ME 273 Lecture Notes - Lecture 4: Consumerism, Classical Liberalism, Keynesian Economics
2 May 2018
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Topic: What is neoliberalism? Explain/discuss by reference to the Week 10 course readings,
Duménil & Lévy (2005) and Munck (2005). You may also refer to any of the readings on
economic modernity (liberal economics) from weeks 8 and 9.
Introduction
The notion of neoliberalism is deeply linked with the modernization of economic thought. In
order to develop an understanding of neoliberalism, it is necessary to have an insight on the
previous economic systems that it replaced. The purpose of my essay is to first explain the
emergence of neoliberalism as the dominant economic system, and then to explain its underlying
ideology, its contrasting features with previous economic systems, its functioning and resultant
economic effects in light of various viewpoints discussed in the selected readings. I will not
however, be discussing the alternatives to neoliberalism or its failure in detail, because that
comes under a domain separate from the topic.
Discussion
Emergence of Neoliberalism
The question that comes to mind here is that when exactly did Adam Smith’s “classic liberalism”
transform into “neo-liberalism”? To answer this, we must examine economic thinking from a
wider perspective. Historically, it has been the case that changes in economy represented
simultaneous changes in economic thinking. Several historians classify the 18th century as the
time period when the consumer society was born, and the emergence of the market was a
necessary implication that followed coincidentally (Brown, 1992, pp. 129-132). This
“consumerism” and the “free market” were key components of Adam Smith’s “liberalism” and
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are useful in explaining the emergence of organized and structured economic social systems,
because they point out a shift in economic thinking.
Brown in her text states a “rule of thumb” according to which a modern economy is that in which
industry is more important than agriculture (Brown, 1992, p. 138). The growing consumerism
called for a transformation in the prevalent system of commerce (i.e. mercantilism), and the rule
indicates a shift towards a modern economic system (i.e. capitalism). In the words of Brown,
“The discourse on nascent consumerism in the eighteenth century seemed to provide a direct
forerunner of twentieth century consumerism.” (Brown, 1992, p. 144)
Capitalism thus had roots in the idealization of a consumer society. This system becomes
problematic when a crisis involving money arrives, the consumer society collapses, causing a
disruption at the very base of capitalism that continues to worsen until the economy is broken.
“Keynesian Economics” provided a system of adjustments to overcome exactly this problem,
through balances that provided a sort of safety net for the general public within the capitalist
system (Gibson-Graham, 2005, p. 95). The argument against this mode of economics was its
failure during the “structural” crisis of 1970s, and this is when the new “social order” of
neoliberalism is said to have emerged, through which the wealth and power of the ruling classes
were re-established (Duménil & Lévy, 2005, p. 9). It should be noted here that neoliberalism
speaks for the wealthiest, it does not regard the lower classes of society. This point and other
distinctive features of neoliberalism are further explained in the following section.
Distinct Features of Neoliberalism
Duménil & Lévy argue that neoliberalism simply refers to a modified form of capitalism,
expanding on globalisation and bringing newer aspects to it; one of these being “the new
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Document Summary
Explain/discuss by reference to the week 10 course readings, You may also refer to any of the readings on economic modernity (liberal economics) from weeks 8 and 9. The notion of neoliberalism is deeply linked with the modernization of economic thought. In order to develop an understanding of neoliberalism, it is necessary to have an insight on the previous economic systems that it replaced. I will not however, be discussing the alternatives to neoliberalism or its failure in detail, because that comes under a domain separate from the topic. To answer this, we must examine economic thinking from a wider perspective. Historically, it has been the case that changes in economy represented simultaneous changes in economic thinking. Several historians classify the 18th century as the time period when the consumer society was born, and the emergence of the market was a necessary implication that followed coincidentally (brown, 1992, pp.
