Anyone remotely interested in politics will have heard the term “neoliberal” being used at some point. It is often weaponized by detractors in an attempt to ascribe all the world’s problems to a form of pro-capitalist economic policy and thus classical liberal values in general. 

But what is neoliberalism in reality — and how does it relate to classical liberalism and libertarianism?

Neoliberalism and libertarianism share many common principles despite meaning different things to different people. Both trace their origins back to the classical liberal ideas of the Enlightenment and place significant importance on capitalism, free trade, private ownership, and limited government.

Their most striking differences come down to how they construct their philosophy, how much of the state they tolerate, and how they view the state.

Neoliberalism as a term originated in the 1930s, during a time in which the scale and scope of government was rapidly expanding. Coined by the German ordoliberal Alexander Rüstow, the term was used to refer to the advocacy in some circles of a new take on 19th-century classical liberal ideas. 

Neoliberalism places an emphasis on capitalism, individualism, globalization, innovation, economic freedom, small government, and an increased role for the private sector in society.

Neoliberalism differs significantly from what can be termed as modern liberalism, a set of ideas which takes influences from factions very much at odds with classical liberalism. Indeed, modern liberalism has become a sort of fusion of liberalism and socialism – broadly anti-authoritarian on social issues while advocating for greater state intervention in economic matters.

Originally a product of the ordoliberal school of thought, neoliberalism aimed to curb the excesses of progressives and socialists by offering something that was both modern and in keeping with older classical liberal ideals.

During the second half of the 20th century, elements of neoliberalism were able to gain some traction. Political figures such as Margaret Thatcher and Ronald Reagan embraced certain aspects of this school of thought by implementing economic reforms and reducing barriers to trade. 

Yet the neoliberalism of “rolling back the state,” as espoused by Thatcher and Reagan, influenced by figures like Hayek, would fuse with social conservatism. Over time, the fusion of conservatism and neoliberal economics morphed into a more collectivist, conservative populism, thus incurring the inevitable political realignment we see today.

Meanwhile, the second half of the 20th century also saw the emergence of another school of thought: the modern libertarian movement.

Both neoliberalism and libertarianism are aimed at creating a freer society, where civil liberties and economic freedom can be enjoyed by all. However, with libertarianism, the end goal tends to be more radical, whereas neoliberalism is willing to operate within existing frameworks and build from there.

Neoliberalism is not libertarian. It approaches matters from a different angle. The libertarian angle, broadly speaking, views issues in a manner that is far more black and white. It is a worldview that is very linear, pitting the individual against the state, and rooted in principles, such as the idea that all taxation is theft.

On the other hand, neoliberalism is highly pragmatic, advocating a sort of technocratic use of markets to achieve certain specific social ends, all within a modern democratic state. 

However, neoliberalism and libertarianism overlap in one very important aspect: they both hold that free markets maximize prosperity.

Right now, the liberty movement as a whole faces challenges on multiple fronts, from both the left and right. Given the current political climate, could the cause of liberty be advanced more effectively if neoliberals and libertarians of various stripes cooperated more extensively in promoting their shared interests? 

Could neoliberals play an important role in helping the liberty movement stand up to the threats of populism and collectivism? To what extent could neoliberalism and libertarianism become important allies in the times ahead?

To find out more, be sure to check out the video below featuring a discussion on libertarianism vs neoliberalism with Spike Cohen and Bastiat.

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This piece solely expresses the opinion of the author and not necessarily the organization as a whole. Students For Liberty is committed to facilitating a broad dialogue for liberty, representing a variety of opinions.