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Timeline of Neoliberalism

 

 

By Brahm C. HARRISON

 

Table of Contents

Introduction 1970s – The Spark of Creation   1980s – The Tiger of Deregulation Links References

 

Introduction

 

     Neoliberalism is not a new concept; it has existed in many different forms throughout time. Inequality between people is something that is argued to have started at the beginning of time when the human race came into being (Fourie & von Fintel, 2010, p. 231). Neoliberalism is only the current incarnation of a system in which human inequity is normalized.

 

     In order to fully understand Neoliberalism, it is important to categorize the main events that have lead to the implementation and systematic integration of Neoliberalism. There will be two main time periods discussed in this timeline with specific focus on each decade: 1970s - the spark of creation and 1980s – the tiger of deregulation. These two time periods are known as the first phase of Neoliberalism. Second phase Neoliberalism is linked with recent history (1990s onward) will not be discussed because it is ongoing. Please note that this is only a snapshot of the events and histories that were going on from the 1970s onward. Neoliberalism has had long reaching effects some of which will take many more decades to realize and even more time to understand.   

 

1970s – The Spark of Creation  

 

     The 1970s for the Western powers was a decade marked by both slow economic growth and increasingly higher and higher levels of inflation. Politically both the Communist and Capitalist states took many pot shots at one another; it was becoming apparent that the war in Vietnam could not be won, and the Keynesian economic theory that dictated many of the economic motivations was beginning to show its limitations.

 

     Oil has been seen as the lifeblood of strong a strong economy. In 1971 the United States abandoned its association with Bretton Woods and abandoned the practice of backing American currency with gold (Hammes & Willis, 2005, p. 502). This in theory was seen as a way to increase the American economy, unfortunately the Oil crisis of 1973 derailed American growth. In the Middle East conflict was brewing and lead to a full out conflict between Soviet backed Egypt and Syria with American backed Israel (Roeder, 2005, p. 167). Many of the Oil producing nations in the East placed an embargo on the export of oil to Western countries.

 

                                                                              

Pictured here is Friedrich August Hayek            Nobel Peace Prize of Economics                             Milton Friedman

 

     Western economic theorists Friedrich August Hayek and Milton Friedman win the Nobel Price of Economic Sciences in 1974 and 1976 respectively. The theories that these two writers explore are about the deregulation of the market and creating a free floating exchange that would theoretically allow the market to influence the economy of a country to self-regulate without issue.  

  

     Economies in Western continued to face slow economic growth in the years leading up to 1979. During the year 1979 three key events ensured for the successful adoption of Neoliberalism into mainstream world economic politics. The Iranian Revolution leads to the victory of Ayatollah Ruhollah Khomeini’s Islamic republic. Oil production slows to a trickle which then creates the 1979 energy crisis, overnight gas prices quadruple and crude oil prices explode to 40$ per barrel when compared to the 1978 price of 15$ USD per barrel (Barsky et al., 2004, p. 122). People were worried and want leadership that will provide a quick solution to the situation. In May, 1979 Margret Thatcher is elected the new Prime Minister of England. Economies all around the world enter into a three year recession which brings us to the decade of the 1980s.    

 

 

This graph illustrates the fall in oil production that lead to the 1979 energy crisis

 

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1980s – The Tiger of Deregulation

 

     The 1980s for Western powers was one of complete recovery and economic explosion. Everywhere people would look there were opportunities to make money easily. The political pundits of Capitalism and Communism started to look for opportunities to work together to increase profits. Many of the theorized reforms that Hayek and Friedman as well as others suggested were starting to be carried out with growing success.

 

                                                                      

Pictured above Deng Xiao Ping visiting the US in 1982 and Ronald Reagan during his victory speech

 

     1980 saw two very important events that would jump-start the economic reforms in the West and the East. Deng Xiao Ping, the Chairman and leader of the People’s Democratic Republic of China started the Shenzhen Experiment. This lead to the development of a Capitalist Micro-Market Economy in one of China’s bigger cities; it also created the now famous Chinese economic theory ‘Socialism with Chinese Characteristics’ (Zhang, 1997, p. 133). The other event culminated in the defeat of Keynesian economic theory in the United States with the election of Ronald Reagan; who promised sweeping and radical changes for the United States economy (Partridge, 2003, p. 57) (Cohen et al., 2002, p. 127). It is important to note that Milton Friedman also serves as Reagan’s personal economic advisor and prominent member of his Nationwide Economic advisor team from 1981-1988 (Hummel, 2011, p. 493).  

 

     By 1983 Thatcher and Regan have started to exercise mass reforms that are producing favorable results for their respective countries. Many other nations begin to follow the examples set by the United States and the United Kingdom. In Canada there was the election of Brian Mulroney and the creation of the North American Free Trade Agreement between Canada, Mexico and the United States. In 1983 the economic experiment in Chile were leading to favorable results for employment opportunity. By 1983 personal credit was on the rise and banks were making a lot of money not just in the United States but all around the world banks were emulating the American example (Turner, 1996, p. 7) (Ryan et al., 2011, p. 483)    

 

     By the late 1980s it was becoming apparent that the Soviet Union was struggling to keep up with the economies of the West. Income growth, disposable income and employment opportunity were cited as the main reasons why American Capitalism was more successful (Ward, 2000, p. 405). Since economic growth was happening across all sectors in many Western countries there needed to be some way of controlling the growth; this lead to the establishment of standards of accountability and the creation of the status quo in the 1990s.      

 

     The 1990s saw the fall of the super power the Soviet Union and the understanding that there was not another alternative other than Capitalism. Many countries felt that there was no viable alternative and turned to Capitalism. During the 1990s there were many attempts to control rampant spending habits that had developed as a result of the deregulations introduced in the 1980s. Many of these reforms are ongoing and continue to this day. As Zhou En Lai once said about the history, "It is often too soon say." Meaning, to fully understand a historical event many hundreds of years have to pass, so one can take a full look at the scope of change introduced by said event.  

 

 

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Links

 

     Here is an excellent documentary produced by the BBC, 'Thatcher: The Downing Street Years' on the rise and rule of Margret Thatcher. It can be found in the following four links below.

Part 1: http://www.youtube.com/watch?v=vi3cnJ2AVxs

Part 2: http://www.youtube.com/watch?v=xG8CkvAlOTs

Part 3: http://www.youtube.com/watch?v=1qj-nFTdIRg

Part 4: http://www.youtube.com/watch?v=K5HsY2LrDdk

 

     Here is a link to an excellent documentary produced by the CBC, 'China Rising' in this episode 'getting rich' the reasons and effects of Capitalism and market economies are explored. The documentary can be found from the following link below. Note this is only one episode from five that makes up the entire five hour documentary 'China Rising'.

Link: http://www.youtube.com/watch?feature=fvwp&NR=1&v=-I5ZlVd49Tc

 

 

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References

 

Barsky, Robert B., and Lutz Kilian. (2004). Oil and the macroeconomy since the 1970s. The Journal of Economic Perspectives 18, (4): 115-134.

 

Cohen, D. B., Dolan, C. J., & Rosati, J. A. (2002). A place at the table: The emerging foreign policy roles of the white house chief of staff. Congress & the Presidency, 29(2), 119-149.

 

Fourie, J., & von Fintel, D. (2010). The dynamics of inequality in a newly settled, pre-industrial society: The case of the cape colony. Cliometrica, 4(3), 229-267.

 

Hammes, D., & Wills, D. (2005). Black gold: The end of bretton woods and the oil-price shocks of the 1970s. Independent Review, 9(4), 501-511.

 

Hummel, J. R. (2011). Ben bernanke versus milton friedman: The federal reserves emergence as the U.S. economys central planner. The Independent Review, 15(4), 485-518.

 

Partridge, M. D. (2003). Part-time workers and economic expansion: Comparing the 1980s and 1990s with U.S. state data. Papers in Regional Science, 82(1), 51-73.

 

Roeder, J. L. (2005). What we learned from the oil crisis of 1973: A 30-year retrospective. Bulletin of Science, Technology & Society, 25(2), 166-169.

 

Ryan, A., Trumbull, G., & Tufano, P. (2011). A brief postwar history of U.S. consumer finance. Business History Review, 85(3), 461-498.

 

Turner, W. J. (1996). Credit unions and banks: Turning problems into opportunities in personal banking. The International Journal of Bank Marketing, 14(1), 1-30.

 

Ward, C. J. (2000). Why did the soviet union collapse? understanding historical change. Journal of World History, 11(2), 405-407.

 

Zheng, W. (1997). Maoism, feminism, and the UN conference on women: Womens studies research in contemporary china. Journal of Womens History, 8(4), 126-152.

 

 

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