The Neoliberal Revolution

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Commonly understood as a political economy committed to rolling back the state, neoliberalism has characterized a decade of challenges and reforms. Both in the US and in the UK, the neoliberal thinking upset the previous political ideas ascribable to the Keynesian Era. Ronald Reagan spearheaded neoliberal policies in the US during his presidency, lasting from 1981 to 1989. The US political context shaped and constrained his ideas, leading this country to a unique neoliberal revolution (Jacob, 1985). A limitation of the power of trade unions, a huge process of deregulation and a relatively slight economic growth had to face, however, an increasing government spending, thus debunking the so-called ‘Reagan myth’ (Krugman, 2008).
One of the main
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However, Reagan’s attempt in rolling back the state presented several drawbacks, some of them caused by the US political context. Let us now examine how the neoliberal revolution has affected the US government spending and how Reaganomics has responded to the newly shaped context. Tax cuts introduced by the Kemp-Roth inevitably led to trade and budget deficits (Blanchard, 1987). From 1981 to 1985, a decrease in inflation and an increase in deficits led the economy through a recession. In response to the political pressure on spending from the large deficits, in August 1985 the “Balanced Budget and Emergency Control Act” – better known as the Gramm Rudman-Hollings bill – was approved (ibid.). It established a ceiling for the deficit for each fiscal year but it was not enough to bring the government spending back to the time in which Reagan took office. Furthermore, even though in the mid-1980s the economy recovered from a severe recession, the government little sustained economic improvements for most Americans; as a consequence, by the late 1980s, middle-class incomes were barely higher than ten years before and the poverty rate had dramatically risen (Krugman,…show more content…
Is the prestige that Reaganomics has obtained during the last decades authentic or is it only (or at least in part) the result of the conservative achievement to rewrite history? The US productivity growth and the renown of American business are usually credited to the Reagan presidency and to its 1981 tax cut. Instead, the US technological and economic leadership dates back to the mid-1990s (Krugman, 2008). Even though Ronald Reagan has managed to spearhead neoliberalism in the US, thus overturning the social and economic landscape of the previous decades, his administration cannot be simply valued as a period of growth and development, but, more generically, as a turning point of remarkable consequence in the US contemporary
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