The idea of neo liberalism was actually coming from the critique from
Adam Smith Classical Liberalism. In his writing that the people should be given
a choice on their own of what work should they do and how. Adam Smith is
stressing on the self regulating market where let the demand and supply of the
market determine the economy. However, as we know that the market were not self
regulating as we thought. Competition is unfair and imperfect. According to
Michael G.Roskin this is the point that he himself discussed about. Adam Smith
also argued “That government is best which govern least” and from this he
brought up the liberal economic policy. (William Letwin.1988.p.65).
Because of
this untouchable economic system, there is a gap between the rich and the poor
and class of the people. Michael Roskin do mention that, when they were class, the status and position
were largely inherited, for example, children that have a better families will
have a better education to stay on the top of the class. Thomas Hill Green also
mentions that, it is true that the goal of Liberalism is to create a free society,
but he asked that what would happen when economic developments take away
freedom. He continues that in liberals we encourage to think “If you don’t like
the deal, don’t take it. However, things
would not be the same if the bargaining power of both parties are not same, or
the bargaining power of both parties is unequal. It could be bargaining between
the rich or poor. Of course that the poor won’t have anything to bargain. In addition,
how about the beginning of unemployment its desperado that and does not have
any choice but to take the job. When
people have no choice, according to green that was the time where the
government should step in and ensure the freedom of people are protected. This
is what he mentions as the positive freedom. They are different understanding
of the term freedom of and the freedom to. Governments have to step in the
economy and economic matters to ensure the freedom are there for the people to
choose. (Michael Roskin et al.2010.pp.44).
In comparison, of classic liberalism, the notion of neo liberalism's
emphasis was to protect people from a sometimes unfair economic system. Classic
liberalism kicks the government out of the people live, however, neo liberalism
bring back the role of government, but in a limited way of ensuring the right
of the people. John Maynard Keynes writes a book of General Theory that
profound new economic thought as neo liberalism. According to Keynes liberal is
a continuing tradition of economic debate. He classified “classical theories”
is from Ricardo through Marshall and Pigou. John Maynard Keynes as a thinker of
pro state that keep mention state as essential in producing the necessary
social ,political and economic condition for human well-being. He believes that
the rationale of an individual cannot add up to a rational individual on the
rational economic outcome on the collective level. He does mention that if we
treat the market was an infallible source of wisdom was a huge mistake. Because
the market was imperfect. (Robert Garner.2009.pp. 458- 459).
Keynes proposes General Theory according to Bill Gerard that sometimes he
reject the classical liberal entirely. Keynes actually focused on the
differences between a real-wage economy and a money wage economy. The real wage
economy is a cooperative economy where it depends on the factor of production
and employment. Keynes argued that classical theories made a quite imprecise
decision on how macro economy is behaving as the same as the co-operative
(barter) economy. ( Keynes ,1979 citer by Bill Gerard). As what Robbins defines
economy, “Economy is the science which studies human behaviour as a
relationship between end and scarce means which have alternative uses”. The subject that the people must understand
is that the competition is imperfect. They are an obstacle between the market, labour,
and employment. If they are no obstacle, the Classical liberal is the best
assumption of the economy. By the existence of monopolies and the oligopoly or
imperfect competition, the state must play their role as ensuring people right
protected.Neoliberals came
from the upgrade of classical liberalism during the Great Depression, when U.S
and U.K as a dominant economy faces a huge challenge in maintaining their
survival. According to David M.Kotz, :
“Neoliberal
theory claims that a largely unregulated capitalist system (a “free market
economy) not only embodies the ideal of free individual choice but also
achieves optimum economic performance with respect to efficiency ,economy
growth, technical progress and distributional justice. “
(David
M.Kotz,2000.p.1)
Even Neoliberal intervenes the market, it does not make neoliberal is
similar as a socialist state centred economy. The states only play a limited
role in the aspect of efficiency, economy and other important matters. However
the role of the state largely being suspicious because the intervention usually
will create more problem that is solved. (David M.Kotz:1). It is back to the
notion that, “Government least, is best government”. In my opinion, the government itself is
imperfect to ensure the perfect equilibrium of markets. Governments are
politician that rule by their own interest and needs. It is bad when the
politicians itself are attached to the market (some politician is the
businessman) and he decides for his self interest. This is what makes people
distrust the government intervention. The intervention will always lead to the
bigger problem. How neoliberal state is
working are related to the idea of the welfare state with certain sets of action,
such as deregulation of business, privatization of public activities and
assets; elimination of, or cutbacks in, social welfare programs; and reduction
of taxes on business and the inventing class. (David M.Kotz:1) . The neoliberal
approach is not a temporary response in order to develop an economy. It is
continuous effort to protect the economic equilibriums. This implementation of
government in their policy was clearly seen under the U.K Prime Minister and
U.S president. At certain points Malaysia under Tun Mahathir also implements
neoliberals in order to save Bumiputera at the imbalance economy competition.
However, in order to implement the neoliberals’ they are risk involve.
When government intervenes in the market, it will change the competitive
structure of capitalism and big business from a supporter of the state into
opponent of it. The monopoly that they have enjoyed will be disturbed by the
government and it might affect the political structure and government. (David
M.Kotz:2).
However, they are some problems of Neoliberals to be implemented in the
contemporary Global Capitalism that emerges. Some of the problems are, the
neoliberals does not suitable or applicable over the long run and also lower
the wages and public spending. Neoliberal needs state to increase spending to
help the people. Secondly, that, neoliberals disturb the stability of the macro
economy of the state by reducing the effectiveness of “automatic stabilizer”
through the reduce function of social welfare programs and less regulation of
the financial sectors. The third is that by the government keep helping in
ensuring the class transformed, the class between conflict will intensify and
may affect the capital investment. (David M.Kotz: 3). David M. Kotz also
successfully proves that actually the neoliberal model of rapid capital
accumulation.
Some mistakes mention that Neoliberals are the “retreat of the State”
where the shift that occurs from being a spender, an investor and a producer,
to new role in privatization and disinvestment. Capitalism Marx had shown the
relation of production underlying is unclear. For example in the use of labor
hidden under the name of custom and tradition. Even in Malacca Sultanate the
exploitation of labor happen under the concept of Daulat and Derhaka.
The exploitation also occurs under the names of volunteers under the name of
national interest. Probate Patnaik mentions that before the concept of
Neoliberals occurs, the transparent methods of exploitation to a more complex,
impersonal and not directly visible compared to Neoliberals period. (Prabat
Patnaik.2003.pp.1-2). Neo liberals are the intervention of government to ensure
the capitalist can grow by providing the facilities to the people and guarantee
capitalism sustainable. According to Fujio Mizuoka, public transportation plays
a significant role in fulfilling this condition. He taking example of Hong Kong
, where British build underground railway and Nigeria develop the
transportation for business and capitalist activities with government funds and
as a means of capitalist regulation.( Fujio Mizuoka.pp.1).
