Instead of delivering growth, some neoliberal policies have increased inequality and have not delivered as expected, according to a recent report from the International Monetary Fund (IMF).
Neoliberalism, a policy model that advocates the control of economic factors to the private sector from the public sector, has been a dominant ideology since the 1980s. It rests on two main planks. Firstly, by increased competition that is achieved through deregulation and the opening up of domestic markets and, secondly, through privatization and limits on the ability of government to run fiscal deficits and accumulate debt, the paper – dated June 2016 - explained.
While the paper, authored by Jonathan Ostry, the deputy director of the IMF's research department; Prakash Loungani, its division chief; and Davide Furceri, an economist, applauds the neoliberal agenda for a number of things, it also outlines two aspects of the neoliberal agenda that have failed to deliver. These include capital account liberalization, also known as removing restrictions on the movement of capital across borders and fiscal consolidation, sometimes referred to as austerity.
"There is much to cheer in the neoliberal agenda. The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state-owned enterprises has in many instances led to more efficient provision of services and lowered the fiscal burden on governments," according to the paper.