DEFINITION: The term “neoliberalism” generally refers to the historical event of the turn away from the post–World War II Keynesian consensus in the Western industrial democracies, back towards the earlier laissez-faire consensus of the nineteenth century.

ETYMOLOGY: The prefix “neo-“ derives from the Greek adjective neos, meaning “new,” and the root “liberal” comes from the Latin adjective liberus, meaning “free.”

USAGE: The term “neoliberalism” came into existence in the 1970s, first in the Latin American countries that attempted to roll back decades of socialist incursions in their economies in the wake of the 1973 coup d’état against Chile’s communist President Salvador Allende led by General Augusto Pinochet.

Pinochet brought Milton Friedman and other American free-market economists to Chile to work as consultants, in his effort to revive his country’s prostrate economy.

In line with Friedman’s recommendations, Pinochet oversaw a wholesale overhaul of Chile’s economy, privatizing publicly owned industries, loosening government regulations that had strangled private entrepreneurship, abolishing duties and tariffs in order to open up Chile’s market to the global market, and scaling back government spending and taxation.

These policies quickly reversed decades of socialist depredations, setting off an astonishing economic boom in Chile, which had reverberations throughout Latin America.

It is important to note that the term “neoliberalism” was introduced by socialist and communist critics of these successful free-market policies. Thus, the word had a pejorative connotation right from the beginning—which continues to this day.

Neoliberal ideas—which are in essence little different from the ideas espoused by Austrian economics—gradually percolated out of Latin America into the wider world, where before long they swept the West.

The tenures in office of Prime Minister Margaret Thatcher in the UK and Presidents Ronald Reagan and Bill Clinton in the US are examples of the heyday of neoliberal consensus during the 1980s and 1990s.

However, neoliberalism’s run as a victorious and uncontested policy preference was to prove short-lived.

Two events, more than any others, sounded the death knell of neoliberalism as an economic consensus. The first was the 2008 asset bubble and resulting credit crisis. The second was the sovereign-debt crisis that engulfed Greece and other small countries that were members of the European Union (EU).

Beginning in 2009 and culminating in 2015, the EU attempted to impose neoliberal-inspired “austerity” policies upon Greece, creating widespread unemployment, economic suffering, and political discontent.

The crisis came to a head with the Greek national elections in January of 2015, in which the progressive Syriza coalition was victorious. Syriza’s leader Alexis Tsipras became Prime Minister. Tsipras’s ally, the progressive economist Yanis Varoufakis, became Minister of Finance.

For the next eight months, Tsipras and Varoufakis battled the EU bureaucracy in Brussels, as well as the German banks who were Greece’s main creditors, to obtain some breathing space for the Greek people. Their success was real, if limited.

Although Syriza fell from power in August of 2015 (it later governed for a few months in 2019, as well), the incident was historically important in two ways.

First, it created a groundswell of sympathy for the Greeks, seriously undermining the neoliberal consensus. While the EU remains officially devoted to neoliberal policies, it now treads more lightly in its economic dealings with its member states.

Second, the Greek sovereign-debt crisis was the event which, more than any other, brought “neoliberalism” in the pejorative sense into common currency among the general public that follows the news but is not expert in economic or financial affairs.

One might even argue that the rise of forthrightly socialist candidates for high office in the United States since 2016—a previously unthinkable development—is due in no small part to the 2015 donnybrook in Greece and to the resulting bad odor in which the term “neoliberalism” came to be held by millions of voters around the world.