In the three decades following the Second World War, egalitarian liberalism underpinned an era of remarkable economic performance across much of the industrialized world. High growth rates, rising wages, low unemployment, modest inflation, and expanding systems of social security characterized what has often been described as the “golden age” of controlled capitalism. By the early 1970s, however, this postwar settlement began to unravel under the weight of a series of profound economic disruptions.
The economic crises of the 1970s exposed vulnerabilities that Keynesian policy frameworks struggled to address. External shocks—most notably the oil crises of 1973 and 1979—dramatically increased energy prices, triggering inflationary pressures across advanced economies. At the same time, these economies experienced the unprecedented combination of rising unemployment and high inflation, a phenomenon that came to be known as “stagflation.” Declining productivity growth and falling corporate profits further eroded confidence in state-led economic management. Together, these developments undermined the credibility of egalitarian liberalism and opened the door to a rethinking of liberal political economy.
It was in this context that a new generation of liberals advanced what came to be known as neoliberalism. Drawing inspiration from classical liberal doctrines, neoliberals sought to adapt older ideas about free markets and limited government to the emerging conditions of globalization. While neoliberal thinkers and policymakers differed in emphasis depending on national and institutional contexts, they shared a core commitment to market-based solutions, private enterprise, and the expansion of free trade on a global scale.
By the late 1970s and early 1980s, neoliberalism had moved from the margins of economic debate to the center of political power. Celebrated by its advocates and fiercely opposed by Keynesians, neoliberalism rapidly reshaped economic policy agendas in the United States, the United Kingdom, and beyond. Its proponents argued that excessive government regulation, expansive public spending, and high trade barriers were the primary causes of inflation, stagnation, and declining competitiveness in the industrialized economies of the 1970s. Once this diagnosis gained widespread acceptance, it was a short step to applying the same logic to the problems of economic development in the global South.
The result was the emergence of a global neoliberal development agenda. Central to this agenda were structural adjustment programs and international free-trade agreements designed to liberalize markets, privatize state-owned enterprises, reduce public spending, and open national economies to global competition. Powerful international financial institutions, particularly the International Monetary Fund (IMF) and the World Bank, became key vehicles for the dissemination of neoliberal policies. In exchange for urgently needed loans, heavily indebted developing countries were required to implement far-reaching market reforms, often with significant social and political consequences.
Neoliberalism’s global ascendancy was further accelerated by major geopolitical transformations. The collapse of the Soviet Union in 1991 eliminated the most prominent ideological alternative to market capitalism, while China’s rapid embrace of market-oriented reforms signaled the adaptability and apparent universality of the neoliberal model. By the 1990s, neoliberalism had achieved an unprecedented level of dominance, shaping economic governance at national, regional, and global levels.
In recent decades, however, neoliberalism has come under sustained and increasingly forceful criticism. Financial instability, widening inequality, social dislocation, and environmental degradation have all been linked by critics to the excesses of market fundamentalism. The global financial crisis of 2008–2009 marked a particularly significant challenge, revealing deep structural weaknesses in an economic system built on deregulated financial markets and global capital mobility.
Yet neoliberalism remains resilient. To assess whether it is in terminal decline or merely undergoing transformation, it is essential to examine its core ideas, internal variations, and policy applications in detail. Only by understanding the principles that have sustained neoliberalism’s influence can we fully grasp the magnitude of the challenges it now faces—and the possibilities for alternative economic futures.
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