Neoliberalism as an economic theory has just come up against its limitations. In 2007 the system that superseded Keynesian approaches to economics collapsed (a.k.a. the global financial crisis of 2007/2008). We’re moving into a period of economic theory where the valid elements of both Keynesian and neoliberal ideas are going to have to be more carefully analyzed and understood; there must be a balance between the two.

The argument for protectionist economic models has merit in that the concept of a ‘free market’ is rhetorically vague and lacks any coherent meaning in a world where a ‘free market’ doesn’t actually exist.

The shift in the 1980s towards favoring more open markets guided by export-led growth and supply side economics, propagated by Reagan, Thatcher, and numerous others, have hit a wall.

Neoliberal economic ideas that consider rolling back state control of the economy, “free markets”, the full privatization of industries, financial liberalization, elimination of barriers to trade and export promotion policies are now being tested.

The key question is; to what degree should any of the ideas underpinning neoliberalism logically be pursued, particularly within the context of their recent failure to put us on a trajectory toward development that is sustainable?

It’s difficult to get global leaders to agree on macro-economic policy; much less the specifics of the discourses that underpin the ideological framework itself.

Limitations are inherent in neoliberalism since the ideology is embedded in the Western cultural ideas of competition, freedom, and responsibility of the individual, which are foreign concepts to a large portion of the global populace. Some have even argued that neoliberalism is a necessary component for the promotion of democracy, and vice a versa, leading to further complications.

Do you think neoliberalism is necessary for the promotion of democracy; why or why not?

There a a number of nation-states that aren’t lining up to enact ‘free markets’ or democracy, and some definitely aren’t pursuing both in tandem (e.g. China).

Uneven geographical development and the lopsided implementation of neoliberal policies from one country to another reveals the tentativeness of neoliberal ideology’s application in differing historical and political contexts. Diverse institutional arrangements are shaped by ‘exogenous’ factors that economists exclude, in their own analysis as externalities (e.g. development and its impact on society and environment). Consequently, when using totalizing concepts (free markets) in scholarly or practical analysis, the debate becomes problematic.

The aim ought to be to unravel neoliberalism’s trajectory in specific contexts by focusing on the effects of the ideas, policies, and practices that have underpinned it, while elucidating their locally contingent forms.

Keynesian ideals on the other hand have re-emerged. Unlike neoliberalism, Keynesian approaches have a greater tendency to focus on discourses of the state, and what the states’ role should be in supporting policies and practices that advance societal interests, including those of the private sector.

It is certain that both the private sector and the state have important roles to perform to ensure that civil society can thrive and prosper in both the public and private spheres. It’s critical to recognize that too much power in the hands of either the private sector or the state can have severe consequences for civil society. Herein lies the need for the protection of individual liberty from corporatism and socialism. Corporatism supported by a state that continuously socializes risk can all too easily lead to fascism.

The recent economic crisis that began under President George W. Bush in 2007 as a result of the failures of neoliberal economics forced President Barack Obama to ask questions regarding what role the government should perform in ‘repairing’ the economy; thereby, turning his Administration’s attention toward Keynesian ideas. As stated, Keynesian approaches have tended to focus more specifically on the role of government in economics and has many ideas to offer up to offset the crisis that resulted from too much neoliberalization, beginning with Reagan in the early 1980s, and pursued by every President since that time. Consequently, the financial crisis has revealed the problems that neoliberalism can bring to society when deregulation, trade liberalization, etc. are implemented to an inappropriate degree. Hence, the need for the state to perform a larger role as this particular moment in time to mitigate the failures of a previous lack of government oversight of the private sector, which was gambling with the public’s money.

In other words, the current economic crisis is the logical result of our government socializing private industries’ risks for nearly three decades. The public is now paying for their haphazard ways. The uninformed call it “natural business cycles”, which is not the case, just an excuse to rationalize the limitations of economic theory in an uncertain and irrational world. Markets aren’t rational, as much as folks would like to think, and they definitely aren’t invisible. They have real people behind them, making real decisions everyday that have positive and negative impacts.

The current myth of socialism articulated by some is driven by a fear of uncertainty in the markets, as a result of the failure of the dominant economic ideology confronting its own limitations.

To what extent do you think Americans should continue socializing the private sectors’ risks?

Do you think that we should have bailed out the auto-industry?

What about the banks?

Henceforth, I think the aim in economic theory ought to be to find a balance between Keynesian and neoliberal ideas, both of which have met their boundaries (Keynes in the 1970s and neoliberalism in 2007). Continuing the conversation as if the debate is capitalism vs. socialism, without regard for ideas that are more localized or regional would surely be narrow-minded and lack a sense of the progressive.