Neoliberalism: A vicious economic cycle

One of the most important and urgent issues in our global political economy today is neoliberalism. Neoliberalism is defined as a modern politico-economic theory favouring free trade, privatization, minimal government intervention in business, and reduced public expenditure on social services etc ., neoliberalism seems to have its pros and cons. Neoliberalism seems to tie in with capitalism, which is effecting our global economy. In theory and in practice neoliberalism can differ immensely.

Neoliberalism would be able to work if it actually eliminated poverty through the free market theory, economies would be able to thrive by free trade, allowing companies to sell their goods without paying any tariffs, and customers to buy high quality goods for a reasonable/ low cost. This of course is neoliberalism in theory.  When it comes to neoliberalism in in our global political economy, what is practiced, differs.

In practice, a lot of private companies exploit certain things like property, resources such as water, and labour. This causes market and individual competition, exploitation and low wages, cancelling out the “free” trades in the market systems. A lot of the time what happens is a market failure. This arises when individuals and firms avoid paying the full cost attribute to them by shedding their abilities outside the market (externelized) A Brief History of Neoliberalism.Oxford: Oxford University Press, 67.

This all becomes an issue when companies exploit things like labour, they allow their employees to work for the very minimum, in able to provide the customer goods for a competitive price. It becomes a vicious cycle because companies begin to have competition amongst each other, to get the lowest pricing for their customers. However their employees aren’t making enough money to purchase goods themselves. This disrupts the “free trade” because at the end of the day some customers (like super companies employees) aren’t able to purchase the very goods that were meant to be fair priced to begin with.

Neoliberalism in theory is supposed to allow individualism and a free functioning market, however what it is causing is super cooperations/ private enterprises to have enormous profit no matter what damage this causes economically or sociably . These coorperations don’t apply awareness to worker’s rights or fair wages, in effect de-unionizing  their employees.  This is a huge issue because it becomes difficult to run a neoliberal state when the benefits of free trade aren’t necessarily there.

For most of the world’s economy, neoliberalism has affected it negatively.  Many super companies have been known to be corrupt and continue to manipulate the neoliberalism’s theory into what is practiced today. It seems to be effecting most of humanity but only being controlled by the wealthy, which make up less than 25% of the global population.

This is a pressing issue as the positive ideology of neoliberalism, is that the free market would be controlled by everybody, and that it would work in every bodies best interests. What we now know, having practised this is that it’s simply not working. For example according to A Premier On Neoliberalism:

  • Some 3 billion people — or half of humanity — live on under 2 dollars a day

Although in theory neoliberalism is supposed to work by having attributes such as private property rights, individualism and most importantly free functioning markets, in practice it truly doesn’t. It becomes an issue economically by putting consumers in a spending cycle, essentially making the rich richer and the poor poorer.



  • A Brief History of Neoliberalism.Oxford: Oxford University Press, 67

-Cecilia Urrutia


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