Design by Shannon Boland
In the 1970s, the international market saw a resurgence of 19th century economic ideologies associated with laissez-faire economic liberalism. This concept came to be known as neoliberalism in the United States. This resurgence was a response to the increasing public debt of the U.S. government and economic stagnation faced by the United States in the wake of the 1970s economic crisis.
The term has different definitions in varying historical contexts, but most often neoliberalism describes the movement towards economic liberalization. Specifically, neoliberal policies involve deregulation, privatization, free trade, and decreased government spending.
The term, neoliberalism, originates from the revival of classical liberalism, which similarly emphasizes free-market economics. While many self-identified liberals in America support government regulation of the economy and social services, neoliberalism is currently related to modern day libertarianism — supporting a free market and smaller government.
Ronald Reagan, arguably the most notable proponent of neoliberalism in the U.S., popularized the term “trickle-down economics,” a defining aspect of free-market capitalist ideology. Trickle-down economics theorizes that financial assets to large businesses, entrepreneurs, and investors will stimulate economic growth. These assets generally include capital gains, tax breaks, and larger income. This term is synonymous with neoliberal ideals, resulting in its popularity within the GOP and libertarian parties in the United States.
Reagan’s economic policies are the cornerstone of the neoliberal economic theory. For instance, GOP tax cut plans are founded upon the idea of trickle-down economics: President Donald Trump and congressional Republicans are currently working on a bill to dramatically reduce corporate taxes in hopes of stimulating economic growth.
After the 1970s economic crisis and resurgence of classical liberalism, the Democratic Party adopted a more centrist platform. This shift specifically occurred as a reaction to the presidential election of 1972, in which George McGovern and his far-left platform lost by a 23-point margin against Richard Nixon. A few members of the Democratic Party, such as Massachusetts Governor Michael Dukakis and the more recent California Governor Jerry Brown, began to speak against FDR’s “New Deal” ideology, which characterized the economic platform of the party at the time.
The Democratic Party shifted towards neoliberal policy, focusing more on economic growth than income inequality, in order to regain favor in the American political system and level the playing field with the politically dominant GOP. The Clinton administration was the first Democratic administration to actualize these neoliberal policies in the 1990s through the passage of policies such as the Commodity Futures Modernization Act and the North American Free Trade Agreement, which would further government deregulation.
All sides of the political spectrum criticize neoliberalism for the damaging effects it has on lower income citizens. Neoliberalism, by definition, supports deregulation of private industries which take advantage of lower class workers, as well as government spending, which usually entails decreased spending on vital social welfare programs. Thus, lack of access to resources for lower-income workers through welfare programs implicate the incredibly damaging aspects of neoliberalism and trickle-down economics.
Trickle-down theory has never worked as its proponents claim it is supposed to. Rather, the rich continue to get richer, and this concentration of wealth within the upper class only increases economic stagnation of the working class.
Neoliberalism is a significantly detrimental ideology that is pervasive throughout the political and economic scene in various forms. Nonetheless, criticism of neoliberalism is growing more common among millennials and economists who witnessed the 2008 financial crisis. It is up to upcoming generations to eradicate neoliberalism for the benefit of all American citizens.