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Neoliberalism is the idea that society should be shaped by the free market and comprises a set of economic theories as well as a more administrative, strategical, and policy position. The theory entails 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, economic growth, technical progress, and distributional justice. Based on 18th-century classical liberalism, catalyzed by Locke, Smith, and Mill, the ideology provides a defense of individual liberty protecting private property and the freedom of markets from foreign interference in the form of taxes and restrictions. It includes central factors like personal liberties, a reduction of restrictions, liberalization of the economy, decreasing the public sector, and the disposition of import restrictions. Moreover, it entails the commodification of almost all aspects of life which means that ordinary goods, products, or resources are made a commodity by commercializing them and putting them on the market.
Before the reforms, the government and civil servants controlled the economy to a large extent. The economy was not regulated and there were not many laws installed. As such, the workers had too much influence on the economy which made the economy stagnant in nature. Nonetheless, a new economic ideology came up under the reign of Margaret Thatcher and Ronald Reagan. Thatcher, also known as the Iron Lady, was the Prime Minister of the United Kingdom from 1979 until 1990. Reagan was the 40th American president and served from 1981 until 1989. In 2017, Sir David Cannadine published a book called Margaret Thatcher: a life and legacy. Here, he elaborated on the great political impact she has had and discusses her relationship with then US president Reagan. According to Cannadine, this relationship was based on differences rather than similarities as he states that he (Reagan) was sunny, genial, charming, relaxed, upbeat, and with little intellectual curiosity or command of policy detail; she (Thatcher) was domineering, belligerent, confrontational, tireless, hyperactive, and with an unrivaled command of facts and figures. Nonetheless, they found common ground in their distrust of the communist ideology which was dominant in the Soviet Union, their liberal beliefs, and their wish for free-market rights.
Even though the way for liberalization had already largely been paved by the Thatcher government and the Reagan administration in the 1980s, the end of the Cold War, the dissolution of the Soviet Union and the fall of the Berlin Wall accelerated and strengthened the process of neoliberal reforms in Europe. The internal disintegration of the Soviet Union in 1991 and thereby the end of the Cold War is signified by the fall of the Berlin Wall in 1989, which opened borders, started free elections, marked an end of communist rule in eastern Europe, and seemed to be a total victory for free market capitalism and liberal democracy over state dictated socialism overall. After 1989, the effective discrediting of communism allowed the proponents of neoliberalism to champion their economic model without serious challenge, as Guyatt says when elaborating on the globalization taking place through privatization of public assets and economic deregulation in the 90s. This new economic model was widely accepted, implemented, and promoted by Western leaders, through international financial institutions like the International Monetary Fund (IMF) and the World Bank, which resulted in the constant growth of the ideology.
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