TOPIC2: IDEAS SHAPING THE GLOBAL ECONOMY
What do you understand by the term neo-liberalism? Discuss the author's critique of the neoliberal analysis of the role of the state. What does he present as an alternative "institutional political economy"?
Neo-liberalism is a set of economic policies that have become widespread during the last 25 years approximately. The term stems from the original "liberal" economics of Adam Smith. Smith argued that markets work best when there is minimal interference from government, and that neither government, nor market players with any momentous share of power, should be authorised to interfere with the "unseen hand" of the free market. Something that also the neoliberal approach shares as a common idea. Although the word is not that commonly heard in the United States, you can evidently see the effects of neo-liberalism, as the rich grow richer and the poor grow poorer. In addition to this, neo-liberalism has been imposed by powerful financial institutions like the International Monetary Fund (IMF), the World Bank and the Inter- American Development Bank.
The capitalist crisis over the last 25 years, with its retreating profit rates, inspired the corporate elite to rejuvenate economic liberalism. That's what makes it 'neo' or new. Neo-liberalism is more a phenomenon of the rich western market democracies, than of poor regions. "For neoliberalists the perfect human being is comparable to Robinson Crusoe who has only limited power and alternatives. He is solely restricted by his natural surrounding and not by any other human being. In this situation he can act absolutely independent" (Friedman 1962: 12).
"In economic terms the state is part of the problem, not the solution." (Green, 1995: 245). When it comes to defining what is government intervention problems instantly occur. The only vindicated intervention of the state in the...