Anyone with the slightest interest in politics will have heard the term “neoliberal” being used at some point. It is often weaponized by critics in an attempt to blame all the world’s problems on some form of pro-capitalist economic policy and therefore on classical liberal values ​​in general.

But what is neoliberalism in reality – and how does it relate to classical liberalism and libertarianism?

Neoliberalism and libertarianism share many common principles although they mean different things to different people. Both have their origins in classical liberal ideas of the Enlightenment and place significant emphasis on capitalism, free trade, private property and limited government.

Their most striking differences are in how they construct their philosophy, how much they tolerate the state, and how they view the state.

Neoliberalism as a term originated in the 1930s, at a time when the scale and scope of government was expanding rapidly. Coined by German ordoliberal Alexander Rüstow, the term was used to refer to the advocacy in some circles of a new take on classical 19th-century liberal ideas.

Neoliberalism emphasizes capitalism, individualism, globalization, innovation, economic freedom, small government, and an increased role for the private sector in society.

Neoliberalism differs considerably from what can be called modern liberalism, a set of ideas that draws on factions very opposed to classical liberalism. Indeed, modern liberalism has become something of a fusion of liberalism and socialism – broadly anti-authoritarian on social issues while advocating greater state intervention in economic matters.

Originally stemming from the ordoliberal school of thought, neoliberalism aimed to curb the excesses of progressives and socialists by offering something that was both modern and consistent with old classical liberal ideals.

During the second half of the 20th century, elements of neoliberalism were able to gain ground. Political figures such as Margaret Thatcher and Ronald Reagan embraced aspects of this school of thought by implementing economic reforms and reducing trade barriers.

Yet “roll back the state” neoliberalism, as espoused by Thatcher and Reagan, influenced by figures like Hayek, would merge with social conservatism. Over time, the fusion of conservatism and neoliberal economics morphed into a more collectivist and conservative populism, resulting in the inevitable political realignment we see today.

At the same time, the second half of the 20th century also saw the emergence of another current of thought: the modern libertarian movement.

Neoliberalism and libertarianism aim to create a freer society, where civil liberties and economic freedom can be enjoyed by all. However, with libertarianism the end goal tends to be more radical, whereas neoliberalism is willing to operate within existing frameworks and from there.

Neoliberalism is not libertarian. He approaches things from a different angle. The libertarian angle, by and large, sees the issues in a much more black and white way. It’s a very linear worldview, pitting the individual against the state, and rooted in principles, like the idea that all taxation is theft.

On the other hand, neoliberalism is very pragmatic, advocating a kind of technocratic use of markets to achieve certain specific social ends, all within a modern democratic state.

However, neoliberalism and libertarianism overlap in one very important aspect: they both argue that free markets maximize prosperity.

Right now, the freedom movement as a whole faces challenges on many fronts, both left and right. Given the current political climate, could the cause of freedom advance more effectively if neoliberals and libertarians of various persuasions cooperated more broadly to promote their common interests?

Could neoliberals play an important role in helping the freedom movement deal with the threats of populism and collectivism? To what extent could neoliberalism and libertarianism become important allies in the times to come?

For more, be sure to watch the video below featuring a discussion on Libertarianism vs. Neoliberalism with Spike Cohen and Bastiat.

This piece expresses the opinion of the author only and not necessarily the organization as a whole. Students For Liberty is committed to facilitating a broad dialogue for freedom, representing a variety of opinions.