Neoliberalism describes a market-driven approach to economic and social policy that stresses the efficiency of private enterprise, and relatively open markets. Neoliberalism seeks to transfer control of the economy from public to the private sector, under the belief that it will produce a more efficient government and improve the economic health of the nation. Neoliberalism is also to be the policies of privatization, austerity, and trade liberalization dictated to dependent countries by the International Monetary Fund and the World Bank as a condition for approval of investment, loans, and debt relief. Neoliberalism seeks to maximize the role of the corporate sector in determining the political and economic priorities of the state.
A policy that based on the ideology of neoliberalism, which the US government has been trying to impose on Latin America, is called "Free Trade". It is a system of trade policy that allows traders to act and or transact without interference from government. Free Trade discourages countries to improve social developmental strategies like public education or health care, but rather let the economy flows in and money will do the job. Neoliberalism's way of thinking can be looked at as "law of the jungle" (Peck and Tickell, 1994), a way to weed out the weak because those who are disabled or unable to work will not be able to contribute to the economy and therefore would have only benefited from a public health care.
While in theory, Neo-liberalism may seem like a perfect economic system and would achieve great relationships between countries, in practicality, it hardly works that well, and sometimes may have the opposite effect. Though the whole point of a free trade market is to have no barriers between countries, in trade, due to the intense competition is brings, each country imposes barriers to protect their own industries. These barriers include taxes and tariffs and subsidies. The most significant example for this condition is USA, the biggest player in the free market trade. Typically, Latin American countries have the comparative advantage in producing agricultural goods because of their land and resources. However, importing these products from Latin American countries would mean that it would put American farmers out of business. So what America does to protect their own industry is to give large subsidies to their farmers to encourage huge supplies. this brings the price of agricultural products made in USA down, making it a lot cheaper than the ones produced in Latin American countries which in actuality has the comparative advantage. However, these poor countries cannot compete in the market with the low prices of goods from USA, so they are driven away from the market.
This, in turn, impacts the further problem of immigration to the United States. Free trade and neoliberalism are components of the US's attitude towards foreign countries, which also includes an active and aggressive dislike of undocumented immigration from Latin America, most prominently Mexico. However, the effects of the US's free trade policies give Latin American workers even more reason to attempt to work in the United States. As the markets for various goods are monopolized by US government-subsidized farms and companies, all those involved in the creation of these goods in Latin America lose their jobs. Such laborers have little choice but to seek out similarly labor-intensive work in the US. This is just one of many causes for immigration from Latin America to the US, but it is a significant one, and thus is another way in which the United States's free trade policy is not as beneficial as it may seem.
Furthermore, big players like USA impose taxes on poor countries for the imports from their countries, at the same time forcing these poor countries to break-down their tariff barriers. This makes the imports into USA much more expensive and imports from USA to other countries much cheaper. Because of this USA comes out as a winner, while the poor countries lose out. In this case, rather than create a friendlier atmosphere between nations, as it is intended to do, it might in fact, create tension between the foreign relations of countries and a hostile environment.
Also, USA uses the free trade to open multi-national firms in these poor countries and take advantage of the cheap labor and low raw material and land costs. In this way, the 'free' trade that sounds so good in theory is not nearly as free or fair as its creators would like people to believe. It is definitely an advantage to big players like USA but does little to improve the economic conditions of poorer Latin American nations.
John Williamson's Washington Consensus is defined by the concrete policies of neoliberalism.
Despite the extensive impact of neoliberalism, there have been an abundant number of country-wide reforms in South America as anti-neoliberal contention increases. According to Eduardo Silva’s Challenging Neoliberalism in Latin America, “first and second-generation neoliberal reforms recommodified labor and land by dismantling the national-populist order and by restructuring the state in support of market efficiency to the exclusion of other values” (Silva 266). The effect of free-trade and market policies spread by the United States and other large business influences created a rift that ultimately cut off subaltern trade and market groups from large competitors, dooming them to become reliant on the state and many times fail in the face of large trade practices. Across South America, the process of neoliberalism and its effects were to sweep “the mixed economy and bringing domestic prices, regulatory environments, and practices in line with the world economy” (Silva 266). In practice, such policies hurt certain areas of the middle class and much of the lower class. The accompanying stabilization policies of neoliberalism drastically reduced the number of subsidies, prompting outcry from the public. The degree of outrage from such a large portion of the public stimulated aggressive government reforms in policy determined to reach the level of modernity of the rest of the world on a pace more conducive to countrywide prosperity and sustainable economic growth. This pace has been heavily dependent on creating a market society in order to embrace a market economy.
Much of the initial influence and driving force for challenging neoliberalism have come from organized indigenous groups, as illustrated by the movements seen in Ecuador and Bolivia as well as Argentina’s Piqueteros. Although more of a catalyst for awareness and public uprising, these interests had to be picked up and pursued by governments in order for lasting change and policies to emerge. For example, in Venezuela under the power of Hugo Chávez, Silva writes “it appears the state leads the process with the expansion of Bolivarian circles, community organization, and the creation of an alternative labor confederation” (266). Although many different government organizations have expressed dissatisfaction with neoliberalism, the question arises as whether governments have been able to create effective policies and alternatives to neoliberalism. Governments such as Venezuela that have been more successful in resisting U.S. implemented neoliberalism and its effects have done so by politically leveraging their natural resources and garnering government support by appealing to those hit the hardest by trade market setbacks; the popular sector. As it stands, it appears the largest hurdle is creating a long-term alternative political and economic change able to hold up to the dynamic forces of international influence while protecting domestic interests and progress.
Silva, Eduardo. Challenging neoliberalism in Latin America . Cambridge: Cambridge University Press, 2009. Print.