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neoliberalism

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There are two main theories (in a broad sense) regarding to how to operate an economy in the best possible way. Countries in the western societies have been facing the continuous clash between these two theories for almost a century, and still continue to do so. On the one hand there are those who affirm that a small state, is a good state. The government should intrude on the economy not more than the absolutely necessary (or sometimes almost not at all). The markets have an unparalleled capability of generating wealth and increase productivity. On the other, a lot of people seem to agree that the government must, in a way, “steer” the markets. They should regulate them, or otherwise they will spiral out of control, ending on a recession. We will review the history between these opposing set of economic ideals, presenting both of these cases, focusing mostly on the first theory we exposed. A stream of ideas that would play a mayor role in global economics on the nineteenth century, and then see a revival along the last quarter of the twentieth century. The idea of the state being involved in how an economy plays out takes us back to sixteenth century, with the rise of mercantilism. This economic policy was mostly based on a government exercising full control over an economy. Amongst its main features, we can find: high tariffs on imported manufactured goods (in order to protect the national industry), subsidizing exported goods, low wages, and a strict control over the currency. Mercantilist states would try to amass as much wealth as they could get, and use them for wars, conquests, etc. Two centuries later Adam Smith (which is deemed by many as the “father of modern economics”) would oppose this ideas, and introduce instead ... ... middle of paper ... ... 1980s, it took these economies decades to recover. Nowadays, we can clearly state that the neoliberal years are behind us, and we are in fact experiencing a sort of revival of the controlled capitalism we saw after the WW2. The United States have clearly adopted Keynesian methods again in light of the 2008 crisis, with its stimulus packages, Obamacare and all kinds of aids. Most of the European countries have universal healthcare, aids to those in need and some of them even provide free education. In South America you can now find left-wing governments in several countries like Argentina, Chile, Venezuela and Ecuador, and those who have a right-wing one, still cannot be considered neoliberals. In fact, the word “neoliberalism” has earned a bad reputation in many of the southern countries given the disastrous governments that took place between the 1970s and 2000s.
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