There was a time when Europe was undergoing unprecedented transformation. With the advent of stream Engine, the economic norms including means of production, trade patterns, and labor market configurations, had been witnessing dramatic changes. Clearly, these were the departing signs from pastoral to industrialist society. The kingdom ships were being replaced with newly emerging organized governments and rules. Age of Enlightenment was the catalyst for fueling individualism and subverting collectivism.
There was an abrupt call for liberty and freedom, which not only encompass the ideas, beliefs, and perceptions but also inter-human trade and business patterns. In this regard, a brilliant thinker, named Adam Smith, writes a book “The wealth of Nation,” in which he posits that a Human is rational and utilitarian; therefore, it is mandatory to grant him all forms of liberty, so he could have a degree of choices to become an active part in the economic cycle. He further argued that the open market is self-regulating and at some point, it inherently maintains equilibrium, which is the cardinal reason for letting it free from all government regulation and interference.
His thoughts, undoubtedly, prevailed and made America a proponent of the free market. From Adam Smith to the 1920s, the USA had sought to end all forms of interference, which resulted in massive economic growth and transformation. A new kind of society emerged, where the major focus was on maximizing capital and reinvesting for prosperity. The withdrawal of government from the economic sphere (to ensure a smooth flow of economic activities) is said to be Liberal economics, which is also referred to as Classic Liberalism.
Till the 1920s, liberal economic had prevailed in the USA and also Europe. However, the era of the mid-1920s proved as the impetus to rethink the practical implication of Liberalism in the economic sphere. That was because of the severe shock blown by massive uncertainty in the USA market when the sudden downfall brought “The Great Depression.” Many theorists came forward to understand the dramatic economic decline, in which “John Maynard Keynes” played a significant and prominent role. His arguments re-revolutionized the economic domain from its roots. Keynes argued that compelling government out of the market is extremely detrimental; because the government is only the legal entity that can ensure the market flow, in the absence of it, the economy does not remain on track and falls. Therefore, it is pertinent for the government to interfere in the market directly.
After that, the world saw a new trend in which governments started feeling necessary to dive into the market if any anomaly occurred. These new norms remained evident and remarkable until the era of the 1980s when due to the slow pace of growth and the emergence of non-state actors, the concepts of the free market were reintroduced. The rejuvenation of classic liberalism with contemporary dynamics is called Neo-Liberalism.
Neoliberalism is an economic theory that ensures maximum freedom and liberty to all individuals in economics with minimal government intervention. Now, not only western states had adopted Neoliberalism, but all over the world, it had become a dominant realm. The formation of the World Trade Organization is a by-product of the Neoliberalist approach.
Soon after, the world saw its history’s most rapid growth and development. New technologies emerged and massive innovation took place. The web of Multinational companies (MNCs) and foreign direct investment (FDI) had landscaped throughout the globe. The labor market became much more diversified and skilled.
However, the shock of the International Financial Crisis (2008) re-forced thinkers reevaluates the efficiency of Neoliberalism – whether it arguably possesses the desired relevancy to achieve common ends or not. Moreover, the Covid-19 pandemic highlighted the cracks more lucidly and exposed the efficacy of the current global order. For example, during covid-19 when inequalities burgeoned and the wealth gap became more widened, billionaires witnessed a massive growth in their money.