NEOLIBERALISM THEORY

Analysis of Neoliberalism and Democratic Deficit

Neoliberalism Theory

Neoliberalism is based on neo classical theories of economics which states that neoliberalism is a market driven approach to economic and social policy that stresses the efficiency of private enterprise. Neoliberalism believe in free trade and open market, and, therefore, seeks to maximize the interference of private sector in determining the economic priorities of the country. Neoliberalism believes in the maximization of the private sector in the political priorities of the companies as well (Keohane, 1998). Free markets are always fruitful as they work according to their own criteria. Neoliberalism believes that government can be made efficient, and at the same time, the economic health of the nation can also be increased by transferring the hold of the economy from public to the private sector. Neoliberalism is based on the policy of Williamson's “Washington Consensus” that also favors the liberalization of trade and believes in a free market.Discussion

Neoliberals always believe in free trade to improve the economic health of the nation (Archibugi, 2005). They are in the favor that the interference of government in the market should be minimal, and market itself should decide its path. Free hand should be given to market to decide its direction. Moreover, state just does not interfere in the matter of market. Williamson is also one the neoliberals who support this concept. He believes that the market should carry out its operations without the influence of anybody. He further argues that if the state without any reason interferes in matters of the market then market will become inefficient, and there will no competition among companies to improve the quality. Free markets believe that there should be no state intervention when market wants to change its core policies. Free market helps in improving the quality as every company strive to achieve the best. This will lead to up gradation of technology, and consequently it will be beneficial for the whole economic cycle. Williamson believes that government should not run large deficits that in future have to be paid by public. These deficits should only have short term effect to improve the employment level in the country. He believes that constant deficits in the long run leads to higher inflation and lower productivity, therefore, it should be avoided. Occasionally deficits are used for only stabilization purposes. He further states that tax base should be broadened and adopt marginal tax rates to encourage innovation and efficiency.

Williamson has firm believe that interest rate should be determined by the market, but should moderate in real terms. There should be no tariffs on imports and trade should be liberalized in order to grow in the long run. Foreign investment should be allowed, anybody who wants to invest in the economy should be welcomed. Sate owned organizations and departments, which government cannot run efficiently should be handed to the private sector.Stakeholders Democracy

This is the new emerging concept i.e. stakeholders democracy. Stakeholders democracy is an exciting idea, which states that stakeholders should participate in the decision making process of organization. Stakeholders should contribute in processes of organizing, decision making ...