Market Fundamentalism - History of The Concept

History of The Concept

While the term "market fundamentalism" emerged relatively recently (until 1950 the Oxford English Dictionary lacked an entry for "fundamentalism"; the derivative fundamentalist was added only on its second 1989 edition, with the meaning: "an economic or political doctrinaire" ), the concept of economic liberalism is not; the ideas were reborn in the 18th century, with the works of Adam Smith and Jean-Baptiste Say. It was only in the 20th century that the relative sophistication found in Smith’s work would be reformulated by economists such as Friedrich Hayek, Joseph Schumpeter, and Milton Friedman (of the Chicago School of economics of the 1960s and 1970s), resulting in a recipe for a free-market economy:

• deregulate business and trade
• restrict state intervention
• let the energies of entrepreneurship and free-flowing capital generate wealth for all of those who participate in the economy

After the influence of Friedman and the Chicago boys (University of Chicago-educated Chilean economists) on the Miracle of Chile under the Augusto Pinochet regime in the 1970s, Prime Minister Margaret Thatcher of the UK (Thatcherism) and President Ronald Reagan in the U.S. (Reaganomics) adapted similar models in the early 1980s.

In the late 1980s the Bretton Woods Washington-based financial institutions, (International Monetary Fund and the World Bank) and the U.S. Treasury Department embraced the Washington Consensus, a standard set of policy prescriptions for crisis-wracked nations. These prescriptions include measures such as eliminating state subsidies, redirecting social spending into infrastructural development, and reducing taxes, or as Stiglitz summarized, promoted the proselytism of a universal set of economic policy recommendations: "stabilise, liberalise and privatise".