A Brief History Of Neoliberalism

In Marxist theory, capital is the wealth generated from the exploitation of labor. Capital is created when workers are paid less than the value of the goods and services they generate. Capitalists are the class of people who own the means of production, and capitalists accumulate capital by paying workers less for their labor than the actual value that their labor generated.

Class is a group of people who share the same position in the economy. Harvey focuses on the elite economic class (capitalists, or the wealthy people who own businesses, make investments, and drive public policy through control of civil institutions) and the working class (wage laborers). He describes neoliberalism as a form of class struggle. Harvey’s class distinctions are broader than those in popular discourse; for example, anyone who works for a wage, including both white-collar and blue-collar workers, would be considered working class under Harvey’s schema. Only those who own the means of production, such as a business, belong to the elite economic class.

Foreign direct investment is the purchase of an asset in another country. This can take a number of forms, including real estate purchases, controlling interest in a company, or reinvestment from a domestic operation into a foreign one. FDI data is one way Harvey assesses the extent to which neoliberalism has resulted in the world economy being increasingly integrated.

Inflation is the devaluation of money, resulting in the increase in the price of goods and services. According to the Phillips curve economic theory, as inflation increases, unemployment decreases, and vice versa. Monetarists, like Hayek, prioritize controlling inflation over unemployment by raising interest rates. Interest rates are effectively the cost of borrowing money. By making money more expensive to borrow, there is less of it circulating in the economy, bringing inflation down.

Keynesianism is an economic policy that seeks to control fluctuations in the business cycle and reduce their effects on the population through government spending. British economist John Maynard Keynes developed this theory in his text The General Theory of Employment, Interest and Money (1936). Keynesianism was the dominant economic theory following World War II until the neoliberal turn in the 1970s.

Liberalism is a political and economic theory that promotes individual freedoms guaranteed by state-backed rights adjudicated through legal systems. Harvey writes about “embedded liberalism” in which the free market is regulated through strong states that engage in national controls of key industries and Keynesianism to promote economic growth (11). Embedded liberalism was the predominant political framework in the West from World War II until the 1960s.

Monetarism is an economic theory that argues that controlling inflation through the manipulation of interest rates should be the primary goal of a state’s economic policy. This contrasts with Keynesianism, which argues that inflation and unemployment should be balanced priorities. Margaret Thatcher, Paul Volcker, and the central bank of West Germany are examples of monetarists cited in A Brief History of Neoliberalism.