A Brief History of Neoliberalism
A political project, not a natural drift
Description
For a long time the story went like this: sometime around 1980, the world simply grew up. Markets, we were told, were more efficient than governments; competition sharpened everyone; the state should step back and let enterprise breathe. Deregulation, privatization, free trade, lower taxes on capital — these arrived not as choices but as facts of nature, the way weather arrives. Countries that resisted were said to be fighting gravity. The whole thing had the feel of an evolution nobody had authored, a tide that had come in on its own.
In 2005, the geographer David Harvey published a short book arguing that this was almost exactly backwards. Neoliberalism, in his account, was not a drift. It was a project — thought through in seminar rooms, funded by specific donors, rehearsed in one country before it was rolled out everywhere, and pushed by people who knew precisely what they wanted. Harvey traced the theory to a small circle of economists gathered around Friedrich Hayek and Milton Friedman, and its first full application not to Washington or London but to Chile, in the weeks after a military coup in 1973.
The word itself has since become a kind of insult, thrown at anything vaguely pro-market. Harvey wanted something sharper: a history with dates, places, and beneficiaries. If a set of policies transferred wealth from most people to a very few, then the interesting question was never whether they were efficient. It was who chose them, and who they were for.
The question we’re asking : Was the turn to free markets after 1980 a natural economic evolution, or a deliberate political project — and if the latter, whom was it built to serve?What we’ll see : How an academic doctrine became state policy, where it was first tested, how it captured two governments at once, and what its true accomplishment turns out to have been.
Table of contents
01Chapter 1 — A theory that arrived with a plan
Harvey starts with an idea, and ideas, he insists, do not float freely. This one had a home. In 1947, Friedrich Hayek convened a group of economists, historians and philosophers at Mont Pèlerin in Switzerland, alarmed by the postwar consensus that had handed governments a large role in managing economies. Their conviction was straightforward: human freedom was best secured through private property, free markets and free trade, and the state's job was to guarantee those conditions and then get out of the way. It was, at the time, a fringe position. The dominant framework was the one associated with John Maynard Keynes, and it seemed to be working.
For nearly three decades it did work, more or less. The long boom from 1945 to the early 1970s combined strong growth with high employment and expanding welfare states across the industrialized world. Neoliberal theory sat on the margins, kept alive by a small network of think tanks, sympathetic businessmen and a few university departments — the University of Chicago economics faculty chief among them, where Milton Friedman gave the argument its most confident public voice.
02Chapter 2 — Chile, and the laboratory nobody voted for
On September 11, 1973, the Chilean military, led by General Augusto Pinochet, overthrew the elected socialist government of Salvador Allende. The coup was violent and the repression that followed was severe. What interests Harvey is what came next in economic policy, because it did not emerge from Chilean tradition. It was imported. A group of Chilean economists trained at the University of Chicago under Friedman and his colleagues — remembered as the Chicago Boys — were handed the levers of the economy.
The program they applied reads like the neoliberal template drawn up in advance: state enterprises privatized, markets deregulated, public spending slashed, trade opened to foreign competition, unions broken. Friedman himself visited Chile in 1975 and advised what he called shock treatment. The results were mixed and painful — a deep recession, then a period of growth followed by a severe financial crash in 1982 — but the ideological verdict was already being written, and it was favorable.
03Chapter 3 — The turn in London and Washington
The gentler capture came at the end of the 1970s in the two countries that would carry neoliberalism into the mainstream. Margaret Thatcher became prime minister of Britain in 1979, Ronald Reagan president of the United States in 1981, and between them they turned a marginal doctrine into the governing common sense of the Anglo-American world. Neither used tanks. They used elections, crises and the slow reworking of what could be said about the economy.
Before the politicians, though, came a monetary decision. In 1979 Paul Volcker, chairman of the U.S. Federal Reserve, sharply raised interest rates to crush inflation, accepting a brutal recession and mass unemployment as the price. Harvey calls this the Volcker shock and treats it as the real hinge — a signal that the priorities had changed, that controlling inflation and protecting the value of money now outranked full employment. Reagan then added tax cuts weighted toward the wealthy, deregulation and an assault on organized labor, dramatized by his 1981 firing of striking air traffic controllers.
04Chapter 4 — The restoration of class power
Here Harvey makes his central move. If neoliberalism is judged by its stated aims — reviving growth, lifting all boats, unleashing prosperity — the record is thin. Global growth rates after 1980 were, on the whole, lower than during the postwar boom the doctrine had replaced. Productivity gains were uneven, financial crises grew more frequent, and the promised trickle-down largely failed to trickle. By its own advertised standard, the project underperformed.
But Harvey argues we have been judging it by the wrong standard. Follow the money instead, and a very different picture snaps into focus. Across the neoliberal decades, the share of national income going to the very top rose steeply in country after country, most dramatically in the United States, where the wealthiest fraction recaptured a slice of the total they had not held since before the Second World War. Wages for most people stagnated even as output grew. Whatever else neoliberalism did or failed to do, it moved wealth upward with remarkable consistency.
05Conclusion
Harvey's history refuses the comfortable version in which markets simply won on merit. It gives the turn a beginning — Mont Pèlerin in 1947, the crisis of the early 1970s, the coup in Santiago, the Volcker shock, the elections of Thatcher and Reagan — and it gives it authors, funders and beneficiaries. The point is not that free-market ideas were insincerely held; many who advanced them believed them completely. It is that belief and interest ran in the same direction, and that the results, decade after decade, landed in the same pockets.
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