When the BJP led government won the elections in 2014, PM Modi strived to practice a neoliberal approach in the economy. This led to a small stream of free trade, privatisation and disinvestment. The rhetoric of ‘minimum government and maximum governance’ was propagated. But after 7 long years of their sovereignty, it is condemned that there was no downsizing of the state’s interference that took place and the governance of India which is known for controlling all aspects of citizens, continues to do so and neoliberalism merely became a political slur.
The neoliberal approach is not a new concept in the economic world. Various governments across the globe have implemented this economic concept under their reign. The neoliberal approach is an extension of economic liberalisation and free trade regime but it also includes privatisation, deregulation, reduction in government spending, etc. The practice of neoliberalism emphasises a significant reduction of the government’s role in the economic policies and restricts its part just to the jurisdiction and welfare sector.
There were various leaders around the globe who actually endorsed the neoliberal approach in their economy when head of the state. Margaret Thatcher was one of the pioneers of neoliberal policies. The government under her control brought about several reforms such as tax reduction, deregulation, flexible exchange rate, etc as part of her neoliberal programme.
The same policies were adopted by US president Ronald Reagan who embraced pro-market policies working in favour of markets and against the government. Leaders under the liberal parties in both Japan and Australia were inclined towards reducing government interference and opening up the regional markets for global domination.
The need for a neoliberal economy was pushed due to detrimental interference by the state governments and widespread scepticism around tax payments and government expenditure. It was anticipated that by reducing control on price, market rates, exchange rates and lowering down the trade barriers, there would be significant scope for economic growth and the market itself would determine the right functioning of the economy.
When it comes to the implementation of neoliberal policies, countries around the world have imparted semi-neoliberal policies. The countries announce changes in tax policy by providing tax cuts for the rich, reducing the dominance of trade and labour unions and encouraging policies that promote market-based wages of which the most popular policy is the disinvestment of public companies.
In various cases, international organisations such as the IMF (International Monetary Fund), WTO (World Trade Organisation) and the World Bank impose neoliberal policies in terms of trade regulations and financial rates in the countries. In the recent modifications of the Farmer’s Act in India, the government aimed to reduce state guaranteed protection and trade as part of its neoliberal programme.
The neoliberal policies that advocate a free market adjusted economy are not free of its limitations. There would be certain sections of society that would be exploited if thrown in the hands of the market fluctuations. The income disparity has been found to be continuously increasing owing to a liberalised economy and the people in the lower income group are further marginalised by getting caught in the clutches of capitalism. In layman terms, it categorically penetrates the idea that ‘everyone should look after themselves, and themselves only’.
Another major domain undermined through neoliberal policies is the environment. As people are rushing towards attaining huge capital gain, its destructive impact can be seen on the environment. Another important criticism of neoliberal policy is its practicality. It is virtually impossible for governments to move towards deregulation in any form. Even though they do aim to reduce their expenses, moving towards reducing their role would not curtail their spending.
Just like every other form of economic approach, the neoliberal approach cannot be implemented in isolation and although various governments propose to reduce their intervention, they cannot maintain their influence by such withdrawing policies. Neoliberalism as a revived liberalisation policy might seem like a fancy approach to running an economy but pro-business policies or crony capitalism does not make an economy neoliberal.
The example of cryptocurrency can be cited to know the functioning of a pro-market sector but time will tell whether an economy of 1.38 billion people can suffice with the shrinking role of states and the dominating role of markets.
Written by- Ashima Bajaj
Edited by- Ubai Sura
