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Neo-Liberal Theory of State - Origin, Key Principles, Major Characteristics, Appraisal & Its Impact

Last Updated on May 20, 2025
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The concept of neoliberalism has gained significant attention in various fields. This includes politics, economics, and public administration. Neoliberalism refers to a political and economic ideology. It advocates for limited government intervention in the economy. It emphasizes the role of the market in promoting efficiency and individual freedom. 

The Neo-Liberal Theory of State is a part of the Political Sciences and International Relations subject in the Mains Optional Paper. In this article, we will explore the Neo-Liberal Theory of State in detail. We will look into its major characteristics and its effect on public administration.

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What is Neoliberalism?

Neoliberalism is an ideology that believes the government should interfere less in the economy. It lets businesses and markets have more control. It became popular in the 1970s when people thought the old way of doing things, called Keynesian economics, wasn't working well. 

Origin of Neoliberalism

Neoliberalism started in the 1970s as a response to the problems people saw with Keynesian economics. Some important things to know about its history are:

  • Neoliberalism became popular because people thought the old way of doing things wasn't working well.
  • Some economists, like Friedrich Hayek, were influential in shaping the ideas of neoliberalism.
  • Leaders like Margaret Thatcher in the UK and Ronald Reagan in the US implemented neoliberal policies in the 1980s.
  • Neoliberalism became even more widespread when the Soviet Union collapsed and countries started adopting market-oriented reforms.
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Principles of Neoliberalism

Some key points about neoliberalism are listed below.

  • Neoliberalism advocates for reduced government intervention in the economy and promotes free-market principles.
  • It thinks that when businesses have more freedom, they can make more money and create more jobs.
  • Neoliberalism wants the government to have less control over the following:
    • Healthcare, 
    • Education, and 
    • Transportation.
  • It wants these things to be run by private companies instead.
  • It also wants fewer rules and regulations that might get in the way of businesses making money.
  • The term neoliberalism is currently employed to describe reform policies that emphasize market orientation. These policies involve the following actions:
    • the elimination of price controls, 
    • the deregulation of capital markets, 
    • the reduction of trade barriers, and 
    • the decreasing influence of the state in the economy.

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Major Characteristics of Neoliberalism

Neoliberalism is characterized by several key principles that shape its ideology and policies. These include:

  • Neoliberalism supports the idea of a free market where businesses can buy and sell things without the government getting in the way.
  • Neoliberalism wants the government to be less involved in the economy. It wants to let businesses make their own decisions.
  • Neoliberalism supports the idea of privatization. It supports private companies owning and running services controlled by the government.
  • Neoliberals argue for the removal of regulations and barriers that hinder market competition.
  • Neoliberals support international trade and global economic integration.

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Neo-Liberal View of State

Neoliberalism presents a distinct view of the state and its role in society. Some key aspects of the neoliberal view of the state include:

  • Neoliberalism believes that the government should be limited in its involvement in the economy. It should allow the market to operate freely. 
  • Neoliberalism sees the government as a supporter that makes sure the market works properly. It has to protect property rights and maintain the rule of law.
  • Neoliberalism often suggests changes to make markets work better. This includes privatizing services and reducing barriers to trade.
  • Neoliberals think that it's important for things to be efficient, even if that means some people don't get as much help from the government.
  • Neoliberalism wants the government to spend less money on things like welfare and social services.

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Effect of Neo-Liberal View on Public Administration

The rise of neoliberalism has had significant implications for public administration. Some effects of the neoliberal view on public administration include:

  • New Public Management: Neoliberal ideas have influenced public administration through a way of doing things called New Public Management. This focuses on measuring performance, decentralization, and using market-like methods. 
  • Privatization of Services: Neoliberal policies have led to the government handing over control of things like transportation, healthcare, and education to private companies.
  • Outsourcing and Contracting: Governments have started hiring private companies to do public services instead of doing them themselves.
  • The Marketization of the Public Sector: The introduction of market-oriented practices in the public sector has aimed to increase efficiency. It has also faced criticism for prioritizing cost-cutting over service quality.
  • Downsizing of Bureaucracy: Neoliberal reforms often involve reducing the size and scope of the state bureaucracy.

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Appraisal of Neoliberalism Theory of State

The Neoliberal Theory of State has been subject to various appraisals and critiques. Some key points to consider include:

  • Critics say that neoliberalism focuses too much on making money. It does not focus enough on helping people and making sure things are fair.
  • Some people think that when markets are left alone, they can have many problems. One company may become too powerful, or certain groups may get left behind.
  • Neoliberalism has been criticized for making social inequality worse. It often benefits some people more than others.
  • Some say that neoliberalism doesn't pay enough attention to the environment and make sure we're taking care of it.
  • Critics argue that neoliberal globalization makes all cultures the same. It can hurt local traditions.

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Criticism of Neoliberalism

Neoliberalism draws criticism from various quarters, including academics, journalists, religious leaders, and activists on both the political left and right. Noteworthy critics include economists Joseph Stiglitz, Amartya Sen, Michael Hudson, Ha-Joon Chang, Robert Pollin, Julie Matthaei, and Richard D. Wolff. Linguist Noam Chomsky, geographer David Harvey, philosopher Slavoj Žižek, activist Cornel West, feminist Gail Dines, musician Billy Bragg, author Naomi Klein, and Pope Francis also oppose neoliberalism. Journalist George Monbiot, psychologist Paul Verhaeghe, activist Chris Hedges, philosopher Roger Scruton, and groups like ATTAC in the alter-globalization movement contribute to the critique. The impact of the 2008 Great Recession has spurred new scholarship criticizing neoliberalism. Some argue that Trump's 2016 campaign tapped into anti-neoliberal sentiments, and there are calls on the left for the Democratic party to mobilize against it.

Conclusion

Neoliberalism is an idea that says the government should have less control and markets have more freedom. It became popular in the 1970s. It suggests that businesses should be able to make their own choices without too many rules. Neoliberalism wants the government to focus on keeping the market fair and protecting property rights. It has influenced how public services are managed, like with New Public Management and privatization. Some people support neoliberalism. Many have concerns about things like fairness and the environment. Understanding neoliberalism is important for UPSC aspirants to know how economic policies and government work today.

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Neo-Liberal Theory of State - FAQs

Neoliberalism is different from other economic theories, like Keynesianism. It believes in less government involvement and more reliance on the market

Neoliberalism has been criticized for making income inequality worse. It often benefits some people more than others.

Neoliberalism is a topic of debate. People have different opinions about it. Its acceptance varies depending on the country and the field of study.

Neoliberalism is an ideology that believes the government should interfere less in the economy. It should let businesses and markets have more control.
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