Question

What is neo-liberalism? Discuss, in particular, its conception of the relation between the market and the state.

Answer 1

Neo-liberalism refers to the economic perspective that focuses upon the least or minimum government intervention and proposes the control to be handed over to the hands of market forces. So, in many ways, it is the modified version of laissez-faire economic perspective that wants to shift the power and authority from state to the market.

The conception of this economic perspective or theory is behind the promotion of private property rights, free trade, deregulation and privatization. All these developments have taken place in the late of 20th century and it is the time of neo-liberalism. Such developments are proposed as a tool to become an economic success as exhibited the developed countries like USA and in developed countries in the Europe where the private property rights are strongly promoted. It shows the shift of power where state ownership or the government ownership is relinquished in favour of private ownership. As a result, private investments take place in R&D areas and innovations take place. It is good to observe such a positive contribution to economic growth and development, but it has its own issues also. The shift of power from state to market, causes greater increase in income inequality and the difference between the social classes increases. Also, during the time of recession, the same private sector resigns and expect the government to intervene as seen in the USA after the crisis of 2008. So, neo-liberalism fails to answer the question when economy suffers. It is the reason that capitalism in the market as a part of this economic perspective, now redefines to give attention to value creation of all the stakeholders, rather creating only wealth for the rich.