Neoliberalism vs Capitalism
Capitalism is a social and economic system that is prevalent in most parts of the world excluding socialist and communist countries. It is a system that encourages private ownership and entrepreneurship and does not find fault with the motive or profit making. It is a market that is not regulated by the state and where the forces of demand and supply rule. There is also a concept of Neoliberalism that refers to the emergence of ideas and thoughts in the economic world in the last 25 years or so. There is much overlap between capitalism and Neoliberalism and there are people who feel that the two concepts are synonymous. However, despite similarities, there are differences between Neoliberalism and capitalism that will be talked about in this article.
What is Capitalism?
Capitalism is a philosophy that is dominant in the western world and is slowly becoming popular in all parts of the world. It refers to free market economy that means no interference or regulation from the state and markets regulating themselves being driven by forces of demand and supply. This is a system that encourages profit motive and entrepreneurship. Ideally, there is less and less participation of the state in industries and it confines itself with administration and maintaining law and order.
Capitalism is an economic system that is ideally characterized by freedom or laissez-faire. It is a system where rule of law is supreme, and the market is not governed by the state.
What is Neoliberalism?
Neoliberalism is a collection of economic policies that have emerged in the last 2-3 decades and which favor economic liberalization, open markets, free trade, deregulation, removal of license and quota system, and so on. Neoliberalism as a term was coined in the mid-thirties, to popularize a kind of liberalism that was different from the classic liberalism. Over a long period of time, Neoliberalism has come to mean many diverse things to diverse groups of people.
Liberalism as a concept is very old, and it was popularized for the first time by Adam Smith in his book The Wealth of Nations, in 1776. Many of his ideas at that time seemed revolutionary such as free markets, no barriers to trade and commerce, no control of government etc. With the passage of time, liberalism prevailed over entire Europe and America. However, the capitalist crisis in the west with shrinking rates of profit led to a revival of liberalization that resulted in Neoliberalism. In general, Neoliberalism emphasizes rule of markets, deregulation, privatization, and cutting down of government expenditures.
What is the difference between Neoliberalism and Capitalism?
• Neoliberalism comprises the latest developments in capitalism.
• Neoliberalism is a type of capitalism.
• For some people, Neoliberalism is capitalism on steroids.