Economic change can be described as the progress in our economy that involves the adoption of new technologies and transition from agricultural-based to an industrial-based economy and associated with improved living standards (Yun, 2004). Globally, many countries have achieved economic development, and others are in the process that has enhanced production of the right products at the right time. From a qualitative measure of the economic change, its always changing to either increase, deplete, or sustaining the vitality. Its progress can be determined by measuring the fluctuations, stability, expansion, and recession. Additionally, economic change is influenced by various factors such as political changes and globalization. Neo-liberalism has greatly influenced economic change regarding the 19th-century ideas that majorly pushed for laissez-faire economic liberalism (Cohen & Centeno, 2016). The ideas were mainly deregulation, free trade, and a decrease in government spending to improve the private sector in economic development. The various policies and market ideas have led to a paradigm shift in the economies of the world that was more prevalent in the 20th century, and it is a continuing process. In the current world, neo-liberalism consist a policy model that contains economics and social studies whose function is to transfer and economic factors to the private sector that from the public sector (Perivier & Senac, 2017). This paper will address how neo-liberalism integrates with ideas from Adam Smith, neoclassical economics, Austrian economics, Soviet socialism, Milton Friedman, and the new classical economics supply-siders.
According to Adam Smith, neo-liberalism refers to an economy whereby the government impacts minimal, if any, controls on the economic factors (Pack, 2010, 123). Adam suggested that the government should eliminate or reduce most of the business regulations for a productive economy. The above idea is supportive of facilitating development of the private sectors. Again, Adam suggested that the government is expected to balance its budget to support the economic growth. Another idea was that taxes should be subsidized for the taxpayers and simple to calculate. The above ideas have supported the presence of equality regarding the availability and distribution of wealth. Smith can be referred to as a neo-liberalist for his ideas that have significant support for economic growth.
From the Smiths ideas illustrated above, there is an indication that social activist pushed for a free economy where there are no regulations and barriers to control the actors. One of the ideas, as presented by Smith, was the elimination of regulations for a productive economy. This move uses the basics of neoclassical economics that suggested that the government should limit subsidies and implement reforms in tax laws to facilitate economic growth. Not forgetting, the government regulations significantly influence open markets and private businesses. Some of the impacts of government policies and regulation on economic growth include market failure, low production, and positive outcomes such as the development of industrialization. According to (Duignan, 2013, p27), direct involvement of the government regarding its business policies to regulate trade promoted industrialization through substitution of imports and encouraged the direct investment into industries and agriculture. Following the market failure due to business regulations and policies that limited the scope of investment, deregulation was adopted thus facilitating structural adjustment whose goal was to reduce the regulatory burden that affected the market economy. Economic liberalization among the developing countries has also faced problems and failures associated with regulatory measures (Pack, 2010, 123).
From the ideas suggested by Smith, he proposed that the government should subsidize the taxes, a balanced budget, and equal distribution of wealth (Pack, 2010, 123). These ideas have focused on building the economy and having a self-dependent country. Taxes can be categorized among one of the regulations that are pulling back the economy by limiting the private investors. Balanced budget, on the other hand, has focused on having a profitable investment while the equal distribution of wealth will promote opportunities for investors including foreign investors. When defining the skeptical role of the government regarding deregulation of economic development, every other economist is concerned about the future conditions. The economic condition is therefore measurable, and its indications are useful in detecting the possible changes. Some of the indicators of economic conditions include the unemployment rate, GDP growth rate, and account status and budget (Pack, 2010, 123). The government should be aware of the economic condition of the country because it influences the investors and businesses by providing insights. Improved or a developing economic condition is an opportunity for investors because of their future expectation regarding the positive returns. For instance, neo-liberalism has changed and encouraged industrialization that is being facilitated by globalization.
From the ideas of Adam Smith, the government has a great role in facilitating laissez-free economic (Pack, 2010, 123). Laissez-free economic was introduced in the 18th century and promoted free-market capitalism. This type of economy requires the government to be less involved in the economy, and it is based on the idea of natural order regarding its rule to the world. Economist such as Adam Smith believed in this idea and presented other views that taxes serve as penalties for production. According to Smith, therefore, it is expected that a countries economy will develop if there are few barriers such as policies, licensing, and other requirements.
Neoclassical economics insights support that the market is better when there is minimal interference by the government and the consumers as well as the suppliers are free to pursue their self-interest (Luiz, 2010). The principles of neoclassical economics have also focused on determination of prices, inputs, and output distribution concerning market supply and demand. Economists apply a mathematical theory for better analysis of the various aspects of the economy. The core idea concerning neoclassical economics focuses on the allocation of scarce resources as well as their distribution. Individuals are interested in making use of the available resources to a maximum utility to attain a better economic satisfaction (Luiz, 2010). The economy of a country is faced with problems such as the inadequate nature of social resources. Following the scarcity, neoclassical economics focuses on establishing welfare through optimal allocation of resources. Concerning the ideas of neoclassical economics and how it relates to neo-liberalism, there is no equality regarding the trade relations because of factors such as labor rights that are associated with economic conditions. Activists of neoclassical economics have argued that consumer perception greatly influences a product's value. Economic surplus is the key issue affecting the economy because crisis occurs when determining the actual cost and the price of a product. Economic surplus is associated with financial crisis across the world (Luiz, 2010).
Neoclassical economics is related to the neo-liberalism through consequential neo-liberalism that focuses its insights on free trade, smaller government, and minimal regulation of the private sector. Neoclassical economics, therefore, stands as the forefather of neo-liberalism and its movements started in the 1960s whose assumptions regarding economic policy were not clear until 1930s (Luiz, 2010). Neo-liberalism has borrowed assumptions applied in neoclassical economics that pushed for free trade, low taxes, and deregulation of the economy. Milton Friedman is considered a classical liberal according to the Austrian perspective. Through neoclassical economics, a low government spending is expected for effective distribution of scarce resources and consumer satisfaction. The insights of neoclassical economics are applied by investors because they are better informed and prepared to take on the market.
Neo-liberalism being a policy comprising of social studies and economic policies extracts radical ideologies from the Austrian Economy, suggesting that a financial system should be characterized by having a free market that has a bold social emphasis (Evans & Aligica, 2016). In addition to that, the economy should also take account of the weaker individuals in the society. Neo-liberalism has therefore borrowed ideas from the Austrian economics suggesting that there should be a healthy relationship between the social and the economic features to enhance the role of price and wage policies. Austria is one of the most developed countries; neo-liberalism has therefore considered the ideas of developing the essential industries such as mechanical engineering, steel construction, luxury, food, and vehicle manufacturing.
With neo-liberalism entailing the ideas of transferring economic factors to the private sector, it has borrowed a lot from the Austria commercial and industrial sectors. It has therefore characterized these two industries by having medium-sized companies. In addition to that, it has covered almost every portion of manufacturing to the rigorous labor production of the highly processed goods. The construction of these systems and plants has expanded the economy, especially in the private sector. Therefore, the private sector has become a robust export-oriented segment (Evans & Aligica, 2016).
Austria is also known for its crafts and arts and therefore, neo-liberalism has borrowed in order to produce glassware, ceramics, customized ceramics and handcrafted materials that reach a world economic level (Evans & Aligica, 2016). Tourism has also been incorporated into the private sector as it is one of the essential pillars of enhancing its economy. The idea has been extracted from Austria which is a highly precipitous country, and therefore neo-liberalism has borrowed the tourism ideas from the economy to enhance the private sector. Finally, neo-liberalism has improved the private sector by expanding its electricity supplies, natural gas sources, petroleum extracts to develop the economy.
According to Milton Friedman neo-liberalism was fabricated on the foundations of a democratic society and a newly dealt with liberalism which was evident through the writings of Ludwig Von Mises, Friedrich Hayek, and Karl Popper (Evans & Aligica, 2016). Milton stated that 1940 marked a new era of the neo-liberalism. It was one of the most potent attacks on the American society and the interventionist as it set aside the power of the free market and transferred it into the private sector. According to Milton, the original neoliberals in the United States and Europe had a feeling that they were thinking neo-liberalism afresh to migrate beyond him older nineteenth-century economics and into the economic ideas in the private sector.
In addition to that, Milton Friedman neo-liberalism was also marked by identifying the troublesome effects of the market, having a stable government that addresses the social impacts on the markets in the private sector as well as having the successful economic operation in the industry. Finally, neo-liberalism was marked by expanding its power into the areas that had been previously ignored by the economists to grow the private sector (Evans & Aligica, 2016).
Soviet Type Socialism
This model of the economy has a unique charact...
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