PHA-Exchange> 38 In preparation of PHA2

[Claudio]

Neoliberalism
 

Much of the period in the West after WWII was influenced by what some call 'Keynesian economics'. Keynesian economics promoted an active role for governments within the market, most notably in pursuit of the goal of full employment. In the 1970s, government intervention in the economy came under attack by a 'new liberalism', which became known as neoliberalism. Neoliberalism has its roots in the theories of classical economic liberalism, which essentially promote a system of free enterprise in the economy. 

 

The US and UK governments were at the heart of the emergence of neoliberalism, which was then propagated globally by institutions such as the IMF and World Bank. Its emergence also coincided with a time when socialism and government intervention were associated with the failed centralised economies of the Soviet Union. 
 
Key tenets of neoliberalism 
 

Neoliberalism promotes the freedom of markets to operate with minimal regulatory interference, including rules that may protect the environment and public health, or govern wage and price controls. It believes that this will lead to greater efficiency, as markets become less distorted by government intervention, which in turn will lead to increased economic growth and social welfare. 

 

While neoliberalism was initially associated with promoting the maximum freedom of movement for finance capital, goods and services in the commercial sector, it now embraces the promotion of a market economy in the social sectors, which used to be considered the responsibility of the state. These include sectors that provide essential services and public goods such as health care, education, social security, policing and prison services. 

 

This has meant a greater emphasis on private financing for such services in the form of 'user fees' or private insurance, and the privatisation of public assets or the out-sourcing of functions and responsibilities to the private sector. In addition, neoliberalism has promoted the introduction of markets and competition into the public sector itself. 

 

Problems with neoliberalism
 

According to classical economy theory, competitive markets lead to increased efficiency and social welfare if:

w        there is a large number of providers who compete with each in order to hold prices down; 

w        information on prices, quality and the likely benefit of product or service utilisation are widely available and understandable to consumers; 

w        there are no externalities (in other words, all the gains or losses associated with a product or service are reflected in the price paid for by the consumer).

 

However, many services and goods, including health care, fail to meet these criteria. Such markets need to be regulated in order to avoid tendencies towards the exploitation of 'consumers' and monopolisation, and to ensure that equity, human rights and the environment can be adequately protected. To many, neoliberalism hasn't so much liberated human and economic activity from the strangle-hold of government red-tape and interference, as it has liberated the freedom to accumulate profits, exploit labour and shift the costs of negative externalities (such as environmental pollution) onto the public. 

 

Under neoliberalism, social security is limited to the provision of a minimum service for the poor, with better services available to those who can access them through the market. Core tenets of social solidarity such as redistribution and cross-subsidisation have been sacrificed, in favour of an emphasis on individual freedom and rights.
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>From Global Health Watch. (forthcoming)
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