliberalism and market supremacy give individuals the freedom to make their own economic decisions, but this is of more benefit to corporations than to the population as a whole. George Monbiot’s article, The Problem with Freedom, pointed out that it might mean cutting regulations that safeguard people’s quality of life to increase corporate profits at the expense of society.
Milton Friedman is credited with giving neoliberalism the traction that it has had since the 1980s, making it an accepted doctrine among many economists and politicians. Scott Sumner, for example, wrote about “The Unacknowledged Success of Neoliberalism”.
That perspective has been robustly challenged, though. Martin Jacques, for example, argues that it has failed and writes of “The death of neoliberalism and the crisis in western politics”. And Martin Wolf’s new book, The Crisis of Democratic Capitalism, claims that:
“We are living in an age when economic failings have shaken faith in global capitalism. Political failings have undermined trust in liberal democracy and in the very notion of truth. The ties that ought to bind open markets to free and fair elections are being strained and rejected, even in democracy's notional heartlands. Around the world, democratic capitalism, which depends on the determined separation of power from wealth, is in crisis.”
Another serious criticism of neoliberalism and market supremacy is that the associated lack of regulation has delivered economic instability (3.5.5). Unregulated financial markets led to the great recession in 2007/8, and some adjustment is needed to correct that weakness.
Simon Wren-Lewis has pointed out that neoliberalism is biased in favour of capital. Its proponents “were selective [in their use of economic ideas] in order to persuade”:
“Perhaps neoliberals like to stress markets because a key part of any market are the corporations or companies that produce goods, and they want to support the interests of these corporations or companies relative to the interests of both workers and the state. I have argued that a better way to describe neoliberalism in practice (policies pursued in the US and UK by Reagan and Thatcher and subsequent governments) is that neoliberalism uses concepts from economics to promote the interests of capital (corporations and companies).”
The following sub-sections explore how to correct that bias. An economy needs to be regulated to deliver economic fairness (3.5.9.2) and to protect other aspects of people's lives (3.5.9.3).
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).