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Advantage of Neoliberalism
Neoliberalism is a relatively new model of policy in the sphere of economics and social studies that implies the shift of control over environmental factors from the public to the private sector. The key difference between liberal and neoliberal economic policies lies in that liberals advocate for freeing the economy by minimizing the restrictions that prevent it from thriving while neoliberals prescribe to the laissez-faire view of the economic development. In this sense, neoliberalism has tremendous potential of making the economy stronger by promoting private ownership, open markets, fixed exchange rates, and the expansion of the tax base. Such an approach towards the economy is one of the strongest points of neoliberalism since countries are at a much lower risk of recession. The elimination of trade barriers also allows companies and producers to sell their goods to a wider variety of countries or companies and in high volumes, which subsequently leads to their prosperity (as well as the prosperity of the global economies that engage in free trade) (Williams, n.d.).
The enhances in product distribution adds to the development of a more competitive and innovative business environment where companies try to outperform each other by coming up with the latest products while maintaining competitive prices. This, in turn, significantly benefits consumers that want to receive products that are affordable and high quality. The internationalized economies created with the help of free trade also contribute to the development and creation of new commodities and innovations that have never been seen on the market thus increasing the speed of economic and innovational progress. Moreover, neoliberals often claim that unified economies have a “homogenizing effect” (Williams, n.d.) on society and can contribute to the distribution of wealth from the upper to the lower classes.
The economic benefits of neoliberalism are not as evident to many even though they exist and work to their full potential. According to the article by Harry Reardon (2016), neoliberal states such as California, Washington, and Massachusetts are on the top of the list of the most highly performing and economically healthy states in the country. While many criticized the policies of high taxation implemented in California, the result was astonishing – the state’s GDP increased to reach $2.3 trillion (which is higher than the GDP of Brazil of $2.3 trillion) (Reardon, 2016). At the same time, Washington is thriving with Amazon on its way to becoming one of the most influential states in the country. Thus, the neoliberal policies implemented by the state’s legislative bodies can enhance the potential and lead to great economic success if implemented correctly.
Disadvantage of Neoliberalism
Even though the proponents of neoliberalism often state that this policy model can facilitate an enhanced distribution of wealth from the highest to the lowest levels of the society, the main argument many scholars make against neoliberalism is that it perpetuates the constant accumulation of wealth by the largest corporations that weaken the democratic institutions. This, in turn, contributes to the uneven distribution of wealth resources within both developed and underdeveloped societies, causing the increase of the income gap between the highest and the lowest-earning members of the society.
As reported by Desilver (2013), “U.S. income inequality has been increasing steadily since the 1970s, and now has reached levels not seen since 1928” (para. 2). What is most important to mention is that the society was aware of this disappointing trend. The Pew Research Center conducted a survey and came up with the findings that more than half of all respondents (61%) stated that the economic system of their country cares more for the wealthy and pays not much attention to reducing the wage gap. It was also interesting that such an answer was not only given by respondents of medium or low wage but also individuals that were classified as those with a high income. Nevertheless, large companies are concerned with acquiring profit by saving costs on the workforce.
Therefore, the uneven distribution of wealth is the main contributor to inequality, which is a principle advocated by liberalism, the predecessor of neoliberalism. The neoliberal perspective on the development of the economy is rooted in centrist opinions that disregard the values of private property. Thus, even though liberalism was initially a movement for absolute social and economic freedom, neoliberalism took a “360” turn and rejected the ideas of social freedom through enforcing somewhat totalitarian regulations that favor the development of those components of the economy that are already large enough to be profitable and competitive. The unequal distribution of monetary resources also facilitates the development of market monopolies that prevent smaller businesses from thriving. Average companies cannot afford to invest in teams of finance specialists that will help them make appropriate decisions on unstable markets, nor can they compete with gigantic corporations that managed to monopolize their markets through deregulation and tax cuts.
References
Desilver, D. (2013). U.S. income inequality, on rise for decades, is now highest since 1928. Web.
Reardon, H. (2016). The economic benefits of liberalism. Web.
Williams, L. (n.d.). Neoliberalism: Pros and cons. Web.