Neoliberalism: What is it, who promoted it and why do some deny that it exists?

Its name has been stirring the debate in Latin America for decades, although for many it is difficult to define it and for some it does not even exist: neoliberalism, the word that marks an era.

Just look at the electoral campaign of Chile, the Latin American country where neoliberal ideas have had the most influence, to see how this concept still divides waters in the region.

“If Chile was the cradle of neoliberalism, it will also be its grave“, has said Gabriel Boric, the leftist candidate who will face the radical rightist Jose Antonio Kast in the presidential ballot on December 19.

Kast, for his part, Raises flags of the neoliberal creed like the free market or the minimal intervention of the State in the economy, and in his government program he cites one of the greatest references of this line of thought: the American economist Milton Friedman.

However, Kast’s program lacks any explicit mention of neoliberalism.

This reflects a trend beyond Chile: while the left refers to neoliberalism in a derogatory way, it is rare to hear others claim it by name, as Friedman did 70 years ago.

Some experts argue that this economic orientation that had its heyday in the 1980s and 1990s began to lose its projection since the global financial crisis of 2008.

“Neoliberalism is on the defensive”, Says Eduardo Giannetti, a prominent Brazilian economist and philosopher, to BBC Mundo.

But what exactly is neoliberalism and why is it so controversial?

One adversary, different schools

As its name suggests, neoliberalism emerged in the 20th century as an effort to renew classical liberalism. The origin of the term dates back at least to a meeting of liberal thinkers in 1938 in Paris.

Its promoters were opposed to Keynesian economic policies that give the state a key role to overcome crises or recessions.

The Austrian economist Friedrich Hayek, another great reference of the neoliberals, argued in his work “Road to Serfdom” (1944) that state planning of the economy leads to totalitarianism.

Hayek founded in 1947 together with other intellectuals the Mont Pèlerin Society, a center of economic thought to defend after the Second World War liberal values ​​such as the market economy, the open society or freedom of expression.

Neoliberal ideas have gained traction in particular since the 1970s, when stagflation and other economic problems in the West cast doubt on Keynesian policies, and many looked for alternatives.

Conservative governments of Margaret Thatcher in the United Kingdom (1979-1990) and Ronald Reagan in America (1981-1989) adopted policies defended by neoliberals, such as the reduction of the State and the strict control of the supply of currency to lower inflation.

However, neoliberalism is far from being a uniform doctrine.

Inside there were different schools such as the Austrian of Hayek and Ludwig von Mises, the Chicago school of Friedman and the Virginia school of James Buchanan, with important differences between them, for example in monetary policy.

All this complicates the definition of neoliberalism, a difficulty that for some is exacerbated for the strong reproaches he usually receives.

“Although the term neoliberalism remains commonplace, its use to cover a lot of things that people see wrong in the world makes it difficult to define it clearly,” says Ross Emmett, director of the Center for the Study of Economic Freedom at the United States. Arizona State University, to BBC Mundo.

An exportable model?

Critics of neoliberalism claim that putting the market at the center of priorities, deregulating the economy and dismantling the welfare state contributed to widening gap between the richest and the poorest in various countries.

Social inequality, they add, brought growing problems for democracy and individuals.

On the political level, the left has often sought to demonize neoliberalism. “It is the road that leads to hell,” then-Venezuelan President Hugo Chávez said in 2002.

But proponents of Hayek and Friedman’s ideas argue that Chávez and the rest of the left failed to show a successful new alternative.

Others simply deny existence of neoliberalism.

“Neoliberalism? It doesn’t exist,” economist Daniel Altman wrote in The New York Times in 2005, arguing that rich countries had never really opened up to free trade.

“There is no new or old freedom, there is freedom or there is not, therefore the neoliberal concept does not make sense“Said the ultra-liberal Argentine economist Javier Milei en August, before being elected deputy this month.

Nevertheless, Argentina was after Chile one of the symbols of neoliberalism in the 1990sWhen the Carlos Menem government privatized everything it could, it deregulated the economy and adopted the one-to-one parity of the peso with the dollar.

These changes were supported by the International Monetary Fund (IMF), which presented Argentina as a model until December 2001, when the country entered a fierce financial crisis and a US $ 144 billion debt default, the largest in history. .

James Boughton, who worked at the IMF and was its historian between 1992 and 2012, denies that the institution had “an extreme view of neoliberalism” but admits that it encouraged privatization and free market policies in countries of the former Soviet Union or Latin America.

“The IMF promoted all those things, so in that sense it can be said that they were promoting neoliberal policies”, dice Boughton a BBC Mundo.

Giannetti considers “a serious error” of the neoliberals to want to implant recipes from developed countries Latin America, where there are problems of poverty and lack of human capital to which the classical liberals were more sensitive.

“It is very curious that the only country in Latin America that made a consistent and profound experiment in neoliberal economic policy, which is Chile, I have done it about a dictatorship”, He says.

It refers to the military regime headed by Augusto Pinochet (1973-1990), who was advised by Friedman himself and handed over the management of the Chilean economy to the Chicago Boys.

In recent decades, Chile maintained free market policies in democracy that allowed it to achieve a GDP per capita similar to that of European countries and lower poverty rates.

But the Chilean model entered into crisis with the massive protests that erupted in 2019 against inequality and for social reforms. The direction of the country It will now be determined by the result of the December presidential ballot and an ongoing constitutional reform process.

“With the exception of Chile“, Advierte Giannetti,”neoliberalism in the governments of Latin America was very inconsistent, ineffective, because there were no reforms that would be neoliberal, for better or worse.l”.