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ЭКОНОМИКА
ВОПРОСЫ ЭКОНОМИЧЕСКОЙ ТЕОРИИ
УДК 330.34244
BIG BAD NEOLIBERALISM?
RETHINKING NEOLIBERALISM IN THE LIGHT OF HISTORY AND MODERN DAY
© Khaykhadaeva Oktyabrina D.
DPhil in Economics, Professor, Buryat State University
24a, Smolina, Ulan-Ude, 670000, Russia
E-mail: [email protected]
© Teija Ruottinen
University of Jyvaskyla, Finland
In contemporary social and economic science, the concept of neoliberalism often has a negative connotation, and it is rarely used in a positive context. However, originally the term had a rather positive sense. Which changes occurred that turned neoliberalism, the once rather positively viewed reformatory ideology into a concept automatically perceived negatively and avoided even by its proponents? What actually neoliberalism is and was, now and then? In this paper we argue that the concept itself is no longer likely to regain its original, rather positive connotations but it is doomed to serve as a scapegoat, the cause of most of the current global problems. But could it be possible to abandon the term neoliberalism and derive new terms, to better distinguish the theory and the original ideas from the negative practices of the international financial institutions?
Keywords: neoliberalism, market mechanism, individual freedom, international financial institutions.
БОЛЬШОЙ ПЛОХОЙ НЕОЛИБЕРАЛИЗМ? ПЕРЕОСМЫСЛЕНИЕ НЕОЛИБЕРАЛИЗМА В СВЕТЕ ИСТОРИИ И СОВРЕМЕННОСТИ
Хайхадаева Октябрина Дмитриевна
доктор экономических наук, профессор Бурятского государственного университета Россия, 670000, г. Улан-Удэ, ул. Смолина, 24а Руоттинен Тейя
исследователь университета Ювяскюля, Финляндия
В современной социально-экономической литературе концепции неолиберализма часто имеет негативную коннотацию и редко используется в позитивном контексте. Однако изначально концепция имела позитивный смысл. Какие же изменения произошли и что повернуло некогда передовую, реформаторскую идеологию в концепцию, автоматически воспринимаемую негативно и избегаемую даже приверженцами данной идеологии? Что же являлось и является неолиберализмом? В данной статье мы доказываем, что концепции неолиберализма вряд ли восстановит свою первоначальную позитивную коннотацию, она скорее обречена служить симво-лом-причиной многих современных глобальных социально-экономических проблем. Но удастся ли современной мировой науке отказаться от концепции неолиберализма и разработать новые концепции, которые лучше бы различали теорию и первоначальные прогрессивные идеи от негативной практики международных финансовых институтов?
Ключевые слова: неолиберализм, рыночный механизм, личная свобода, международные финансовые институты.
Introduction
Despite being at present actively used in political debates and scholarly writing in development, neoliberalism is a concept rarely defined explicitly. In contemporary social science, the concept of neoliberalism often has a negative connotation, and it is rarely used in a positive context. However, originally the term had a rather positive and self-identifying sense. Which changes occurred that turned
neo liberalism, the once rather positively viewed reformatory ideology into a concept automatically perceived negatively and avoided even by its proponents? What neoliberalism actually is and was, now and then?
The literature gives two radically opposing views on neoliberalism: one seeing it as the most progressive and appropriate way to development and modernization; the other as the cause of the increased global inequalities and injustices. Indeed, the term 'neoliberalism' is being used asymmetrically across ideological divides (cf. the content analysis of Taylor Boas & Jordan Gans-Morse). Thus, the perspective one adopts on neoliberalism depends largely on their academic background — cf. e. g. the discipline of economics vs. humanities — and the literary sources used. Therefore, the negative or positive image of neoliberalism is based on the interpretation it is given, while the concept in itself is neither purely positive nor negative.
Origins of Neoliberalism
So what does neoliberalism mean? In some sense, the concept suggests its own definition: it is a revival of liberalism. It suggests that liberalism has undergone an initial rise, followed by an intermediate decline and a relatively recent reincarnation. Neoliberalism renews the beliefs of classical liberalism and relates to it positively. Looking at neoliberalism from this angle, it is closely related to neoclassical economics. To understand neoliberalism profoundly, it is essential to begin by looking at its roots: the ideas of those considered as the founders of neoliberalism (yet, ironically, nobody identifies themselves as a 'neoliberal').
Early developers
It is safe to note that neoliberalism has its origins in the scholarly debates between German and Austrian economists in the 1880s. Although it was a methodological struggle between the two schools — the German historical school of economics was empirical, while the Austrian school was abstract (mathematical) in methods — essentially, it was about diverging views on the perspectives of the development of the economic systems. The German historical school tended to be critical to capitalism, while the Austrians defended the market mechanism. In the 1880s a debate between the Austrian Carl Menger and the German Gustav von Schmoller divided the German-speaking economics into two opposing camps. Schmoller, the leader of the German school of economics, viewed naive the idea of people being motivated by pure self-interest. By contrast, the Austrian school of economics, led by Menger and his students Wieser and Bohm-Bawerk, and later by Mises, was pro-market.
A significant role in the development of neoliberal ideas (in the sense of reassertion of classical liberalism) was played by a second-generation Austrian economist, prominent figure in the Austrian School, Lud-wig von Mises (1881-1973), who in his Theory of Money and Credit (1912) idealized classical liberalism. According to Mises, all social phenomena are the outcomes of individual choices. Proponent of free market, Mises argued that there is harmony between consumer and entrepreneurs, between entrepreneurs, managers and employees, etc. A state may be necessary, but its power must be minimized, and laissez-faire should work its miracles. The philosophy of laissez-faire and theories of free market are at the center of Mises's conception of freedom.
Friedrich von Hayek
Mises's ideas were further elaborated by his student Friedrich von Hayek (1899-1992). Hayek's theory has three strands: value of market mechanism, primacy of individual freedom, and the assertion that the pursuit of social justice is fruitless (Barr 2004, p. 44). Advocating the market mechanism, Hayek argued that prices were not merely the "rates of exchange between goods", but also "a mechanism for communicating information" (Hayek 1945, pp. 519-530).
For Hayek, the free price system is an outcome of thousands of uncoordinated choices. In a complex economic system, only prices can coordinate the economy. Hayek considered as a fatal conceit the socialist belief that a complex economic system could be designed by planning. In planned economies, the distribution of resources is determined by a group of individuals, planners. In this case, Hayek believed that no one person or group of people, including the government, could ever understand the society or the economy in order to design the best plan. Therefore, the planners can never have enough information for efficient allocation of resources, which leads to misallocations of resources and significant inefficiency of the economy. This view is perfectly sound.
In contrast, Hayek's view on limiting the role of the state merely to maintaining the rule of law, with no or as little as possible intervention in other areas, is more debatable. Indeed, it is reasonable to believe that the state should be active in the social sphere and provide public goods such as health, education, social security, and environmental sendees. There is always a trade-off between efficiency and equity, and finding
the right balance between them is the fundamental question (or problem?). Hayek, however, being a classical liberal, accepted the economic inequalities as a natural result of competition.
In 1944, Hayek published his famous book The Road to Serfdom, where he argued that for the planners to achieve their ends, it was necessary to create concentration of power in magnitude never seen before. To reach such concentration of power, freedom and democracy will have to be suppressed. In the planned system, the smallest bureaucrat has enormous power wielding a coercive state power and deciding on how people are allowed to work and live. In Hayek's view, in a country where the only employer is the state, opposition to the state means death. This very idea of Hayek's is agreeable. Indeed, it well was visible e. g. in the Soviet Union, where during the Soviet times, official opposition to the state and the Communist party was unimaginable, although there was a lot of grassroots critique of the system in "kitchen talks", among friends and other trusted people.
Moreover, Hayek believed that planning inevitably leads to dictatorship, since dictatorship is the most efficient instrument of coercion. In a planned economy, everybody is forced to work to reach the ends selected by the planners. Workers should think of those ends as being their own ones, and this is brought about by propaganda and by a complete state control of all sources of information. All these elaborations made Hayek to conclude that a policy of freedom for individual is the only progressive policy.
Hayek on Social Justice
Hayek's view of social justice was in a sharp contrast with that of John Rawls, American philosopher, who saw social justice as a natural right of the human being. For Hayek, a given circumstance can be regarded as good or bad, but not as just and unjust (e. g. being born disabled, having rich parents, dying at a young age, etc.):
Strictly speaking, only human conduct can be called just or unjust. If we apply the term to a state of affairs, they have meaning only in so far as we hold someone responsible for bringing it about or allowing it to come about. A bare fact, or a state of affairs which nobody can change, may be good or bad, but not just or unjust (Hayek 1982, p. 41).
Thus, according to Hayek, something is just or unjust only if it is caused by someone's action (or inaction). For Hayek, the whole notion of social justice is no more than "quasi-religious superstition":
What we have to deal with in the case of 'social justice' is simply a quasi-religious superstition of the kind we should respectfully leave in peace so long as it merely makes those happy who hold it [...] (Hayek 1982, p. 66).
Hayek continues further stating that striving for social justice will lead to the destruction of personal freedom:
[...] the more dependent the position of the individuals or groups is seen to become on the actions of the government, the more they will insist that the governments aim at some recognizable scheme of distributive justice; and the more governments try to realize some preconceived pattern of desirable distribution, the more they must subject the position of the different individuals and groups to their control. As long as the belief in social justice governs political action, this process must progressively approach nearer and nearer to a totalitarian system (Hayek 1982, p. 68).
Therefore, for Hayek, the primary value is individual freedom. He did not consider social justice as a human right. No doubt, it is difficult to understand and accept his views on justice; Hayek firmly believes things cannot be just or unjust, and the pursuit of social justice can be harmful.
In 1974, the Bank of Sweden awarded the Nobel Prize in Economics to Friedrich von Hayek and Gunnar Myrdal for their pioneering work in the theory of money and economic fluctuations and the analysis of the interdependence between economic, social and institutional phenomena. Hayek's ideas became popular in the late 1970s and early 1980s with the rise of conservative governments in the USA and UK, especially during the era of Ronald Reagan in the USA and Margaret Thatcher in the UK.
Milton Friedman
The next figure influencing the development of neoliberal ideas was Milton Friedman (1912-2006), a right-wing economist from the Chicago School of Political Economy. In economics, Friedman is known as the founder of monetarism, the core idea of which is that macroeconomic problems such as inflation and debt derive from excessive government spending. According to Friedman, inflation can be controlled by limiting the amount of money in the economy (printing money is a function of central banks). As for the role of government in the economy, Friedman rejected its distributional role and believed that the government's
tasks should be limited to adjusting interest rates. Like Hayek, Friedman valued the primacy of individual freedom:
[...] the scope of government must be limited. Its major function must be to protect our freedom both from enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private order contracts, to foster competitive markets. Beyond this major function, government may enable us at times to accomplish jointly what we would find it more difficult [...] to accomplish severally. However, any such use of government is fraught with danger. We should not and cannot avoid using government this way. But there should be a clear and large balance of advantages before we do (Friedman 1962, pp. 2-3).
For his views, Friedman can be seen as the devil figure in economics. On the other hand, Friedman was too idealistic thinking that competitive markets with active and innovative entrepreneurs as well as with minimal government intervention can transform the underdeveloped economies into developed ones.
Friedman worked in Chile during the dictatorship of Pinochet, when many leftists were killed. How is it possible to value individual freedom while participating in dictatorship? Despite his participation in a dictatorial regime, Friedman was awarded the Nobel Prize in 1976 for his achievements in monetary history and theory, as well as for his demonstration of complexity of the stabilization policy.
Ordoliberalism
Although contemporary scholarship identifies Hayek and Friedman as the fathers of neoliberalism, there was a time in the history of economic thought when neoliberalism meant quite a different stream of thought, nowadays often referred to as ordoliberalism. Ordoliberalism is a German version of neoliberalism related to the Freiburg School during the interwar period:
[...] Freiburg School economists argued that for the free market to function, the state must play an active role. The German neoliberals accepted the classical liberal notion that competition among free individuals drives economic prosperity, but they argued that powerful private actors—the monopolies and cartels that decimated Germany's small businesses in the interwar years—could pose a threat to freedom of competition. To keep private interests in check, the neoliberals supported the creation of a well-developed legal system and capable regulatory apparatus [...] (Boas & Gans-Morse 2009, p. 10).
The German "new" liberals sought to revive classical liberalism by suggesting a significant reconsideration of it. Their belief in the market mechanism was rather moderate, and they argued that the state should play a more active role in the economy. In contemporary classification of politico-economic ideas, however, the German neoliberals, as advocates of a more active government role in the economy, would rather fall under Keynesianism than neoliberalism.
Cornerstones of Neoliberalism
This brief consideration of the ideas of those named in the contemporary scholarship as the founding fathers of neoliberalism allows us to highlight their common beliefs, which formed the basis for neoliberalism. All three of them, Mises, Hayek and Friedman, believed in the market mechanism with limited state intervention and individual freedom. It is worth mentioning, however, that while Mises considered himself as a classical liberal, Hayek and Friedman identified themselves as classical economists. Indeed, none of the three thought of themselves as being neoliberal. Nonetheless, nowadays, the critics of the market mechanism often consider Hayek and Friedman as the fathers of neoliberalism. It is their ideas about market economy, state intervention and individual freedom that lie at the center of neoliberalism. Moreover, all contemporary debate on neoliberalism is mainly about the market system and state intervention.
Contemporary Critics of Neoliberalism
In the modern days, despite being frequently used, the concept of neoliberalism is rarely defined explicitly in scholarly writing. According to Boas & Gans-Morse, neoliberalism is used most often by the critics of the free market phenomenon, denoting to a radical, far-reaching application of free-market economies unprecedented in speed, scope or ambition (Boas & Gans-Morse 2009, p. 5). Indeed, in his book A Brief History of Neoliberalism (2007) the geographer David Harvey takes a strong stance against neoliberalism, almost seeing it as being the direct cause of the current global injustices and income differences.
For Harvey, neoliberalism, a theory ofpolitical economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free market and free trade (Harvey 2007, p. 2) became globally dominant with the process of "neoliberalization" involving nearly all states and affecting the political-economic practices and thinking worldwide.
Harvey considers neoliberalism as a source of injustice, as a means to restore the power of economic elites by capital accumulation and trampling labor rights. According to Harvey, neoliberalism gained its hegemonic position in the political-economic thinking by appealing to the common sense of the population, promoting ideals such as individual freedom and human dignity. However, Harvey continues, in reality neoliberalism has only been promoting the interests of private owners, financiers and transnational corporations.
For Harvey, the first attempt of a neoliberal state formation occurred in Pinochet's Chile in the 1970s, with economic reforms of stabilization and market liberalization, implemented under dictatorial conditions. Interestingly, Boas & Gans-Morse mention Pinochet's reforms in Chile as being the very moment when the significance of the concept of neoliberalism shifted from being a positive term denoting a moderate alternative to classical liberalism into being a negative term denoting radicalism, i.e. when neoliberalism got its bad reputation. Indeed, Harvey sees practically nothing positive about neoliberalism, leaving aside the origins of the concept, and the fact that the present significance of neoliberalism is merely one type of interpretation, emerged in the 1970-1980 s.
Contradictions and Paradoxes
Harvey presents the hegemony of neoliberalism and the idea of a neoliberal state, a state apparatus whose mission is to enable conditions for capital accumulation, in a strongly negative way, making it sound almost like some sort of conspiracy of the elites: the corporations and the business elite "brainwashing" the media, the academy, the church and the politicians to support neoliberalism, as "there is no alternative", riding on the ideals of individual freedoms.
Harvey sees many contradictions between the theory and practice of the neoliberal state. While the theoretical goal of neoliberalism is to improve the well-being of the population, its practical consequences are, almost without exception, leading to the restitution of class power to the elites. According to Harvey, the neoliberal state is based on a paradox: the state is not supposed to intervene into the activities of the market, yet it is expected to create beneficial conditions for entrepreneurship. What is more, by limiting the role of the state, neoliberalists restrict democratic governance and resort to undemocratic institutions such as the IMF and the American Federal Reserve to dictate what is best for the "common good", i. e. in reality, for the finance and corporations.
Harvey points out that the process of neoliberalization has occurred unevenly in different locations of the world, depending on the context. Despite the differences, Harvey lumps all the locations together and considers them all as representing different extents of neoliberalism. Indeed, he sees a common factor featuring in all the locations subjected to neoliberalization:
But one persistent fact within this complex history of uneven neoliberalization has been the universal tendency to increase social inequality and to expose the least fortunate elements in any society — be it in Indonesia, Mexico, or Britain — to the chill winds of austerity and the dull fate of increasing marginalization (Harvey 2007, p. 118).
However, if the realities of the different neoliberal locations are so diverging, is it correct to speak of neoliberalization in all these contexts, or are they just different variations and interpretations of policies based on or inspired by neoliberalism? Either way, it almost seems like for Harvey, neoliberalism is a way to understand and explain the persistence of or increase in global inequalities. For Harvey, the concept of neoliberalism serves as a scapegoat, the cause of the worsening global conditions.
Indeed, Harvey states, neoliberalization has led to increased black economy, and a decrease in public well-being. The practices of privatization, commodification and financialization of everything (including culture, arts, health services, etc.), increased speculation and crisis manipulation characteristic to neoliberalization have generally not increased global well-being, but have certainly increased income inequalities within and between countries: The main substantive achievement of neoliberalization, however, has been to redistribute, rather than to generate, wealth and income (Harvey 2007, p. 159). Until the very end of his pathos, Harvey remains convinced of the existence of the true hidden agendas of neoliberalization, ignoring thus the more positive origins of neoliberalism: [...] there is abundant evidence that neoliberal theory and rhetoric (particularly the political rhetoric concerning liberty and freedom) has also all along primarily functioned as a mask for practices that are all about the maintenance, reconstitution, and restoration of elite class power (Harvey 2007, p. 188).
Seeing the persistent hegemony of neoliberalism mainly as negative, Harvey envisions ways to challenge it, and claims a comprehensive reform of global governance, including a more institutional
approach to global problems, better global regulation and more control to finance speculation. Harvey also weighs in a possibility of a return to Keynesianism, with necessary adaptations to the modern context. Harvey underlines the importance of collaboration among the already existing alternative civil-society movements (e. g. those striving for reform or dissolution of the undemocratic global governance institutions; environmental movements, etc.) to draft an oppositional program to that of the neoliberalization, and seeking alternatives through critical analysis with 'theoretical and practical enquiries'. Harvey concludes, justly, by demanding new values to reject neoliberalism, a failed Utopian rhetoric masking a successful project for the restoration of ruling-class power (Harvey 2007, p. 204), and instead promoting and reinforcing ideals of open democracy, social equality as well as economic, political and cultural justice.
Fuel to the Fire
Harvey's co-ideologists Gérard Duménil & Dominique Levy do not paint an any more rosy picture of neoliberalism. Indeed, in their book Crisis of Neoliberalism (2011), the French economists present the current global financial crisis as being the consequence of the neoliberal practices and policies.
Duménil & Lévy consider it difficult to provide a specific definition for neoliberalism and its beginnings, yet they acknowledge it being a phase, or an episode in the evolution of capitalism. For clarity's sake, however, the authors take a shortcut: Simplifying to some extent, one can contend, however, that neoliberalism was first established in the United States and the United Kingdom at the end of the 1970s [...] a few years later in continental Europe, and then around the globe (Duménil & Lévy 2011, pp. 7-8). Even though considering all its aspects (free-market economics, free trade, free mobility of capital), Duménil & Lévy admit neoliberalism to be "what the word says", i. e. new liberalism, in their study the concept is understood as a social order aiming at imposing a new discipline on labor and establishing new market criteria and policies, with the help of the so-called 'free market'. In line with Harvey's view, Duménil & Lévy see neoliberalism as the expression of the restoration of the power and income of capitalist classes (Duménil & Lévy 2011, p. 64).
Seeing clear connections between the hegemony of neoliberalism and the post-war financial agreements (Bretton Woods and the global governance institutions), Duménil & Lévy consider neoliberalism as not having any other purpose than serving the interests of the elites:
Neoliberalism is not about principles or ideology but a social order aiming at the power and income of the upper classes. Ideology is a political instrument. Considered from this angle, there was no change in objectives. In neoliberalism, the state (taken here in a broad sense to include the central bank) always worked in favor of the upper classes (Duménil & Lévy 2011, p. 228).
In sum, like Harvey, Duménil & Lévy see neoliberalism as a direct source of global injustice. According to the authors, the sufferings and inequalities caused by the 'neoliberal order', or the 'neoliberal globalization' imposed under the US hegemony were justified by the neoliberals as being the unfortunate effects of a deficient ability to adapt to an inescapable common fate (Duménil & Lévy 2011, p. 323). In line with Harvey, Duménil & Lévy see the end of neoliberal order as inevitable, and claim alternative ways of governance for the "post-neoliberal" era.
Discussion on the Critiques
Justification of the Market Economy
As it was discussed above, in the original sense, neoliberalism implies market economy with less state intervention. Let us go back to defining the meaning of market economy.
The term "market" is defined by Begg, Fischer and Dornbusch, professors of economics at the Birckbeck College and MIT, as follows:
Market is a shorthand expression for the process by which households' decisions about consumption of alternative goods, firms' decisions about what and how to produce, and workers' decisions about how much and for whom to work are all reconciled by adjustment ofprices (Begg, Fischer & Dornbusch 1997, p. 8).
Thus, in the narrow sense, market is a place where buyers and sellers of goods and sen/ices are brought together. In a broader sense, market is a system of organization of the economy, a way or mechanism to run the economy. Market mechanism is based on market prices, private property, individual (including) entrepreneurial freedom, and competition.
An alternative to the market economy is the command economy: In a command economy a government planning office decides what will be produced, how it will be produced, and for whom it will be produced. Detailed instructions are then issued to households, firms and workers (Begg, Fischer & Dornbusch 1997, p. 9).
Such planning is a very difficult task, hardly possible to be fulfilled. Indeed, pure command economy has never existed in history. However, in some countries, such as Cuba or the countries of the former Soviet bloc, there was a large scope of central planning. The state owned all the enterprises and made all the important decisions about production and consumption: what goods, in what amount and how firms should produce, what people should consume, how much people should work and earn, and so on. It would be fair to notice that even in such over-controlled economies people had some freedom and some choice of what goods to buy and how to spend their income. In any case, the command economy proved its inefficiency, as it was impossible to know everything about the society and to design a good plan which would be based on the calculation of all the demands of all the goods. Such calculation is hardly possible, not even a perfect computer program could do such job. Therefore, planned economies had enormous deficits: there was a big gap between what was produced and what was demanded. When there is a deficit of goods, the mechanism of natural rationalization works, i. e. the long lines. For instance, in the Soviet Union, to buy a deficit good, people had to stand in line for 2-3, even up to 4 hours. Or, a seller could make the decision on whom to sell the product (usually, those lucky ones were friends, or members of the family). A British sociologist, Alena Ledeneva, called the phenomenon the "economy of favours" (Ledeneva 1998). At the same time, the stores were full of goods which were not demanded. This historical experience shows clearly the inefficiency of the command economy.
Free Market as a Subject of Criticism
Returning to the contemporary critics of neoliberalism, who often use the term "free market"; as a matter of fact the term in itself is rather misleading, since in reality an absolutely free market never existed anywhere. However, the economists often use the term in two particular occasions: 1) to denote the market mechanism — in this case, free market economy and market economy are equal in their meaning; 2) to denote an abstract, absolutely free market which can be used as a benchmark in the scientific economic analysis.
In free markets, the individuals pursue their self-interests without any government interference. Such free market is rather abstract. In real life, even the most "free market" country such as the USA still has a significant level of government activities in the economy, such as provision of public goods and sendees, redistribution of income through taxes and transfer programs, market regulation (through antimonopoly legislation, through the activities of the U.S. Security and Exchange Commission, etc.).
Between these two extremes, pure command economy and absolutely free market economy, lies the mixed economy: In a mixed economy, the government and the private sector interact in solving economic problems. The government controls a significant share of output through taxation, transfer payment, and the provision of services such as defense and the police force. It also regulates the extent to which individuals may pursue their own self-interest (Begg, Fischer & Dornbusch 1997, p. 9).Most countries in the world have mixed economies, although some are biased to command economy (like Cuba) while others are close to free market economy (i. e. the so-called market economies).
Reasons for the Prevalent Criticism
So, why has neoliberalism, which implies the market mechanism, received a lot of criticism? To answer this question, it is necessary to look where, under which circumstances and why the neoliberal policies have been applied.
Most countries who suffered from the neoliberal policies are developing and/or transition countries. In most cases the imposition of the neoliberal policies was conducted under a direct control of the international (US-led) institutions, such as the IMF and the World Bank. But why did it happen?
The history of the countries subject to the imposition of neoliberal policies shows that they had a budget deficit (because of an economic crisis) and were thus not able to pay for the imported goods. To adjust their balance of payments, they approached the IMF to get loans. The IMF (later and for a relatively short time, the World Bank), before issuing any loans to the borrowing countries, imposed a set of policies for economic reforms, i. e. conditions, on them. These suggested e. g. economic reforms, including privatization, price liberalization, cutting government expenditures, and opening their economies to foreign competition. The IMF considered such reforms to guarantee loan and interest repayment. In reality, in most cases these economic reforms only worsened the economic environment, resulting in an increase in poverty and inequality. In this sense, Harvey's criticism of neoliberalism is perfectly understandable.
Indeed, the problem is that the reforms were dictated from the outside, often blindly, without taking into account the contexts and desires of the borrowing countries. The most painful and controversial moments
related to the economic reforms were cuts in government expenditure (including cutting subsidies) and privatization. In general, cutting all subsidies during a recession really is not smart policy advice. To cut subsidies for "dead" enterprises is justifiable, but to require cuts in pensions for old and disabled people, or in subsidies for the social spheres such as health and education, is rather inhumane. Nevertheless, as is known and what Harvey also strongly criticizes, the IMF blindly insisted on requiring cuts in all subsidies in the borrower countries.
The Russian and the Chinese case
Let us briefly turn to consider the Russian case. During the economic depression of the 1990s, Russia received numerous loans from the IMF. In the following years, the Russian economy was regularly inspected by the IMF; there was a consistent demand from the IMF to cut the expenditures for the social spheres and to speed up the privatization process. This policy created poverty and increased inequality. All these "shock therapy" policies assumed that the economy can be changed overnight, a set of policies was considered very simple to conduct. However, real life is not that simple. People cannot change overnight; indeed, they have centuries-old traditions, cultures, and beliefs — to change it takes a long time.
On the contrary, China, refusing to follow the IMF recommendations, chose to reform its economy gradually. Indeed, there was no widespread privatization in China. Instead, the Chinese government allowed, along with the state enterprises, to run private business. This policy led to the emergence of the market economy coexisting with the state economy. The result was an unprecedented economic growth and poverty reduction. Today Chinese economy is one of the most powerful market economies. In 1995 Janos Kornai, a Hungarian economist, published his book Highway and Byways, where he criticized the "shock therapy" economic reforms and expressed clear sympathy to the Chinese economic reform, i. e. proving that the byways clearly are better than the highway. It is justifiable to conclude that Kornai was right!
Conclusion
In sum, as the examples show, with the ever more blatant global inequalities, it seems like neoliberalism has become a much hated curse word. As for the policies and practices, the last few decades of "neoliberalization", the US and the IMF as the leading figures, have dragged the reputation of neoliberalism through the mire, possibly for good. Moreover, as for the concept itself, it is no longer likely to regain its original, rather positive connotations but it is doomed to serve as a scapegoat, the cause of most of the current global problems. Indeed, also Boas & Gans-Morse admit the concept denoting these days mainly to radicalism rather than having the original connotation of a new, moderate form of classical liberalism.
With no explicit and commonly agreed definitions, and with strong contemporary negative connotations of the concept, could it be possible to abandon the term neoliberalism and derive new terms, to better distinguish the theory and the original ideas (cf. e. g. "moderate liberalism") from the exploitative practices of the international financial institutions? After all, it is reasonable to claim that the original, progressive ideas of new liberalism would not have deserved to become overshadowed by the current unjust practices now referred to as neoliberalism.
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