Mises Wire

What’s the Difference Between Liberalism and “Neoliberalism”?

It is possible that there is no term more abused in modern political discourse than “liberalism.” Originally meant to describe the ideology of free trade and limited government, the anti-capitalist left adopted the term in the 1930s and changed its meaning to the opposite of what it meant in the 19th century

Liberalism never quite lost its correct meaning in most of the world, however, and in Spanish-speaking countries, for example, the word “liberalismo” still often means the ideology of free trade and free markets. Only American right-wingers appear to use the term as a pejorative to sling at the anti-capitalist left. Even in America, though, with the left having eschewed the term for the more trendy “progressive,” the use of “liberalism” in political invective appears to be fading. 

As if this weren’t complicated enough, liberalism has now been saddled once again with a new variation, the meaning of which remains unclear: “neoliberalism.” 

What is neoliberalism? Well, it appears that, at least among its critics, “neoliberalism” usually means nothing more than “liberalism.” 

“Neoliberalism” As a Pejorative Term for Laissez-Faire Liberalism 

To get a sense of the common usage for a term, it never hurts to check Wikipedia, and in this case, we find that neoliberalism is simply liberalism:

Neoliberalism is a controversial term that refers primarily to the 20th century resurgence of 19th century ideas associated with laissez-faire economic liberalism. These include extensive economic liberalization policies such as privatization, fiscal austerity, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy.

But why is it a controversial term? The controversy stems from the fact that the term is primarily used as a pejorative term and not as a good-faith descriptive term to denote an ideology. 

In a study of 148 articles on political economy that use the term, authors Taylor Boas and Jordan Gans-Morse found that the term “neoliberalism” is almost never used in a positive light. The study found that 45 percent of the time, the term is used in a neutral fashion, but 45 percent of the time, is it used to portray liberalism negatively. Only 3 percent of the time is the term used in a way designed to cast free markets in a positive light. 

In other words, “neoliberalism” is really just an anti-liberal slogan.

Boas and Gans-Morse continue: 

One compelling indicator of the term’s negative connotation is that virtually no one self-identifies as a neoliberal, even though scholars frequently associate others — politicians, economic advisors, and even fellow academics — with this term. While a fifth of the articles on neoliberalism in our sample referred prominently to other people as neoliberals, in all of our research, we did not uncover a single contemporary instance in which an author used the term self-descriptively ...

Moreover, as Boas and Gans-Morse note, “neoliberalism” is often used to “denote... a radical, far-reaching application of free-market economics unprecedented in speed, scope, or ambition.” For those wishing to appear “reasonable” or non-radical, neoliberalism’s connotations as being radically in favor of free markets provide an additional reason to avoid self-identifying with the term.

This unwillingness to self-identify extends to mises.org, although not for reasons of avoiding radicalism.  As editor, I have published more than one article here that makes distinctions between the liberalism of the Austrian school and the so-called neoliberals. Philipp Bagus’s review essay, “Why Austrians Are Not Neoliberals“ explains many of these distinctions in detail. In another article, Guido Hülsmann describes Ludwig von Mises’s own battle against an early group of neoliberals at the Mont Pelerin Society. In Mises’s eyes, these neoliberals were relatively liberal — compared to doctrinaire socialists — but were interventionists who favored central banking and the bureaucratic, regulatory state. Then as now, the central problem with the neoliberals revolved around their blithe attitude toward inherently anti-market central banks and government-created money. 

To those of us who keep up with the details of the marketplace in liberal ideas, these distinctions are readily apparent. 

To anti-liberal leftists looking in from the outside, however, Austrians, Chicagoans, and neo-classicals all probably look like pretty much the same thing. These “neoliberals” all say nice things about markets and free trade, so they all must agree with those neoliberals at the International Monetary Fund. Or so it is assumed. After all, don’t we hear from the IMF about the importance of free trade and balanced budgets and limiting government spending? The fact that the IMF supports central banking, bank bailouts, and corporatist deals for the politically-connected is lost on those who only see the IMF’s ostensible support for markets. The anti-liberals then lump together IMF President Christine Lagarde and Ludwig von Mises

In the UK, for example, it’s easy to find articles that equate neoliberalism with the alleged free-market policies of Ronald Reagan and Margaret Thatcher. In this article at The Guardian, for example, George Monbiot views Thatcherism and Reaganism as the vanguards of a supposed hard-core free-market hegemony we groan under today. 

The Anti-Neoliberalism Movement Is Just an Anti-Capitalist Movement

Naomi Klein, a perennial critic of neoliberalism, sees the popularity of the Bernie Sanders movement as a defeat for neoliberalism. In a recent radio interview, she stated

So neoliberalism lost the argument. They lost the argument, to the extent that not only was Bernie out there calling himself a socialist, not apologizing for it, making these arguments that, you know, we — not reductions in tuition, but free college, you know, just pushing the envelope, 100 percent renewables, just going all the way, and people were cheering. And he forced Hillary Clinton to move to the left. And we also saw that even Donald Trump had to throw out the rule — the neoliberal rule book, trashed free trade agreements, promised to defend the social safety net, in order to build his base.

In other words, in Klein’s mind, a victory against neoliberalism brings with it hard-left environmentalism, opposition to free trade, “free college,” and “mov[ing] to the left” in general. 

Not surprisingly, sometimes Klein and other opponents of neoliberalism are right by accident. They often (correctly) oppose trade deals like the TPP, for example. But, they do so for the wrong reasons. They oppose these trade agreements not because they are extensions of the regulatory, corporatist state, but because the anti-liberals mistakenly view these trade deals as being for actual free trade and free markets.

Opposing Both the Neoliberals and the Anti-Liberals 

The conclusion we’re forced to draw is that consistent advocates for laissez-faire are stuck between both the actual neoliberals (as identified by Mises) and the anti-capitalist, anti-neoliberal left. If they could, the anti-neoliberals such as Klein and Sanders would happily expropriate and nationalize entire industries. Entrepreneurship would wither, small business would be regulated out of business, and the financial sector would function — even more than it already does — as a de facto state-owned enterprise. 

Meanwhile, the neoliberals found at the IMF and central banks of the world continue to manipulate the global economy through monetary policy, bail out favored cronies at major corporations, and support corporatist policies in general. 

Both groups continue to present significant threats to the cause of laissez faire. 

Ryan McMaken is the editor of Mises Wire and The Austrian. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre. Contact: email, twitter.

Image Source: Photo of Christine Lagarde and Janet Yellen, courtesy of the IMF at Flickr.com
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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